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Politics : The Donkey's Inn -- Ignore unavailable to you. Want to Upgrade?

To: Mephisto who wrote (7412)	9/5/2003 2:27:32 AM
From: Mephisto	Respond to of 15516

The China Syndrome The New York Times September 5, 2003 By PAUL KRUGMAN A funny thing happened this week: the Bush administration, with its aggressive unilateralism, and its contempt for diplomacy and international institutions, suddenly staked its fortunes on the kindness of foreigners. All the world knows about the Iraq about-face: having squandered our military strength in a war he felt like fighting even though it had nothing to do with terrorism, President Bush is now begging the cheese-eaters and chocolate-makers to rescue him. What may not be equally obvious is that he's doing the same thing on the economic front. Having squandered his room for economic maneuver on tax cuts that pleased his party base but had nothing to do with job creation, Mr. Bush is now asking China to help him out. Not, of course, that Mr. Bush admits to having made any mistakes. Indeed, Mr. Bush seems to have a serious case of "l'état, c'est moi": he impugns the patriotism of anyone who questions his decisions. If you ask why he diverted resources away from hunting Al Qaeda, which attacked us, to invading Iraq, which didn't, he suggests that you're weak on national security. And it's the same for anyone who questions his economic record: "They tell me it was a shallow recession," he said Monday. "It was a shallow recession because of the tax relief. Some say, well, maybe the recession should have been deeper. That bothers me when people say that." That is, if you ask why he pushed long-term tax cuts rather than focusing on job creation, he says you wanted a deeper recession. It bothers me when he says that. Of course, nobody says the recession should have been deeper. What critics argued - correctly - was that Mr. Bush's economic strategy of tax cuts for the rich, with a few token breaks for the middle class, would generate maximum deficits but minimum stimulus. "They" may tell him it was a shallow recession, but the long-term unemployed won't agree. And the fact that even with all that red ink the recovery is still jobless should lead him to wonder whether he's running the wrong kind of deficits. Instead, however, he's decided to plead with the Chinese for help. Admittedly, it didn't sound like pleading. It sounded as if he was being tough: "We expect there to be a fair playing field when it comes to trade. . . . And we intend to keep the rules fair." Everyone understood this to be a reference to the yuan, China's supposedly undervalued currency, which some business groups claim is a major problem for American companies. By the way, even if the Chinese did accede to U.S. demands to increase the value of the yuan, it wouldn't have much effect unless it was a huge revaluation. And China won't agree to a huge revaluation because its huge trade surplus with the U.S. is largely offset by trade deficits with other countries. Still, even a modest currency shift by Beijing would allow Mr. Bush to say that he was doing something about the loss of manufacturing jobs other than appointing a "jobs czar." And so John Snow, the Treasury secretary, went off to Beijing to request an increase in the yuan's value. But he got no satisfaction. A quick look at the situation reveals one reason why: the U.S. currently has very little leverage over China. Mr. Bush needs China's help to deal with North Korea - another crisis that was allowed to fester while the administration focused on Iraq. Furthermore, purchases of Treasury bills by China's central bank are one of the main ways the U.S. finances its trade deficit. Nobody is quite sure what would happen if the Chinese suddenly switched to, say, euros - a two-point jump in mortgage rates? - but it's not an experiment anyone wants to try. There may also be another reason. The Chinese remember very well that in Mr. Bush's first few months in office, his officials described China as a "strategic competitor" - indeed, they seemed to be seeking a new cold war until terrorism came along as a better issue. So Mr. Bush may find it as hard to get help from China as from the nations those same officials ridiculed as "old Europe." Sic transit and all that. Just four months after Operation Flight Suit, the superpower has become a supplicant to nations it used to insult. Mission accomplished! Copyright 2003 The New York Times Company nytimes.com

To: Mephisto who wrote (7412)	12/10/2003 5:57:23 PM
From: Mephisto	Respond to of 15516

Growth without jobs ROBERT KUTTNER boston.com By Robert Kuttner, 12/9/2003 THE ECONOMY grew at a sizzling 8.2 percent in the third quarter. But job growth is not following. The economy has shed about 2.6 million jobs since President Bush took office. In the past few months, it has begun creating new jobs, but not nearly enough. Last month the economy gained only 57,000 new jobs, compared with the 306,000 a month pledged by the administration. It actually continued to lose jobs in the politically sensitive manufacturing sector, some 19,000 last month. It's not that the economy is generating no manufacturing jobs at all. Rather, the good, unionized jobs in sectors like autos and steel are being lost to automation and low-wage foreign competition. It just happens that manufacturing is concentrated in political battleground states like Ohio, Pennsylvania, Michigan, and Wisconsin. Last month the unemployment rate ticked downward a bit, to 5.9 percent. Job creation at the current rate will not make much of a dent on overall unemployment between now and next November. Long-term unemployed workers, now 24 percent of the total, are at their highest share since 1983. A related issue is wages, which are lagging inflation. Employers have effectively been cutting take-home pay by shifting health costs to employees through reduced employer contributions and higher out-of-pocket copayments. With labor markets still so loose, employers face little pressure to hike wages. Lower-income workers have been falling further behind ever since the early 1980s. Only in the late 1990s, when the unemployment rate briefly dropped to around 4 percent, did workers at the bottom briefly post real gains. As a new report by the Economic Policy Institute points out, this recovery is like no other recent economic turnaround in the low proportion of income gains that have gone to wages. The EPI, citing Commerce Department data, calculates that in the last seven major recoveries, dating back to 1949, labor compensation at this point in the cycle typically commanded around 61 percent of the new growth in output and in no case less than 55 percent. But in the current recovery, labor compensation is just 29 percent of total income growth. What gets the lion's share? Corporate profits. In the typical postwar recovery, corporate profits got about 26 percent of the pie. This time they are getting 46 percent. That helps explain the stock boomlet, but it won't feel very comforting to the typical worker (who is also the typical voter). The other big job-killer is trade. The trade deficit is now running at an annual rate of more than $500 billion -- about 5 percent of GDP. If America's trade accounts with the rest of the world were balanced, foreigners would be buying more products from the United States, and Americans would have millions more jobs. The United States keeps running an ever widening trade imbalance for several reasons. First, wealthy countries like Japan and the European Union are growing more slowly than the United States and count on us to absorb their exports. Despite its high wages, Europe actually manages to run balanced trade accounts with the rest of the world. Second, poor countries like China and India are taking not just low-wage jobs like the manufacture of toys and clothing but increasingly high-skill, high-salary jobs like software engineer. It's desirable for poor countries to move up the economic chain as long as they pay their own people decent wages as their productivity rises. But China violates its own rock-bottom minimum wage laws. Third, rich countries and poor ones have used state subsidies to build industries as diverse as steel and semiconductors, which also violates trading rules. The World Trade Organization has ruled a gainst US retaliatory tariffs on steel but does little to stop the subsidies that lead to the worldwide steel glut, or the state involvement in the creation of China's semiconductor industry. The Bush administration protected domestic steelmakers with tariffs, then withdrew them in the face of WTO objections. It fought to have China admitted to the WTO, but has not insisted that China abide by WTO rules. In theory, a gradual shift of low-wage jobs to poor countries can be good for both the United States and the Third World. But unless the US government intervenes forcefully demand that every nation follows the same rules, US workers will be the losers. The administration, on balance, sides with the global corporations that benefit from the low labor costs and with corporate profits at the expense of worker wages. That strategy is unsurprising but may be shortsighted. At the end of the day, corporations don't vote. Robert Kuttner is co-editor of The American Prospect. His column appears regularly in the Globe. © Copyright 2003 Globe Newspaper Company.