Everything's Coming Up Roses



July 19, 2008

 

John McCain's top economics advisor, Phil Gramm, said in a July 9, 2008 Washington Times story, "We have sort of become a nation of whiners." ^[1]

Really? Well excuse me for whining. I didn't realize everything's coming up roses!

John McCain says he needs to be educated about economics. ^[2] So, he has economists who advise him on economics and the economy. Phil Gramm, a former U.S. senator from Texas, is his top economics advisor. Mr. Gramm's wife is Wendy Gramm, a former board of director with Enron. ^[3] He is now the Vice Chairman of UBS, the second largest bank in Europe and a global financial services company and has lobbied Congress about the U.S. mortgage crisis on behalf of his company. ^{[4, 5]}

Gramm said in the Washington Times, "You just hear this constant whining, complaining about a loss of competitiveness, America in decline despite a major export boom that is the primary reason that growth continues in the economy." Later, on CNN, Gramm attacked politicians who "blame speculators and oil companies for our problems, instead of presenting concrete programs for using energy more efficiently, or leaders who don't think we can compete with Mexico." ^[6]

I believe this is a classic case of twisting facts to defend the status quo. Regarding the so-called export boom, Gramm fails to mention that it comes at a very high price: $6.5 trillion in direct, accumulated trade deficits ($817 billion as recent as 2006!). Regarding his comments about competing with Mexico, Electrolux told Michigan's governor recently: "There is nothing you can do to compensate for the fact that we are able to pay $1.57 an hour in Mexico." ^[7] Additionally, our trade deficit with Mexico has jumped to $75 billion in 2007 compared to a trade surplus of $5 billion in 1992 before NAFTA was passed. ^[8] Less than half of the deficit with Mexico was due to oil imports ($30 billion), the vast majority of the deficit was due to merchandise ($45 billion). Roughly, for every dollar the U.S. makes in exports, it loses $1.79 due to imports based on 2006 trade data. ^[9] Sounds like a lousy business model if you ask me! So, here again, Gramm is not representing the interests of Joe Q. Public ...he's representing the financial industry and multinational CEO's who profit enormously from trade at the expense of workers and our nation's fiscal health. See What's Wrong With The Economy below for a more accurate diagnosis of the economy. ^[10]

Consumer spending accounts for two-thirds of U.S. economic activity. ^[11] When consumers slow down their consumption, everyone is affected. One sad aspect of this is that it impacts churches and charitable groups who help those in need. I would like to advocate in this commentary that we all try to continue supporting our community churches and charitable organizations during this time of uncertainty and hardship. The assistance these organizations provide are extremely important to those affected by job losses and foreclosures.

The main point of my commentary is to highlight how those who want us to continue spending as if nothing is wrong are defending the status quo. The longer the status quo continues, the richer the richest top one-percent become while the rest of the country sinks deeper into debt to foreign governments (e.g., Communist China), unemployment, and foreclosure. As I have written before (Losing Our Independence) our nation must consume less imports and produce more exports. It's not a question of whether free trade is good or bad. The fact is that, in reality, U.S. free trade and market-based policies have nearly bankrupted the U.S. (over $6 trillion in debt from accumulated trade deficits that have required the U.S. government to borrow, increasingly from Communist China and other foreign interests at a rate of $2 billion a day!). Again, read my commentary, Losing Our Independence. 

I'll end by re-posting an excerpt of an excellent reader response to the Washington Times story:

What is it with Republicans when it comes to facing economic reality? They were all too ready to take credit for any expansion when times were better, and quick to blame the Democrats for anything bad. But now? Phil Gramm certainly put his foot in it.  ... The point is that being in recession or being close to recession might be worth economists’ time to debate, but for us in the real world, this is not horseshoes: close is as good as a ringer.  ... With 343,000 foreclosures, with housing prices in freefall, with unemployment rising, with the prices of necessities like gasoline and food spiking, with even the employed living from paycheck to paycheck, it takes a very special kind of person to castigate those who are worried about the economy as “a nation of whiners” who are living in a “mental recession.” Perhaps when you are the Vice-Chairman of a huge Swiss bank, have medical care covered as part of your benefits from serving in Congress and sit on the boards of major corporations, everything is rosy. As for the rest of us who lack these advantages, uninformed as we are, it’s too bad for Gramm and his party that we get to vote in November. Perhaps this is what happens after having your way too long in Washington. RIP.

Now go spend like a drunken sailor as McCain, Gramm, and the GOP want you to do. This group of folks has no accountability (e.g. doubling the national debt in less than eight years with increased spending AND tax cuts for the rich, acceleration of jobs going overseas, etc) and, trust me, they have their fortunes protected unlike most other folks. So, spend, Spend, SPEND and put yourself and the country deeper in debt. And, have fun 'cause everything's coming up roses! ;-)

References:

1. Washington Times: McCain adviser talks of 'mental recession'
2. Youtube: Robert Greenwald: McCain's YouTube Problem Just Became a Nightmare
3. Public Citizen: New report links actions by Sen. Phil Gramm, wife Wendy Gramm and Bush officials to Enron fiasco, California crisis
4. Wikipedia: UBS AG
5. MSNBC Countdown: McCain economic policy shaped by lobbyist; Swiss bank paid McCain co-chair to push agenda on U.S. mortgage crisis
6. CNN: Gramm: We need more leadership, less whining
7. IHT/NYTimes: For bargain-basement America, foreign investment no panacea
8. U.S. Census Bureau Foreign Trade Statistics: Trade With Mexico - 1992
9. U.S. Census Bureau Foreign Trade Statistics: Trade With World - 2007
10. Economic Policy Institute: What's Wrong With The Economy?
11. BBC: US consumer gloom deepens in June


Related:

o Centre For Research on Globalization: The Real State of the US Economy
o McClatchy: Business bankruptcies soar, reflecting economic woes
o The Nation: The Rich and the Rest of Us
o CNN Video: Obama knocks Gramm comments
o Forbes: A Choking Trade Deficit
o Commentary: Losing Our Independence
o Public Citizen: 43 Percent of Lawmakers Who Left Office Since 1998 Have Become Lobbyists, Public Citizen Analysis Shows
o Coca-Cola ships finance office jobs overseas (Dallas Location, Tampa Bay/Brandon Location)
o FDR's Fed. Reserve Chairman: Inequality of Wealth and Income
o Huffington-Post Max Bergmann: The Week That Should Have Ended McCain's Presidential Hopes

Examples of "Whining":

o CNNMoney: Foreclosure filings up 120%
o Lake James, NC News & Observer: Repossessions flower as economy withers
o Detroit FreePress: Auto sales worst in 15 years
o Reuters: As economic woes mount, homeless plan to vote
o McClatchy: Commercial bankruptcies soar, reflecting widening economic woes
o AP/Yahoo: Downturn gains steam as inflation roars ahead
o McClatchy: A gloomy day for the economy, except at the White House
o LA Times: Home Builders Battle To Survive
o Bloomberg: U.S. Economy: Home Construction Hits 17-Year Low
o Press-Enterprise: Boat sales capsize
 

What's Wrong With The Economy
Economic Policy Institute
June 2006

1. Profits are up, but the wages and incomes of average Americans are down.

o Inflation-adjusted hourly and weekly wages are below where they were at the start of the recovery in November 2001. Yet, productivity—the growth of the economic pie—is up by 14.7%.
o Wage growth has been shortchanged because 46% of the growth of total income in the corporate sector has been distributed as corporate profits, far more than the 20% in previous periods.
o Consequently, median household income (inflation-adjusted) has fallen five years in a row and was 4% lower in 2004 than in 1999, falling from $46,129 to $44,389.3

2. More and more people are deeper and deeper in debt.

o The indebtedness of U.S. households, after adjusting for inflation, has risen 42.0% over the last five years.
o The level of debt as a percent of after-tax income is the highest ever measured in our history. Mortgage and consumer debt is now 120% of after-tax income, more than twice the level of 30 years ago.
o The debt-service ratio (the percent of after-tax income that goes to pay off debts) is at an all-time high of 13.9%.
o The personal savings rate is negative for the first time since the Depression.

3. Job creation has not kept up with population growth, and the employment rate has fallen sharply.

o The United States has only 1.9% more jobs today than in March 2001 (the start of the last recession). Private sector jobs are up only 1.5%. At this stage of previous business cycles, jobs had grown by an average of 8.8% and never less than 6.0%.
o The unemployment rate is relatively low at 4.6%. But the percent of the population that has a job has never recovered since the recession and is still 1.3% lower than in March 2001. If the employment rate had returned to pre-recession levels, almost 4 million more people would be employed.
o More than 3 million manufacturing jobs have been lost since 2000.

4. Poverty is on the rise.

o The poverty rate rose from 11.3% in 2000 to 12.7% in 2004.
o The number of people living in poverty has increased by 5.4 million since 2000.
o More children are living in poverty: the child poverty rate increased from 16.2% in 2000 to 17.8% in 2004.

5. Rising health care costs are eroding families' already declining income.

o Households are spending more on health care. Family health costs rose 43-45% for married couples with children, single mothers, and young singles from 2000 to 2003.
o Employers are cutting back on health insurance. Last year, the percent of people with employer-provided health insurance fell for the fourth year in a row. Nearly 3.7 million fewer people had employer-provided insurance in 2004 than in 2000. Taking population growth into account, 11 million more people would have had employer-provided health insurance in 2004 if the coverage rate had remained at the 2000 level.