Trade is sacking American workers, sinking family incomes

Trade is sacking American workers, sinking family incomes

January 27, 2016   Peter Morici                                                             

Slow growth is often blamed for the dearth of good paying jobs and the administration’s inability to stem the decline in average family incomes.
The six-year expansion has averaged 2.2 percent annual economic growth and added 188,000 jobs per month. Coming off a similar bout with double-digit unemployment, the Reagan recovery accomplished about 4.6 percent annual growth and adjusting for the size of the economy, added almost twice as many jobs.
Now conditions in China are threatening to deflate or even derail the U.S. recovery. Its growth has slowed from double digits to less than 7 percent—at least as reported by Beijing’s number crunchers. Western economists peg growth at closer to 4 percent, and much of that is decadent and sterile.
Spending to build apartment and office buildings that fail to attract a single tenant and even entire ghost cities complete with utilities counts in China’s formal GDP tally but adds nothing to its productivity. Such wasteful outlays have helped rocket China’s combined public-private debt to 260 percent of GDP.
Nervous about a looming credit crisis, China’s private investors are heading for the doors—selling yuan for dollars to invest in foreign real estate and securities. That exodus is panicking global stock markets, pushing down the yuan against the dollar and making Chinese goods artificially more price competitive against American-made products than underlying differences in national costs warrant.
For all the talk of a faltering industrial dragon, U.S. imports from China were up, exports down and the bilateral trade deficit increased nearly $25 billion in 2015—killing at least another 200,000 American jobs.
Crippling debt is epidemic among emerging economies, as many borrowed in a mad race to expand manufacturing. Like Japan and the European Union, they now seek to cope with excess capacity and crushing interest payments by cheapening their currencies to boost exports and send their unemployment to the United States.
All of this makes foreign goods cheaper at Wall-Mart and U.S. exports too expensive, slows growth and adds to deflation that has the Federal Reserve flummoxed.
Those beggar-thy-neighbor strategies have pushed U.S. manufacturing into recession—employment in export-focused durable goods manufacturing is down 35,000 since June.
Trade should work better for America. After all we have a highly productive workforce and still generate most of the world’s cutting edge innovations, but commerce does not happen in a vacuum. Governments put up tariffs and impose administrative burdens on foreign goods and investment, and offer local businesses subsidies to boost exports.
Read the full article on the Hill.