January 16, 2021

Are we a nation of fiscal dropouts?

Posted on 09. Jan, 2012 by Stephan Helgesen in Economy

After seeing the latest December unemployment numbers (8.5%) that reflect a mere one-tenth of one percent drop in unemployment from the previous month, it got me to thinking about the real statistics that undergird this obscenely high figure that has stayed above 8.0% for over 30 months.

It’s what the unemployment stats DON’T say that worries me. They don’t include the chronically unemployed, those who’ve totally given up looking for work and those who are underemployed (occupying part-time instead of full-time jobs).

It also doesn’t mention the approx. 150,000+ jobs that must be created each month just to accommodate the new entrants to the labor market. I don’t study these figures like the professional statisticians, but I do know sleight of hand when I see it, and this oversimplification of our true unemployment is deserving of inclusion in a David Copperfield show.

Black magic didn’t get us into our current economic morass; it was a number of factors that came together over time. One of them was: we took American business for granted and forgot to ‘check in’ on them once in awhile to see what they were doing with their profits, investment dollars and  manufacturing strategies. Big scandals like Enron, individual shysters like Bernie Madoff and the recent MF Global debacle where $1.2 billion of clients’ money is MIA, made some of us sit up and take notice of these prime time abusers.

Others have just shrugged their shoulders, clucked their tongues, demanded a little more oversight and were placated by the regulators and a ‘there there’ pat on the head by our government. “Everything (like Fannie Mae and Freddie Mac) is going to be alright,” said soon-to-be-retired Congressman, Barney Frank. “Trust us.”

Somewhere along the way we dropped out and thought that due diligence was something other people did. We didn’t connect the dots or forgot that the first duty American business has (to its stockholders) is to survive. Companies will do what’s necessary in order to survive, and that includes off-shoring manufacturing jobs and investing profits overseas instead of here.

We turned a blind eye to corporate excess in the boardroom, too. CEOs’ salaries, bonuses and golden parachutes escalated at an alarming rate, and no serious attempts were made to make mandatory a change in the way preferred stockholders vote on these benefits packages (they should be detaching or decoupling the benefits votes from all the other votes taken at annual general meetings). It’s no surprise then that these absurdly high benefits have continued to increase, markedly. Whose fault is it anyway? Answer: ours.

When large profits were being racked up by corporations who were investing them in non-productive investments (read: not manufacturing or infrastructure), stockholders did not object because all boats were rising on the same tide…or so we thought. Stock prices indicated America’s strength as did America’s home values. Meanwhile, many Americans hit the ‘off’ button and stopped trying to understand the economic challenges facing our country because they were too complicated.  We trusted the Federal Reserve and the President as we ‘bailed out’ and ‘TARP’ed’ our way forward with borrowed money.

What we didn’t realize was, that like everything in life, there comes a day of reckoning, of paying the bill or when somebody yells, “Hey, the emperor not only has no new suit of clothes, he has no clothes at all.

America’s markets have always behaved like our children who, when given something for free (and in the case of our banks a massive capital infusion and blank check to act however they want) don’t respect the hard work it took to earn that something. Instead, their sense of entitlement grows and they return with an open hand for another helping.

The trouble is that the cupboard is now bare and the cookie jar is filled with IOUs. Value is no longer king, because value has plummeted down the rabbit hole.  We must realize that real value is not only determined by supply and demand and stock prices. It is also a function of perception. If we are to survive this recession – and for many the recession is still very much alive – we must get a grip on our expectations and our national debt and get re-engaged in the running of our companies and in our political process.

The Administration has rolled the Trojan Horse of America’s long-term debt squarely onto Main Street and is downplaying its impact on us in an election year. To ignore this future debt and retreat into inertia, or worse spend more money, would be the ultimate drop-out decision. That’s simply unacceptable when the future of our whole economy is at stake.

- Editor

Stagemanship or Statesmanship?

Posted on 02. Jan, 2012 by Stephan Helgesen in Politics, Uncategorized

Where are the Stewards of Democracy, the Protectors of Capitalism and the Guardians of the Constitution?

I hope that in 2012 America’s leaders will resolve to regain something they’ve lost over the last few years…their fiduciary responsibility to the three most sacred tasks we the people have entrusted to them: 1. to protect and preserve the Constitution, 2. to provide for the common good and 3. to secure the defense of the Republic against all enemies both foreign and domestic

Many of us have entered the New Year, soberly, and with a renewed sense of purpose about restoring America’s greatness in 2012. Some will choose the upcoming elections in November to remove the President, his advisors, his Czars, and his ideology and along with them some Congressional Representatives. Others, who are content with the status quo or believe that hope will change things, will vote to retain them. It’s that simple, really.

The current administration has already set the stage for the second phase of its Great American Makeover. No longer just a cosmetic change using the miracle lotion of stagemanship, the Obama Administration seems intent on giving America a major facelift. The wrinkles that have shaped Columbia’s character and America’s history will be removed, consigned to the ‘before’ side of the page. After the next major surgery, we will not recognize her. Her face will be tight, but her morals will sag behind her facade.

Every administration has an agenda, just as every President, Senator and Congressman has a ‘to do list’ of action items they want accomplished. No one should begrudge them that, but everyone should begrudge them the right to misrepresent who they are and what they want for our country before they’re elected. Each candidate owes us the truth about how they will acquit the three sacred trusts I mentioned earlier.

Before we discuss those trusts, we must be clear about one thing: there are only two ways to really effect change – by electing people of high moral character to office or through our established democratic process (the third way, revolution, is enshrined in our Constitution and is therefore part of the democratic process, strangely enough).

That said, let’s examine how the current administration should be rated for its handling of all three. Preserving and protecting the Constitution simply means upholding and enforcing the law of the land. What grade would you give the Administration for the Justice Department’s refusal to prosecute a voter intimidation case against the Black Panthers for wielding billy clubs at a Philadelphia polling place in 2008? What about the ‘Fast and Furious’ gun-walking operation that has dogged Attorney General Eric Holder?

Then there’s the ‘Affordable Healthcare Act’ commonly known as ‘Obamacare.’ Aside from the blitzkrieg tactics used to pass the bill (which many would call legislative thuggery), does the individual government mandate to buy health insurance under penalty of law bother anyone who’s read the 10th Amendment? Apparently the Attorneys General of 27 U.S. states think so as their suit is now in the hands of the Supreme Court. We will see if the scales of justice are balanced if Justice Elena Kagan recuses herself from this case (she was an active participant with the Obama Administration in the formation of the Act).

Providing for the common good is high ground both parties claim to hold, and while each sees the ‘shining city on the hill,’ neither one really has a foolproof legislative GPS to find the right route. Both, however, have more than enough rhetoric about why we should stay their respective ideological course to reach the shining city’s gates. Their paths could not be more divergent.

For the Democrats, the ‘common good’ is a euphemism for collectivism. Their city shines because it is constantly being polished by government workers and funded by American taxpayers. It is a city where maximum earnings levels are dictated by government and where wealth is distributed by government fiat. In their shining city, government always knows best.

The Republicans’ city shines with the glow of free enterprise. You can tell by the billboards that announce your arrival with slogans like, “It’s Your Shine, Keep It Bright” not “Your Shine is Mine.” It’s a city with a City Manager, not a community organizer Mayor. Their city is run like a business by businesslike people.

The answer to what the ‘common good’ is was purposely left open for debate by the Founding Fathers, though they were specific in which areas government should not be involved. Government ownership of private property and appropriation of assets were two of them.

That segues nicely to the General Motors bailout and the strong-arm tactics used by the Administration to intimidate priority shareholders to give up their right to higher recompense for their securities. Add to that the Government’s intervention in our economic ‘natural selection’ by allowing the Treasury Secretary to choose which investment houses should live or die and you surely have another case for Constitutional aggression.

Preserving the Republic sounds like a phrase straight out of the Minuteman handbook, but it is as relevant today as it was over two centuries ago. One of the most widely-debated issues that calls the Administration’s defense of our Republic into question is their seeming unwillingness to secure our southern border with Mexico. By filing suit against legislation passed by several states that would protect their citizenry from repeat illegal immigrant offenders, the Administration has turned away from its responsibility under the Constitution thereby putting law-abiding Americans at risk.

Protecting America against all enemies, foreign and domestic will be the central issue of the current Administration’s campaign strategy as it tries to shift the focus to its foreign policy successes (like the assassination of Osama bin Laden) and away from the economy. The rhetoric will go something like this, “We can promote democracy without going to war. We can defuse potentially dangerous relationships by talking with our enemies.

We must trust our institutions (like the U.N.) to represent our interests. We must not undermine foreign governments just to achieve democracy. The Bush Doctrine (of preemptive strikes) is dead. Long live the Obama Doctrine (of perpetual discourse). The jury may well be out on the efficacy of the Obama Doctrine (because talk is never done), but there is one area where we cannot afford to make any mistakes, and that is terrorism.

America may have had its fill of war, but it is not yet ready to let down its defenses against terrorism. While the Administration may wish to soften the dialogue through euphemization, it will fail. War is still war; it is not overseas contingency operations. Terrorism is still terrorism; it is not a man-caused disaster. We will not succeed in re-writing the rulebook by simply changing the terminology.

Unless we fully understand how the game is being played and what motivates the other side to play the way they do, we will be the walking wounded on the field or worse yet, sidelined and helpless.

- Editor

The Reciprocal Market Access Act and IP Protection – Too Long Overdue!

Posted on 01. Jan, 2012 by Stephan Helgesen in Economy

“America’s trade policies often force domestic industries to compete on an unfair playing field with foreign competitors, and it’s costing us jobs.  To help address this problem, we have introduced H.R. 1749, The Reciprocal Market Access Act.” Congresswoman Louise M. Slaughter (D-NY) Congressman Walter B. Jones (R-NC)

Right now, three fundamental premises underpin America’s overall global economic and trade policy.  Each is deeply flawed, especially as it relates to our single most important trade relationship, which is that with China.

The first premise is that advancing the interests of America’s multinational corporations always benefits American workers and in turn the American economy.

The reality, however, is that the disconnect between the interests of America’s multinational corporations and the best interests of employees and the country has never been greater.  Significant consequences have been the  consequences-be-damned offshoring of millions of American manufacturing jobs and a failure to tie the fruits of domestic R&D and innovation into corresponding production in the U.S.

The second premise is that the rules-based, free trading system favored by U.S. multinationals, combined with the overall rule of “Country Comparative Advantage”, will result in balanced globalization for all trading partners, to the advantage of American workers and the American economy.

This premise works well when all nations play by the same rules.  However, we know that China especially continues to pursue mercantilist policies that are at best anti-competitive and often illegal.

Many of us have written often about how China has gained unfair trade advantages through its abysmally low direct labor costs, its lack of meaningful environmental and labor standards, and its currency manipulation.  Less appreciated, however, are the other measures China uses to game the system, the two most extreme of which are China’s “Indigenous Innovation Production Accreditation Program” and its related unceasing demands that U.S. companies seeking to do business in China make massive transfers to it of their intellectual property that took decades to develop with internal investment and often with support from U.S. government-funded research laboratories.  Because of their perpetual ripple effects throughout our economy, these IP transfers will ultimately be an even bigger drain on our economy than the direct off-shoring of millions of American jobs over the last 15 years.

The third premise is that the U.S. can make up for the millions of manufacturing jobs being lost overseas with exports of “software, movies, medicine, university degrees, management consulting and legal work” plus new employment by the high technology companies of Silicon Valley.

This first conclusion is simply absurd on its face.  And as for the high-tech companies and their plans and capabilities, Silicon Valley is mostly a jobs-exporting juggernaut and not a jobs-creating one.  Our own Bureau of Labor Statistics has concluded that U.S. employment in “information technology” will actually be lower in 2018 than it was as far back as 1998.

In the face of these three very flawed premises and actions by certain of our major trading partners which are particularly counterproductive to American interests, we can pursue one of two strategies:

We can continue to try to resolve our problems through lengthy bilateral and international discussions over the next several years, which our recent history in this arena ought to discourage; or  we can adopt a realistic, hard-headed approach to leveling the playing field, in order to straighten out our trade deficit and help U.S. companies be more competitive.

Both strategies, of course, would be intended to create American jobs, especially manufacturing jobs. The first strategy, however, smacks of timidity and belies the urgency of the problems and the lack of past success in patiently trying to resolve these problems through lengthy bilateral and international discussions.  By contrast, the second strategy is all about quickly restoring U.S. self-determination and adopting a more urgent, hard-headed approach.

We need to do three things to successfully put into place the second strategy.

First, we need to enact the Reciprocal Market Access Act, the bipartisan legislation sponsored by Representatives Slaughter and Jones.  This Act was first introduced in 2007, and reintroduced in this Congress.  Its companion bill, S. 1766, has been introduced by Senators Sherrod Brown (D-OH) and Kay R. Hagan (D-NC).  Here is why this legislation is critical.

Right now, U.S. industry faces significant non-tariff barriers (“NTBs”) in key markets, preventing fair market access.  These NTBs deny U.S. manufacturers current and future export opportunities.  As the Members of Congress have noted, “eliminating the U.S. tariffs without securing elimination of NTBs is equivalent to unilateral disarmament – giving full advantage to our competitors, while allowing them to protect their home markets.”

The Reciprocal Market Access Act would immediately break down the ‘barrier’ (i.e., the Chinese Wall) which, under the current Doha negotiation process, exists between tariff and non-tariff barriers. Currently, so-called “tradeoffs” are almost strictly tariff-for-tariff and non-tariff-for-non-tariff.

This Act, according to its legislative write-up, would, in addition:

Tie the authority to reduce or eliminate tariffs in trade agreements to achieving meaningful market access for U.S. domestic producers that have identified and worked with the U.S. government to address those barriers.

Require that the President provide a certification to the Congress, in advance of agreeing to a modification of any existing duty on any product, that sectoral reciprocal market access has been obtained.  This will also greatly enhance the vital trade ‘partnership’ with Congress.

Give our government – triggered by either a private sector or a Congressional request – the automatic negotiated right (or “snap back authority”) to revoke concessions to cut tariffs if our trading partners don’t implement the commitments they made in order to open up their markets.

Second, for economic, employment, competitiveness and national security reasons, the administration and Congress should continuously test their views of our international trading environment against the following realities:

The now-desperate need for a Manufacturing & Industrial Policy for the U.S. that balances the mercantilist policies of our major trading partners, especially China’s, whose overall trade surplus in manufactured goods matches almost dollar for dollar America’s trade deficit in such goods.  Nineteen members of the G-20 have defined Manufacturing Policies.  America alone does not, even though there is not a responsible economist who believes that an economy as large and complex as ours can prosper with less than 20-25% of its workers being in manufacturing and without the sector contributing a like percentage of GDP.  As it is, however, only 8 to 9% of Americans now work in manufacturing, and as a percent of our GDP, the sector provides just 11.2% of the total.

The obvious challenge to America’s interests from China’s non-WTO-compliant “Indigenous Innovation Production Accreditation Program” and from China’s illegal subsidies and currency manipulation.  Many of China’s practices provide its companies with a clear-cut “counter-available subsidy” and they need to be treated as such, including China’s abysmal environmental practices.

The outright theft every day of America’s hard-gained, valuable intellectual property, especially by China, which enervates  our economy as much as any other trade tactic employed by China or any other country.  The U.S. International Trade Commission estimated in May that “up to 2.1 million new direct private-sector jobs would be created in the U.S. in total if China [alone] raised its IP protection to U.S. levels.”

Third, we need to stop international intellectual property theft.

When it comes to finding solutions to the daily theft of America’s invaluable IP, a single anecdote brings this imperative home.  Microsoft, one of the real gems of American ingenuity and also one of the most patriotic major companies headquartered in the U.S., recently sold to a large commercial customer in China one (1) unit of its advanced business software, for several hundred dollars.  However, when it sent out an upgrade to the software, the upgrade was downloaded thirty million (30,000,000!!) times.  This egregious theft of Microsoft’s IP – and the millions of other thefts in China of the company’s intellectual property – is why Microsoft’s profits from sales in China, with its 1.3 billion population, are no greater than its profits from sales in The Netherlands, with its population of only 16.7 million.

The best immediate solution to the theft of American intellectual property would be to adopt former U.S. Senator Slade Gorton’s (R-WA) recent recommendation to the U.S. China Economic and Security Review Commission that the U.S. impose tariffs which would generate revenues equivalent to 150% of the estimated annual IP losses suffered by American companies.

The best solution into the long-term would be for the administration and Congress to make IP theft a trade agreement priority, which is a priority sadly lacking today in an urgent, encompassing way.

Following the US-China Strategic and Economic Dialogue meetings held in mid-May 2011, Commerce Deputy Assistant Secretary Craig Allen declared: “In all of these cases – indigenous innovation, intellectual property enforcement, transparency – we would have preferred much more explicit detail in terms of timeline, in terms of coverage, and in terms of implementation. But we are pleased at the same time that the Chinese did commit those previously verbal assurances in writing.  That is progress.”

This may be deemed “progress” by some, but I, for one, am not satisfied that this is the kind of progress that we should ever accept.  We need to take a much more pro-active stance in trade in order to better balance the nationalistic economic policies and mercantilist practices of our trading partners with our own trading rights as a nation.

Within the last week, the recently confirmed new Secretary of Commerce, John Bryson, declared in a speech that we must reshape our trade policies toward China.  One important way to meaningfully do that would be for him to get the administration to support the important trade legislation being sponsored by Senators Brown and Hagan in the Senate and Representatives Slaughter and Jones in the House.  As they have implored us: “We must ensure that our trade negotiators do not give away our domestic markets in future trade agreements without gaining meaningful market access for American manufacturers in exchange.  Unless other governments play by the rules and remove barriers to our exports, the U.S. should not acquiesce to their demands by further opening our market – already the most open market in the global economy.”

This article was submitted by Leo Hindery Jr. who is chair of the US Economy/Smart Globalization Initiative at the New America Foundation, co-chair (with USW President Leo Gerard) of The Task Force on Jobs Creation, founder of Jobs First 2012, and a member of the Council on Foreign Relations. He is the former CEO of AT&T Broadband and its predecessors, Tele-Communications, Inc. and Liberty Media, and is currently an investor in media companies.


New Mexico: Sixth largest recipient of federal money

Posted on 01. Jan, 2012 by Stephan Helgesen in Economy, Uncategorized

New Mexico ranks sixth among the states in terms of per capita federal spending. New Mexico’s dependence on federal government spending increased in FY10. According to the U.S. Census Bureau, federal government spending during the year grew to $28 billion, up from $27.5 billion in FY09. New Mexico ranks sixth among the states in terms of per capita federal spending. In FY10, the federal government spent $13,577 per capita for every New Mexican.  Of that $28 billion of federal spending, $6.7 billion came in the form of grants, $7.4 billion in procurements and $2.7 billion in salaries and wages.

The U.S. Department of Energy spent $4.8 billion on procurements in the state during the year. Federal spending in New Mexico amounts to about one third of the state’s GDP. Business and political leaders have expressed concern about the state’s dependence on federal spending, especially in light of looming federal budget cuts.

To read the whole article, logon to the New Mexico Business Weekly at www.bizjournals.com/albuquerque

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