Friday, July 30, 2010

U.S. Economic Expansion Stronger Over Last 4 Quarters Than Following the Last Two Recessions

Today's GDP report from the BEA raised a lot of concerns about the economic recovery, based on headlines and reports like this:

1. Steep decline in GDP growth raises alarms,
2. US recovery loses steam,  
3. Double-dip feared as US economic growth loses pace, and
4. The closer you look at the GDP report, the uglier it gets, etc. 

But how does GDP growth in this recovery (assuming the recovery started in third quarter of 2009) over the last four quarters (1.6%, 5%, 3.7% and 2.4%) compare to output growth in the four quarters following the last two recessions in 1990-1991 and 2001?  Pretty good actually, see the graph above showing real GDP growth in the one-year periods (four quarters) following the last three recessions.

Sure, real GDP growth has slowed from 5% to 3.7% to 2.4% over the last three quarters, but following the 2001 recession real GDP slowed even more, from 3.5% to 2.1% to 2% to 0.1%.  And looking at the average growth over the four quarters following the last three recessions, the average 3.18% real GDP growth over the last year was higher than the 1.93% following the 2001 recession and higher than the 2.63% following the 1990-1991 recession.  Keep in mind that the economic recovery that started in 1991 was the longest (120 months) and strongest economic expansion in the history of the U.S.   

So what about a headline like "U.S. economic expansion stronger now than at the beginning of the last two recoveries?"


At 7/31/2010 1:53 AM, Blogger fboness said...

The last two recessions didn't have the extraordinary government input into GDP.

At 7/31/2010 2:48 AM, Blogger PeakTrader said...

Typically, strong recoveries follow severe recessions. In the subsequent four quarters after the trough in the 1973-74 recession, real GDP expanded over 6%, and after the 1981-82 recession expanded about 8%. This recession is recovering at one-third to one-half the rate.

Also, this expansion had much more stimulus or maximum stimulus (which suggests fiscal policy is offsetting much of monetary policy).

However, some highlights (both positive and negative) of Q2 2010 GDP are (excerpts from articles):

"Growth in the last quarter was held back by a 28.8% surge in imports, which eclipsed a 10.3% rise in exports. The widening trade deficit lopped off 2.78 percentage points from growth, the largest subtraction since the third quarter of 1982 (imports subtract from GDP).

"Stripping out the rise in inventories, the economy expanded at only a 1.3 percent rate in the second quarter (after a 1.1% rate in the first quarter). "What you're going to see is GDP numbers migrate down to that underlying trend in real final sales which is pretty modest, between 1 and 2 percent.""

Annual GDP revisions from the BEA indicate U.S. monetary policy was restrictive in 2006 and 2007:

For 2006-2009, real GDP decreased at an average annual rate of 0.2 percent; in the previously published estimates, the growth rate of real GDP was 0.0 percent.

The percent change from the preceding year in real GDP was revised down for all 3 years: from 2.1 percent to 1.9 percent for 2007, from an increase of 0.4 percent to 0.0 percent for 2008, and from a decrease of 2.4 percent to a decrease of 2.6 percent for 2009.

At 7/31/2010 2:53 AM, Blogger James said...

GDP Up But This Economy Continues to Bleed Jobs

While the Unemployment rate declined from 9.7 percent in May to 9.5 in June, the total number of people employed declined by 301,000 in the same period. Regardless of what the GDP is doing this economy continues to bleed jobs.


Decoupling of GDP and prosperity is caused by free trade.

I see no real recovery in jobs until we return to Alexander Hamilton’s advice and protect our people with tariffs.

At 7/31/2010 8:45 AM, Blogger bix1951 said...

Economy Continues To Accelerate


But that is not what you will read in the media propaganda that passes for news.

July 30 (Bloomberg) -- The U.S. economy slowed in the second quarter as a scarcity of jobs eroded consumer spending, leaving the rebound dependent on a surge in business investment.

They call this a slowdown. They say the "economy slowed."
Not so. If I am going 50 MPH and then 60 MPH and then 61 MPH. I am not slowing. I am still accelerating. The rate of acceleration has slowed, but the economy is going faster and faster.

Words make reality. Let us speak the truth

At 7/31/2010 11:01 AM, Blogger juandos said...

Apparently some think that theres's more to that GDP report than meets the eye:

Underneath the GDP report

At 7/31/2010 11:24 AM, Blogger juandos said...

From the Drudge Report there is this link: Recession was deeper than gov't previously thought

Note the last line of this item: 'The Commerce Department's latest revisions reach back to 2007. They're based on more complete data and on methodology thought to be more accurate'...

At 7/31/2010 11:44 AM, Blogger morganovich said...

that seems like a poor comparison set. the last 2 recessions were quite mild. compared to a deep recession, this recovery is very weak.

all recessions:

deep recessions:

and bix, how much of that 2.4% (itself a big deceleration from Q1) was inventory build? about 1.05%. thus, final consumption figures were actually up only 1.35%, an extremely feeble number for this point in a recovery.

inventory build actually went negative an a number of regions in june, presaging tougher times for the Sept Q.

here we are 12 months after the resumption of growth, and we are still .85% below the previous peak. given that it was a 12 month decline, i guess that puts paid to the notions of a "v" shape.

Q3 is poised to show even less growth than Q2 (due to inventories, housing, and some notable declines in future orders figures from the regional reports) and as the comparisons get difficult, Q4 could well be flat or down on a year ago.

the argument has already shifted from "v" shaped to "better than the last 2". what will it be at zero growth?

as counter intuitive as it may seem, our ultra low interest rate policy and stimulus programs are hampering our recovery. in an overcapacity situation, you need bankruptcies, not bailouts. as an anchor currency and the big export market for the developing world, we are exporting our monetary policy and driving negative real interest rates in much of the developing world leading to massive bursts of investment that just worsen the overcapacity and shift it offshore.

meanwhile, cheap money here is going to pay down debt, not for consumption, so monetary policy is unable to drive growth and is instead serving to delay the necessary and inevitable adjustments than must be made in the economy.

loose money is not always a gas pedal. it can also work like a brake. the irony is that our obsession with making sure no one gets hurt is making it impossible to recover.

At 7/31/2010 3:25 PM, Blogger PeakTrader said...

Bix, growth slowed. The economy increased (or expanded) at a decreasing rate. So, it decelerated.

James, free trade adds to prosperity.

The GDP data suggest U.S. firms prefer to invest in new machines than new workers. Businesses seem confident about productivity, profits, and protecting benefits of existing workers, but uncertain about demand and maintaining benefits with more workers.

I think, about everyone knows they'll pay more taxes soon, except maybe low income earners.

At 7/31/2010 3:35 PM, Blogger PeakTrader said...

Morganovich says: "in an overcapacity situation, you need bankruptcies."

We need demand to raise actual output towards potential output.

At 7/31/2010 5:47 PM, Blogger Craig Howard said...

Decoupling of GDP and prosperity is caused by free trade.

No, it's caused by government. As mentioned a couple times above, our GDP is now more dependent on government spending than it used to be. Absent that, it would be clear that we are still in a private sector recession.

Free trade has nothing to do with it.

At 7/31/2010 9:52 PM, Blogger morganovich said...


and how do you propose to drive demand when the consumer and the federal government are already in far too much debt?

stimulate demand (through anything other than tax cuts) and you get a dead loss as we pay down debt (save) instead of consume, as has been the pattern over the last year.

with this much overcapacity, we're not going to invest much regardless of how much money we have.

tax cuts are likely a good idea and will provide longer term benefit, but will certainly drop government spending in the near term unless you recommend continuing to run 10% deficits.

so, the simple fact is that there is no quick fix.

demand stimulation (mostly through monetary policy) has been the alleged cure all for too long. but like drinking coffee, you build up a tolerance. at some point, the system has so much debt that such stimulus just doesn't work anymore and new stimulus just goes to pay for consumption that has already occurred.

the fact that money is shrinking with a yield curve this steep shows you that we have reached this point.

hate to say it, but that play just isn't going to work in the short run. there is no easy demand generation left. cutting taxes is the best of the ideas and will at least provide a long tern gain, but short term, the multiplier isn't going to be so hot as consumers use extra money to pay down debt and wait to invest.

the gap is best closed from both sides. propping capacity levels up through bailouts just makes it harder for demand to catch up.

get ready for a decade of below trend growth...

At 7/31/2010 10:52 PM, Blogger PeakTrader said...

Morganovich, there isn't an overcapacity problem. There's an underutilization of capacity. To say there's overcapacity, under present conditions, is like saying the labor force participation rate is too high. We don't need bankruptcies like we don't need a higher unemployment rate.

Demand is needed to increase saving. If net income rises 5%, some will go into consumption and some into saving. Without that 5% increase, there will be less saving.

Since the government squandered too much money, it should cut spending, and whatever is saved should go into tax cuts to stimulate demand. Also, we can't afford many regulations. So, they need to be scaled back.

At 8/01/2010 1:34 AM, Blogger James said...

The harm done by free trade is reflected in the U.S. Bureau of Labor Statistics series “Real average weekly earnings for production and nonsupervisory employees on private nonfarm payrolls, seasonally adjusted” usually referred to as Average Weekly Earnings or Real Wages. The current reading is at reference [1]. A tabular history of the series can be seen at reference [2] and a chart at page 26 of reference [3] which you can see at Amazon if you have an account. These data show that the last time real wages made an all time high was 1973.

Let us do the numbers :

Using the BLS Inflation Calculator [4] with the data we get:

1973 wage of $332 (1982 constant dollars).... 750 (2010 dollars)
2010 wage of $298 (1982 constant dollars).... 673 (2010 dollars)

The difference is a loss of $77 a week or $4000 a year. That is the amount of decline that the average worker has lost in real wages since 1973. In my judgment that is a serious decline in prosperity.

By comparison consider what real wages did from 1947 to the high in 1973:

1973 wage of $332 (1982 constant dollars).... 750 (2010 dollars)
1947 wage of $196 (1982 constant dollars).... 443 (2010 dollars)

The difference is a gain of $307 a week or $15,964 a year. Just think of what a wealthy nation we would have been if we had continued to grow from 1973 instead of decline.

What is the Cause?

There are at least a baker’s dozen explanations of this that argue that free trade has nothing to do with it including PeakTrader’s “U.S. firms prefer to invest in new machines than new workers.” All of the arguments fail for one of two reasons. PeakTrader’s argument is fatally flawed because of reason 1: it is not unique while free trade is unique. U.S. firms did not suddenly develop a preference for productivity over workers in 1973. They have been doing that since Washington bought gun power for the Continental Army at least. Batra [3] shows a chart of the ratio of trade to GDP that does explode to the upside in 1973. Also for most of our history we were the worlds most trade protected nation. Prior to 1973 declines in real wages were rare and short usually only a few months. Prior to the 1970s, as far back as we have data, there was not a single decade in which real wages declined. Real wages actually increased during the 1930s. Since the 1970s there has not been a single decade in which real wages rose.

One of the other reasons advanced that free trade is not the cause is that American savings are down. That is wrong because of reason 2: it is a result of the decline in wages rather than a cause of it. As real wages decline people try to maintain their standard of living. On of the first things the cut is savings. The sequence is quit adding to savings, spend past savings, borrow, face a declining standard of living.

Free trade as practiced in this country is detrimental to most Americans.


[1] Current Average Weekly Earnings data at [2]

[2] Table of Weekly Earnings data 1947-2000 at

[3] Ravi Batra, The Myth of Free Trade: The Pooring of America

[4] BLS Inflation Calculator

At 8/01/2010 3:03 AM, Blogger PeakTrader said...

James, you're making a conclusion based on very little information.

You need to consider the U.S. dominated the global economy after WWII, because Europe and much of Asia were in ruins.

Also, real wages and real GDP increase at faster rates in smaller economies (what was U.S. GDP in 1973?).

Inflation has likely been overstated, since the beginning of the Information Revolution in 1982, which would understate real wages.

Interest rates are lower, because the U.S. captured and created enormous capital in the global economy (and there's an inverse relationship between wages and profits).

Real compensation has increased about 70% since the mid-1960s.

The U.S. has consumed more than produced for 30 years, and seems likely to consume more than produce for another 30 years.

When you add trade deficits (up to $800 billion per year) to real GDP of 3%, you get up to 9% annual increases in U.S. living standards.

U.S. living standards are many times higher today than in the 1970s, although real wages have been flat.

The U.S. benefited tremendously from free trade, since it became an open economy around 1980, while our trading partners, who rely on protectionism, benefited much less. Also, free trade has benefited lower income Americans the most.

Moreover, I may add, in the 1960s, union workers were grossly overpaid, while non-union workers were grossly underpaid. That disparity has narrowed with the decline of unions.

At 8/01/2010 3:19 AM, Blogger PeakTrader said...

However, if you don't believe me, perhaps you'll believe Adam Smith:

"Wealth of Nations represents a highly critical commentary on mercantilism, the prevailing economic system of Smith's day. Mercantilism emphasized the maximizing of exports and the minimizing of imports. In Wealth of Nations, one senses Smith's passion for what is right and his concern that mercantilism benefits the wealthy and the politically powerful while it deprives the common people of the better quality and less expensive goods that would be available if protectionism ended and free trade prevailed."

At 8/01/2010 10:30 AM, Blogger PeakTrader said...

Let's look at the U.S. housing boom, mostly from 1995-05. Perhaps, over 15 million new homes were built, while home prices doubled, tripled, or more.

Tens of millions of homeowners were able to refinance at lower rates (many more than once), to lower their monthly payments and pay-down their mortgages, while many others extracted equity, for home improvements and other purchases.

Of course, people who bought near the top lost. However, for tens of millions of households, they benefited tremendously, even after the prices of their homes fell by large margins. It was real wealth creation, for homeowners before 1995, and the vast majority of home purchases after 1995.

At 8/01/2010 11:11 AM, Blogger morganovich said...


i think you are missing something in your analysis.

i agree with you that we need lower taxes and less (and an end to deficit) government spending. that is unquestionably the long term cure and will drive long term demand.

that said, what you are missing is the massive overbuild that occurred due to preposterously loose money over the last decade. current capacity utilization is still in the low 70's, up from the all time low it hit last year.

it's not so simple to just say, hey, we need more demand to use it up. that's going to take a very long time. you need to come at this from both ends: allow failure to seed out the weak and leave the strong.

our recent policies of bailing out everything and everyone are just making it more difficult for the needed adjustment to take place. we need to get the contraction over with not keep trying to avoid it. it is doing that that got us into this mess. we're now facing several recessions worth of adjustment all supersetted onto one another because we have failed to take our medicine for so long.

we inflated a debt bubble while trying to keep the game going. we spent a lot of money we have not earned yet.

paying that down is going to suppress demand. hence, we are set for an extended period of below trend growth.

if we insist on keeping underutilized capacity around through that period, it's just going to make the period of depressed pricing and investment last longer.

apart from cutting taxes, there is not a helluva lot the government (or anyone else) can do to increase demand right now.

but even tax cuts will depress spending (or explode deficits) in the very near term as incremental money kept by the consumer will go, at least in significant portion, to paying down debt (as can be seen by CS trailing income) and corporate income will be trained rather than re invested as low utilization of current capacity reduces the return on new projects.

i think we are coming out to more or less the same prescription: less tax and government interference. however, i also think we need to stop bailing out failures and and quite possibly begin to tighten our money return the rest of the world to positive real interest rates.

the bubbles currently inflating in the developing world due to their negative real rates (india being an excellent example) are just going to make getting our own capacity utilization back up that much more difficult.

At 8/01/2010 11:42 AM, Blogger morganovich said...

some data:

as you can see, capacity utilization generally gets up to about 85-6% in a strong economy, then drops to around 73-74% in a contraction.

the last recovery, driven by loose money, never saw utilization recover fully. it peaked and plateaued at more like 80 than 85. that's the direct result of both our own cheap money driving over-investment and the export of our monetary policy driving the similar over-investment overseas.

this is the problem with using an instrument as blunt as money to attempt to drive growth.

then, inevitably, you wind up here: debt laden and underutilized, which is a pretty sticky situation.

we saw utilization drop to record lows. it has barely recovered to what would normally be the low end of a bust.

demand is certainly a part of this picture, but so is oversupply and given the factors lined up against demand increases in the near term the kind of one sided "drive demand and all will be OK" thinking that got us here is not going to get us out.

we need a significant round of creative destruction as well. that's how you keep an economy healthy. suppress that, and you get sickly industry dependent on bailout after bailout.

if we had let one of the big 3 fail years ago and subjected them to the consequences of their labor decisions, we'd have a very different industry today.

if we let more banks fail and let the strong and prudent gain at their expense instead of the other way around, we'd have a much stronger and more self regulating financial sector.

if we let people go bust when they took out unpayable mortgages (do you realize there are over 4 million americans with >50% negative equity in their homes?) then we'd get a more prudent consumer.

instead, we bail out anyone and everyone either directly or though monetary policy and drive the level of moral hazard up and mute the discipline of creative destruction.

that is no way to run a railroad.

we have allowed the economy to become sick to the extent that this round of adjustment is going to feel like chemotherapy, but it's still better than the alternative, and we should be trying to hurry it along, not hold it up.

At 8/01/2010 12:45 PM, Blogger PeakTrader said...

Morganovich, I don't entirely agree with your statements (e.g. you contradict yourself when you say the money supply was too accommodative when there were too many idle resources).

However, I agree, it's best when idle resources are productively employed. The goal should be to fully employ those idle resources most productively and maintain sustainable growth, which is optimal growth.

At 8/01/2010 2:43 PM, Blogger bix1951 said...

To me, the common simple man, slowing or decelerating means
a decrease in velocity

problem seems to be a mixed metaphor
does an economy really grow or expand or shrink or recover or recede or any of those words?
Is it moving at all?

if a steady state economy is standing still, then it has stopped. A stopped economy.
But to me that sounds wrong. An economy that is not growing at all is still producing. It is not dead or dead in the water

My point is that words matter and mixing metaphors obscures the truth, to the detriment of our community

At 8/01/2010 2:43 PM, Blogger Ron H. said...

"'s best when idle resources are productively employed. The goal should be to fully employ those idle resources most productively..."

Peak, perhaps one way to accomplish this is to allow business failures and bankruptcies to reallocate those unproductive resources to others who can make better use of them.

At 8/01/2010 3:56 PM, Blogger morganovich said...


that's not a contradiction at all. loose money begets over-investment and overcapacity. in particular, if real interest rates are negative you get asset (and capacity) bubbles. our current policy is driving such behavior both at home and abroad.

so i don't see the contradiction. it seems to me like simple causality.

the issue with propping up overcapacity is that is prevents the best companies from winning and the worst from losing, an essential factor in maintaining a healthy economy. bankruptcy is an important part of that. if we prop up the losers, the winners cannot win.

sure, encouraging demand is a good idea (within reason) but doing so while propping up capacity we don't need just makes the problem you are trying to fix worse.

we have been living far beyond what you term "sustainable growth" for a decade at least.

no we will have to pay the bill. best to just get it over with rather than drag out the problem for ages.

At 8/01/2010 7:38 PM, Blogger PeakTrader said...

Bix, an economy is either expanding, contracting, or stagnant (in aggregate). It's now expanding at a decreasing rate.

Ron, jobs are being created and destroyed constantly, and there's always frictional unemployment.

Morganovich, we learned from the Great Depression you don't tighten the money supply when the economy is underproducing, and we haven't "been living far beyond sustainable growth for a decade at least," because actual output has generally been below potential output in the 2000s. The U.S. benefited from international trade, because export-led economies overproduced and the U.S. captured most of their gains-of-trade.

At 8/02/2010 1:50 AM, Blogger PeakTrader said...

I try to make it as simple as I can.

The U.S. has little or no control over foreign economic policies. If foreigners want to sell their goods too cheaply and lend their dollars too cheaply, about all the U.S. can do to slow that down is adopt protectionist trade policies, which is an inferior economic response.

The U.S. has control over its domestic economy, not economic policies by foreign governments. The Fed tightened the money supply from 2004-06 (raising the Fed Funds Rate from 1% to 5 1/4%). The U.S. economy reached a full recovery, from the 2001 recession, to where actual output equaled potential output (and the U.S. didn't overproduce).

U.S. overconsumption and overinvestment were created by foreign economic policies, while U.S. economic policies engineered a "Goldilocks" economy of 3 1/2% real growth and 2 1/2% inflation (or 6% nominal growth). That came to an end, because U.S. monetary policy was restrictive in 2006 and 2007 causing a recession.

At 8/02/2010 9:02 AM, Blogger morganovich said...


i know that's the popular version of what we learned, but as we are seeing now, it's is not nor ever was that simple.

we have zero interest rates and a steep yield curve, yet money is contracting anyway. QE has not reversed this either. so why do you think that is? what would you do to expand it? demand for money just isn't there. printing piles of it doesn't seem to make much difference.

it's interesting that you see consumption as needing to be driven by demand yet money by supply. neither is quite that simple.

nor is your notion that we have little influence on foreign monetary policy. we have MASSIVE influence on foreign monetary policy. the dollar is both the anchor currency and the major trade currency. we have the vast export market that the emerging world covets. they are constrained in their policies by a need to keep their currencies from appreciating and making their exports less competitive. this constrains both their investments and their interest rates.

why else would they be buying so much of our virtually yeildless short term debt?

the tendency to oversimplify economic systems is always seductive, but you seem to be leaving too much out of your model and therefore missing the actual situation.

At 8/02/2010 10:55 AM, Blogger morganovich said...


i guess that depends upon what you mean by "full recovery". yes, gdp and output went on to new highs, but why?

is a consumption and real estate binge driven by unsustainable borrowing really a "full recovery"?

debt levels soared from 2000 to 2008.

that drove our "recovery". but such a binge has lasting after effects that are going to be with us for a while.

monetary contraction has far more to do with a reduction in leverage than monetary policy. the same trick only works for so long.

the last time we saw anything like these debt levels was 1929.

rates are zero. the curve is steep. the only way to print more money is to actually have the fed become a massive buyer of assets. is that what you really want? a fed buying up trillions of dollars of assets? even that is just a quick fix (and a nominal one at that). note that the first 2 trillion of QE failed to prime the pump.

the economy responds differently when there is such a need to delever. the tools that "worked" in 2000 will not work now, at least not in the short run.

what is it you are advocating? i don't understand what you think the solution is here.

At 8/02/2010 2:50 PM, Blogger James said...


Real compensation has increased about 70% since the mid-1960s

Not for the approximately 80 percent of workers which are those covered by the government’s Average Weekly Earnings. Here is what they have seen:

2010 wage of $298 (1982 constant dollars)
1960 wage of $262 (1982 constant dollars)

That is an increase of $36 or 14% not 70%

Where does your 70% increase come from? I would believe that as an increase in senior management wages.

In the Wealth of Nations Adam Smith advised the United States not to industrialize but to remain an agrarian country because it was more efficient to buy manufactured goods from England. A 33 year old upstart advised that the world’s foremost economist be ignored and that we engage in tariffs and other protective means. His advice was delayed until after his death because Thomas Jefferson agreed with Adam Smith and wanted farmers to have access to cheap British goods but by the 1820s the US had become the world’s most trade protected nation. It remained so for more than a hundred prosperous years. Thank God for Alexander Hamilton.

We are more prosperous that we were? How many of your friends have college graduate children living at home? In the 1960s that was unheard of but is becoming more common with each passing year.

At 8/02/2010 7:33 PM, Blogger PeakTrader said...

Morganovich, I can only speculate what your comments mean, because they're not in the context of any economic model or equation I know about. So, I'll just answer one of your questions:

"we have zero interest rates and a steep yield curve, yet money is contracting anyway. QE has not reversed this either. so why do you think that is? what would you do to expand it? demand for money just isn't there. printing piles of it doesn't seem to make much difference."

Banks have over $1 trillion in excess reserves. Demand for money is there. However, you can't borrow without someone willing to lend. If politicians in Washington got rid of the hostility towards financial firms, they may begin to lend enough to make monetary policy more effective.

James, I don't recall where I got the 70%. However, Dr Perry's posting on June 19, 2008 "Real Compensation HAS Risen With Productivity" shows real compensation per hour has increased 103% from 1970 to 2008. Also, you may want to look at the Employment Cost Index:

Employment costs rise 0.8% in fourth quarter
Jan. 31, 2008

The employment costs index is a broader measure of compensation costs than the separate series of data on average hourly wages, which cover only about 80% of U.S. workers...The ECI covers more workers than the average hourly earnings series and covers a greater range of compensation costs, including fringe benefits, bonuses and perks.

Also see: DJ US Employment Cost Index-STATS-Historical

At 8/03/2010 8:32 AM, Blogger juandos said...

Regarding unemployment...

Over at the Business Insider Vincent Fernando has this posting: Once You Accept The Ugly Truth About American Unemployment, Then The Solution Is Easy

The long and short of Fenando's posting is, those with less education are losing jobs at a much higher rate than those with four years of college...

At 8/03/2010 11:48 AM, Blogger James said...


What is your point? Are you so lacking in patriotism that you are willing to give jobs to foreigners when there are plenty of available Americans? Is it OK with you that we construct our economy in such a way that uneducated people have no place when by imposing tariffs we can employ all our citizens?

Every Republican presidential candidate from Abraham Lincoln in 1860 to Alf Landon in 1936 ran on a platform calling for protective tariffs to keep American jobs regardless of the education of foreigners. The 25th president, William McKinley, was one of the most outspoken on trade protection. Here is what he said on the subject in 1888:

“I would secure the American market to the American producer, and I would not hesitate to raise the duties whenever necessary to secure this patriotic end. I would not have an idle man or an idle mill or an idle spindle in this country if, by holding exclusively the American market, we could keep them employed and running. Every yard of cloth imported here makes a demand for one yard less of American fabrication.

I think it too bad that our leaders have lost the patriotism and concern for their fellow Americans expressed by McKinley.

More important, once upon a time, capitalism and traditional morality were mutually supportive. For most of its history capitalism was supposed to be practiced in a moral manor meaning that any policy should have a fair return for land, labor, and capital. In current practice it is moving towards undermining traditional morality principally by treating labor not as a factor of production entitled to a place at the table but as a commodity.

At 8/03/2010 6:36 PM, Blogger Ron H. said...

James - It's not clear why you believe it's patriotic to force people to spend more for things than they have to. Tariffs or other restrictions on imported goods - including labor - do just that. How is using government to force me to pay more for a US made something in order to provide employment for a US worker any different than using government to take money out of my pocket to support him on welfare?
(the cynical answer is that the welfare is probably cheaper over all)

As for concerns about unemployment, check with BLS for historical unemployment rate trends. I think you will find that except during recessions, including the current one, unemployment rates have fluctuated within a pretty narrow range since the 1960s. During that same period the number of jobs in the US has increased dramatically, so it doesn't seem that foreign workers are stealing jobs from American workers at some alarming rate.

You said: - " are willing to give jobs to foreigners when there are plenty of available Americans?"

Perhaps those available Americans are unwilling to compete for those jobs by lowering the amount they are willing to work for. They may prefer to cry to nanny government that they want protection from those evil foreigners. Keep in mind that the effect of tariffs will cause higher prices for all of us, so those 'available Americans' will see the same effect they would have seen with lower wages.

"Is it OK with you that we construct our economy in such a way that uneducated people have no place when by imposing tariffs we can employ all our citizens?"

Well, I'm not fond of the phrase "construct our economy", but if people need education, I think it is up to them to get it. As before, why should I pay more for things so an uneducated person can have a menial job they don't like?

"In current practice it is moving towards undermining traditional morality principally by treating labor not as a factor of production entitled to a place at the table but as a commodity."

Well, I think you can thank labor unions for that condition. Each worker is a unit of labor, to be paid and treated the same without regard for merit or value as an employee. How else could it be?


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