December 17, 2017

Trade deficits widening under GOP rule, as de-industrialization and impoverishment continue

This topic is so crucial to the (increasingly bleak) project of re-aligning the GOP toward a populist party under Trump, that we will have to split this up into an ongoing series of posts on the unique role of manufacturing in providing prosperity for the working and middle classes, and how manufacturing's prospects are determined by trade policy, such as allowing companies to off-shore their production to countries where labor is cheaper, decimating American workers, their families, and their communities.

For now, we will review the trajectory of trade deficits since Trump has taken office.

On the campaign trail, Trump devoted time at every rally and interview to slamming our unbalanced trade deficits with other countries, especially with Mexico and Asian countries, where American companies have transferred factories to be operated by cheap labor.

During the prosperous period of our nation's history, we ran trade surpluses rather than deficits -- right up through the early 1970s. Since the second half of the '70s, we have been consistently running trade deficits, and they have been growing wider. This coincides with stagnating and declining standards of living for most people other than the elites, whose standards have been taking off like a rocket.

Although underway by the Carter administration, these deficits get much worse when the cheap labor lobby inks a major free trade deal such as NAFTA, or letting China into the World Trade Organization.

As a candidate, Trump sought to gut these free trade deals, which would then restore the trade balance to a surplus rather than a deficit, which would go along with good-paying manufacturing jobs returning to this country, which would raise incomes for working and middle class Americans -- and that higher pay would be paid by the elite employer class, so that inequality would narrow from both directions (higher wages for workers, lower profits for stockholders, identical prices for consumers).

And yet under the GOP-controlled government, trade deficits have been widening, not narrowing. See here for data by country, which is sorted by year from 1985 through today, at monthly intervals.

We are only looking at the "trade in goods" rather than "in services" because the service industries where we dominate relative to other countries do not provide many jobs, and are at the elite pay level. For example, some American lawyer who does consulting work for a Chinese bank that wants to enter the American financial services sector, and needs to know the ins and outs of the American laws that regulate banking.

We're focused on the middle and working classes, and we do not net-export services at that income level. I'm sure when you do look at services done by working and middle class people, like answering phones at a call center, we're running massive deficits there too.

From January through October, our trade deficit with the entire world is 8% bigger than the same period last year. After the final two months of data are in, the year's deficit will still probably be 7-8% bigger than it was for 2016. It will wind up a bit under $800 billion, the highest it has been since the twilight years of the Housing Bubble. It actually declined and rose only meagerly under the following two terms of Democrat rule.

Just to pick two countries that Trump rightly railed against regarding trade deficits, let's look at China and Mexico. Our deficit with China has grown by 7% for the year so far, and will round out the year that way as well. This is within the range that we saw under Obama, although it will be the largest amount ever, at around $370 billion. Our deficit with Mexico has grown by an even faster rate, by 10%, which is a higher rate than most of Obama's years. It will wind up around $70 billion -- also the highest it's been since 2007.

Go on down the list of countries with whom we have the biggest trade deficits in Asia -- they will all be the same or worse. Especially for up-and-coming countries like Vietnam, whose rapid ascent Trump warned about constantly on the trail. Our deficit with them will explode by a whopping 20%, at just under $40 billion.

Why is this bad? For economic and for political reasons.

Economically, the continued rise in trade deficits, at even higher rates than under Obama, signals the continued de-industrialization of our economy. Mexico and Asia are not producing the same kinds of things we are, only better -- rather, they are producing manufactured goods, while we do agricultural products.

"Japan sends us cars by the shipload, and all we send them -- is beef. And wheat. And corn."

Manufactured goods are expensive and their industry pays high wages, while agricultural products are cheap and their industry pays diddly squat -- when that labor is even done by Americans (more likely by immigrants, legal or illegal).

The trade imbalance reflects the structural differences in our economies -- they have industrialized manufacturing, like an advanced economy, and we have agriculture and natural resources like a backward economy of 5,000 years ago. (But don't worry, here in America you also have a one-in-a-million chance of getting into a truly advanced career like legal consulting to foreign banks, or a know-nothing pundit for a media monopoly outlet, where you'll make a killing.)

As our trade deficits widen, it shows the further impoverishment of the working and middle classes here.

Politically, the widening deficits reveal the inability of Trump and his trade hawk advisors to steer the federal agencies, the lawmakers in Congress, and the decision-makers at American companies in the direction of re-industrializing our economy.

Without those results, Rust Belt voters will be much less enthusiastic about turning out to vote Republican again, and may go back to the Democrats, who are more reliable on trade policy and protecting manufacturing jobs. That choice will be even easier because Democrat politicians from the Rust Belt run on these populist issues, rather than the off-putting identity politics of a corporate shill like Nancy Pelosi. Midwestern Republicans are openly the country club yuppie elitist party, and none will be able to even ape Trump on economic policy, let alone deliver.

The more disturbing lesson is that Trump and the trade hawks will have failed to deliver despite belonging to the same party as the heads of the executive-branch agencies and both houses of Congress. Obviously that is damning not of Trump, Lighthizer, Navarro, et al., but of the GOP politicians and civil servants as a whole. They will be standing in mutiny against the supposed leader of their party, who is communicating the will of their own party's voters (and the general electorate), and suffering no consequences.

We know it is an outright mutiny because Trump specifically demanded tariffs from his economic team and General Kelly, as that member of the Pentagon junta took over as Chief of Staff back in August. Tariffs could penalize American companies who off-shore production, and would restore manufacturing jobs here, reducing the trade deficit as we made our own products rather than import cheap crap from China and Mexico.

Trump was already complaining at the end of July about the lack of tariffs, and none are on the way despite vociferously demanding them from his team.

Again, the Republicans are not simply halting progress, or slow-walking it -- the trade deficits are getting worse, and by a similar rate or faster than under Obama. Far from expressing concern over the widening deficits, they are forging ahead with GOP business as usual, chuckling at the Trump movement's expense, and have yet to pay the price for it. The elite factions that control the GOP are simply too reliant on cheap labor, representing labor-intensive sectors of the economy, but that's for another post.

At least in the short-term, it will be far easier to re-align the Democrats to be trade hawks and re-industrializers than the Republicans. Their politicians' records on trade deals are far better (again, a topic for another post), and they are in league with unions whose collective power would be ruined if their industries were sent overseas. And there is a populist insurgency within their party (the Bernie revolution) that is on the brink of taking over the wheel, however slowly or rapidly it winds up proceeding in their new direction.

We keep looking for signs of an economic populist re-alignment from the government totally controlled by the GOP -- and we keep coming up with "they are only doubling down on corporate elitism". They sense their terminal decline as a presidential party, and are using Trump's shock victory to ram through all the elitist bullshit they've been dreaming of but could never win an election on.

If their results destroy Trump's image as a populist, the GOP doesn't care. And if it makes Rust Belt voters go back to voting blue, they don't care either. They're perfectly happy to lose the White House after they've rammed through their limited number of Big Policy Ideas that everyone hates.

They may even give up after tax cuts, which they know like the back of their hand. Maybe a knowingly futile attempt at gutting the social safety net, just to run out the clock. Really -- what other Big Policy Ideas do they have waiting in the wings? They didn't even know what the fuck to do with Obamacare. Hence the constant beating of the war drums -- the only other thing the GOP knows like the back of its hand, launching and losing pointless wars. This time against an even less beatable nation than Iraq, and that has never attacked us -- Iran.

All the ideas and plans, all the action and excitement, is going to be on the Democrats' side, as the Bernie revolution wrings more and more concessions from their party's Establishment. The independents who were decisive in winning the election for Trump now know where to direct our time, money, and effort in order to Make America Great Again -- and it's not the GOP.

20 comments:

  1. Newsflash - corrupt businessman, anti-intellectual, reality TV show host, and social media celebrity turns out to be incapable of leading a government he never took the time to learn anything about. Are you somehow surprised that someone so glaringly incompetent, when he gets probably the most demanding job in the world, turns out to be incompetent? You're writing about this as if there was a genuine political movement to change the direction of the country rather than what it was, a desperate, misguided "fuck you" from left-out Americans.

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  2. Bla bla bla. What was at stake was not whether Trump could single-handedly change the world -- nobody thought that, other than a handful of airhead rationalizing cheerleaders.

    What was at stake was: Would the elites listen to the ultimate "fuck you" from the masses, and carry out the reforms delineated in great tireless detail by Trump during the campaign? Tariffs, lower deficits, shrinking military footprint, leave social safety net alone, border wall, deport illegals, lower immigration in future, etc.

    The elite factions, their political puppets, and career civil servants could have decided to heed the warning, rather than risk a larger explosion when the day of reckoning comes. They have chosen to delay the reckoning and accept a bigger blow-up, in order to go on with the status quo in the short term.

    That truly was up in the air -- not certain that they would refuse, not certain that they would accept. It was a high-risk, high-reward choice, and what other alternative does a desperate population have?

    We will be placing no blame on Trump himself, but on the elites and politicians for refusing to negotiate with our deal-maker and telling us instead to "Let them eat cake."

    OK, the only response to that historically has been, "Off with their heads!"

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  3. You're obsessively personalizing things just like some emo teenager from 2005. "Fuck Bushitler -- every face he makes looks like a chimp!"

    Zero institutional analysis or understanding of society, 100% obsession over a single person, and even then that individual's persona rather than their role in the larger system.

    Newsflash: hysterics about Cheeto Hitler, reality star DRUMPF did not persuade anybody during the campaign, and continue to go over like a lead balloon. They're persona-based obsessions that he has used to drive you crazy -- and it's working big-league.

    The only ones persuading right now are Bernie saying that Trump promised many great things during the campaign, but that they are not being reflected in the GOP legislation, and that Trump should hold his own party's lawmakers to account (don't destroy social safety net, etc.).

    Anyone with half a brain, like Bernie, is not obsessed with Trump's persona.

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  4. The anti-intellectual brand is now owned by the liberals, odd as it may seem to someone from 10-20 years ago.

    Rachel Maddow is still ranting like a lunatic about Russia conspiracies -- again, zero institutional analysis, no understanding of how our or their society works, dropping all pretense of a rational thought process or a sober tone in delivery.

    And she's been that way at least since the campaign, when she blew up a moral panic about Pepe the Frog being a white supremacist symbol.

    She may have more cognitive horsepower than a dimwit like Rosie O'Donnell, but she is just as clueless about wealth, power, and society -- and is just as psychotic sounding to normal people. (Normal people ignore cable news, which only reaches a million viewers, tuning in to hear the anchors tell them what they already believe.)

    Only those on the Left who are progressive sound even halfway sane these days. Tulsi Gabbard is openly sympathetic with the Trump campaign, Max Blumenthal sees the Pentagon / CIA in control of our Middle Eastern policy rather than that guy from The Apprentice, and sadly Michael Tracey's full-time job now has become trying to defuse the anti-intellectual obsessions over Trump's persona and over Russia conspiracy theorizing from liberals.

    But Trumpian independents with a functioning brain are happy to provide reinforcements, and rescue the project of sober analysis.

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  5. Conservatives never pretended to be intellectual, on the whole. But generally the further "left" you went, the more rational and systematic their thinking became -- whether you agreed with their politics or not.

    Then the New Left took over, big-league during the Postmodern Nineties, and the whole rational analytic approach to observing and commenting on the world has gone out the window.

    There were major debates over this back then, and the Old Left lost.

    It's only since the Bernie campaign that the Old Left has started to gain a wider following, generally due to generational turnover (Millennials being more focused on class issues because they're going to be fucked economically from cradle to grave).

    But also due to independents from earlier generations becoming tired of how extreme the irrational conspiratorial approach has become. It's not just some obscure academic wasting his research efforts on Postmodernism -- it's Rachel Maddow and John Oliver, and their million viewers (for whatever that's worth) going into nightly conniption fits about Russia and DRUMPF.

    Once the embarrassment goes mainstream, normal people can no longer tolerate the embarrassment. Actual rational thought has begun to return to the "left," though largely from independents who voted Democrat, rather than dyed-in-the-wool liberals, along with the stalwart Old Leftists (see Cornell West's recent take-down of Ta-na-ma-ma Coates in The Guardian).

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  6. Trade deficits may not interest the DRUMPF shriekers, but they are being covered by mainstream sites like CNN and HuffPo.

    So unless they improve, the word will get out. Especially since Trump said so loudly and so repeatedly how bad they were on the campaign trail. It will be trivial for Dems to cut ads that juxtapose his campaign trail rhetoric with the actual results under full GOP governance.

    "We understand why you voted for Trump, but look at what the GOP has actually delivered -- vote Generic Democrat for Congress, and stop Republicans from sending more good jobs out of our country."

    This stuff writes itself, if only the irrational emotional hysterics will STFU and go diddle themselves to Maddow or Oliver (same look, though, really), while the Bernie people take over the wheel.

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  7. been having this exact discussion with a dyed-in-the-wool liberal friend, who parrots all the anti-Drumpf talking points. bullshit like the Russia conspiracy, him becoming president so he could further enrich himself, whatever nonsense.
    Instead of counting with Conservative™ boilerplate, I tried to reach him from the left flank so to speak, like you do, but so far unsuccesfully.
    bringing up a class perspective, the idea of re-industrialization, the effects of immigration on wages - doesn't compute. we're headed towards technological utopia anyway, so these are (soon to be) non-issues, is what I took away from him.
    he's upper-middle class with a nice cozy programming job. the more media they consume, the more narrow-minded they seem to be.

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  8. Google saw that I wrote an insightful comment on the nature of the economy when it goes toward the informational sector like Silicon Valley, and garbled it up in censorship. I'll expand it into a proper post later.

    But the gist of it was that tech utopians like your friend believe that each stage of economic development makes people more prosperous. Wrong from pre-history: agriculture made people poorer and elites wealthier than hunter-gatherers.

    But then things turned around with the Industrial Revolution. The techies think this will happen even further when the economy goes from manufacturing and related material sectors toward only informational sectors like finance, media, and digital / online tech.

    Yet these informational sectors are characterized by their utter lack of jobs, since a firm like Google taking over 10 times as much market share does not require 10 times as many workers. Rather, it will eliminate jobs -- namely the jobs serving the market share that it gobbles up ("redundant").

    A stylized economy with only informational sectors means perpetual joblessness, or spotty "gigs" at best, for everyone but a small handful, who will make gigantic incomes.

    This population-sized mass of permanently structurally unemployed people will lynch the handful with jobs, so the super-rich job-havers decide to buy off the masses with Universal Basic Income. Something Zuckerberg himself is already pushing.

    The tech utopians are gambling on most people tolerating an existence of subsisting on UBI plus free streaming porn and video games, and maybe a daily ration of Soylent, rather than having real jobs that pay well.

    I can see that appealing to Millennials, who have only known cocooning their whole lives and might not mind living in The Matrix, but not to the next generation after them, or to Gen X before them.

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  9. Unlike informational sectors, material sectors *do* provide a lot of jobs, although only manufacturing and related sectors pay well.

    Right now, though, those manufacturing jobs are being done by people outside the country, in cheap-labor countries, as employers want to cut labor costs to boost corporate profits.

    Tariffs will penalize anti-American companies and bring those good-paying jobs back home.

    Then we will have decent incomes *without* needing UBI or even the minimum wage, which will be there only as a safety net rather than what everyone makes in a jobless info-tech economy.

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  10. Your friend is one of the lucky few to have a job in tech.

    Most of those pursuing a job in an informational sector know just how few there are -- they talk about it all the time, with gallows humor.

    They also talk about how over-paid the few job-havers are.

    A lot of these people are Bernie supporters. They just need to be steered, if they aren't already going there, toward breaking up the mega-companies as the solution.

    If Google or NBC-Universal were broken up into 100 smaller companies, that would create 100 times as many jobs as there were before. Then the Bernie people looking for a job in media or digital tech will stop being frustrated, and earn a decent honest living.

    But if they go the route of pushing for a higher minimum wage or UBI, plus a minimal basket of "free comfy shit," they will accept the bleak jobless landscape where they're just bodies in The Matrix cells. The info-economy monopolies will remain as large, and maybe grow larger, as long as their frustrated would-be-but-won't-be employees withdraw into their UBI cocoons and wait for a painless death.

    Trust-busting as job creation -- that's the vision that the Trump supporters need to promote among the Bernie movement. Social safety net is fine, but accepting UBI plus free comfy shit is surrendering your soul to dystopian mega-corporate hegemony.

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  11. Thoughts On Power12/19/17, 2:47 PM

    You're right about the stratification regarding money and tech!

    Everyone's already surrendered their soul to mega-corporate hegemony. UBI/GAI are good. I don't see an alternative.

    The reason for jobs of the sort you mention is status and self-worth, not actual need.

    Tariffs are good but that's like the gold standard or any of the other policies pre-1972/3 that created local prosperity - BANNED! By the Powers That BE. Cuz they work. They have real trickle down effects that are opposite to the hidden rulers agenda.

    All good analysis on your end. Reminds me of Pat Buchanan.

    Here is a question. You talk of system or institutional analysis. Why would voting work?

    Plenty of analysts of power note that voting and overt politics acts like an energy sink for discontent. They drain away energy and change nothing but a few tweaks.

    The phrase is:

    'if voting worked it would be made illegal'.



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  12. It works because the public were actually successful in reversing inequality, and creating equality, during the mid-century(1920-1970) - partly by voting.

    There's plenty of other examples of democratically elected politicians who radically changed course - Abraham Lincoln, etc.

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  13. The cynicism of "voting doesn't matter" is something that ferments during periods of rising inequality - the last 40-50 years, depending on whose schema you're using.

    Strauss and Howe claim that a lack of trust in institutions - including elections and elected offices - correlates with inequality. I'm pretty sure Peter Turchin says the same thing somewhere.

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  14. Voting matters because it determines which elite coalition will rule -- the Pentagon, oil companies, agribusiness, and Pharma, or Wall Street, Silicon Valley, media, and higher ed.

    We may not like either side, but it's not true that they're the same. One has interests stemming from informational sectors in the economy, the other from material sectors.

    They may overlap on some areas that benefit elites uniformly, but not on those that have different -- especially, opposite -- consequences for either side.

    Cheap labor is more important to material sectors, so GOP rule will be geared more toward cheap labor than Dem rule.

    Warmongering will be more common under GOP vs. Dem rule.

    On the other hand, we may be allowed more freedom of speech under GOP rule since they don't control the means of communication.

    However, the GOP has been weak at attacking the power factions of the other side -- allowing higher ed to grow in size, wealth, and influence, letting media companies merge, and bailing out Wall Street.

    The GOP only goes after the grassroots groups on the other side -- poor, working class, unions, etc. They won't bust up a media monopoly that is devoted to destroying the Republican party.

    The Dems will absolutely go after the other side's major factions, like single-payer healthcare that will defund the drug monopolies and HMOs, taxing carbon or gasoline to take down the energy companies, slamming Saudi Arabia (once they're out of power) and shying away from new wars (albeit not saying anything about current wars and commitments).

    They're not anti-militarist, they just correctly see every dollar spent on defense as a dollar not spent on banking.

    We are left with the decision of which of these elite coalitions we trust the most, or distrust the least, with governing our society.

    Right now, I distrust the Dems least. The hope was Trump turning around the elite factions controlling the GOP, but it ain't happening.

    Under GOP rule, we can expect cheap labor policies, open borders (part of that), open borders for jihadists since that's the Pentagon's main allies (Saudi Arabia, Pakistan), more pointless wars, and dismantling the social safety net.

    To the extent that these things don't materialize, it will only be because Trump was able to influence things at the margin within the GOP, and Dem obstruction from the other side of the aisle.

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  15. That's the short-term usefulness of voting, even while both parties are elitist rather than populist.

    To make either or both parties do our bidding, we need voting to be part of a broader movement from below. Like the labor movement and Temperance movement during the Progressive Era.

    That ramped up so much by ~1920 that the elites finally relented and said, "OK, better to give you guys what you're asking for than for us to suffer the fate of the Romanovs."

    The way forward is to act as a collective force to raise the costs on the elites for ignoring our popular demands. Voting would be one component of that broader collective effort. "Don't serve our needs, and we'll vote for the other party or a primary challenger."

    The Dems got the mother of all bitchslaps last year, and even the corporate sell-out Centrists like "Third Way" are saying they need to focus on working / middle-class economic issues to bring back the Obama-Trump voters for Congressional races.

    Less clueless than the GOP, whose many losses only led to their "autopsy" finding that they needed to reach out more to Hispanics!

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  16. WRT cowardice and the media:

    - Sen. Amy Klobuchar (D-MN), the ranking Democrat on the Senate subcommittee, requested a hearing on the proposed mega-deal, echoing concerns voiced by advocates who worry the $66 billion deal would concentrate too much power in the hands of a single Hollywood studio, and result in consumers paying higher prices for entertainment.

    “I’m concerned about the impact of this transaction on the American consumer,” said Klobuchar.-

    So, yup, we've got Democrats concluding that media conglomerates are getting too big for our own good. And it's fairly easy to voice this sentiment in the Midwest, where few over-paid media or entertainment superstars dwell.

    You'd think that one of these days, the GOP might get cracking on "the liberal media", but nope. It grates on the sensibilities of decadent conservative individualists/free agents to go after any elite's cash cow, even when said cash cow spews out atrocious multi-cult garbage.

    For those claiming this is a partisan anti-Fox thing, well, Disney is gonna Disney, even if Rupert Murdoch slithers onto Disney's board. And is Fox's scripted TV material or Fox's movie division any more conservative than the competition? Not really. Murdoch's "news" outlets are slanted to the corporate right, but other sectors are allowed to be quite liberal (The Simpsons has always been a liberal Boomer haven, even after two decades of increasingly poor ratings caused by dull satire that's blown out of the water by the manic take no prisoners style of South Park)

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  17. The introduction of IB represents some sort of concession on the part of the elites. Its recognition that the current system is unstable and isn't working. For most people, its better than working two jobs, trying to go on disability, etc.

    Looking through recent history, welfare is most likely to be introduced when crime rises, and cut during periods of cocooning. It was Clinton, in '95, who reduced welfare with welfare reform. Why is this? Maybe because the workforce is rougher when crime rises, or people can organize grassroots movements better when they are more social(and demand welfare).

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  18. The real million dollar question: no Star Wars post this year?

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  19. Is there anything left to say about Star Wars? I'll see for the weekend...

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  20. Was being semi-facetious; I do really enjoy your takes, but you're right that it's kind of a dead horse by now. It does seem like this one is getting some real pushback from audiences and non-professional reviewers, so maybe Disney is blowing through fan goodwill faster than expected with all their lame story innovations and overexposure. Still, if you get the chance to drop a few comments it'd be nice to get your take.

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