Cutting taxes and government outlays together won't boost spending for US-made goods, increase traffic at restaurants and dry cleaners, put the unemployed back to work or resurrect growth.
Neither would a stronger stimulus package, because the economic quagmire is not a 1950s-style recession, caused by a temporary buildup of unsold goods precipitating shorter shifts and layoffs. Rather, it is caused by systemic malfunctions, created by wrong-headed energy, trade and banking policies that won't easily resolve.
In 2008, net petroleum imports will likely cost US$400 billion, up nearly 10-fold since Bill Clinton took office. Many oil dollars sent to Arabia, Russia and elsewhere are not spent on American goods and do not create jobs here.
Coupled with booming prices for food prices, rising gasoline, electricity and heating bills give Americans less and less to spend on nonessentials, and retail sales sink, layoffs mount, and wages falter.
US exports have not kept pace to pay for oil and the other goods we buy abroad. Since Clinton took office exports have increased about $1.1 trillion, while imports have jumped $1.7 trillion. The overall result is a whopping $700 billion trade gap that reduces GDP by $250 billion and longer-term economic growth by even more.
Americans use too much gasoline, and the ethanol(ELMAT: meaning CORN ethanol) program dents the problem much less than it pushes up prices for butter, baked goods and beef, and instigates food shortages in poor countries.
Ethanol (ELMAT: meaning CORN ethanol) is the sophistry begotten by pandering for farm votes. The real answer lies in more fuel-efficient vehicles manufactured with readily available and reasonably obtainable technologies, within our reach.
Sadly, hardly anyone in Washington - including the trio of senators running for president - seems willing to embrace truly rapid deployment of hybrids, lighter vehicles, fuels cells and more efficient diesel and gasoline engines.
Our free-trade policies would raise productivity and living standards if we paid for what we buy abroad with exports, because exporting industries use labor more productively and spend more on research and development. However, governments in China, Japan and much of Asia intervene in foreign exchange markets to keep their currencies artificially cheap and US exports too expensive in rich markets with the greatest untapped opportunities.
Peter Morici is a professor at the University of Maryland School of Business and former chief economist at the US International Trade Commission.
FULL ARTICLE HERE:
atimes.com |
