President Bush in the State of the Union Address:
"A future of hope and opportunity begins with a growing economy -- and that is what we have. We're now in the 41st month of uninterrupted job growth, in a recovery that has created 7.2 million new jobs -- so far. Unemployment is low, inflation is low, and wages are rising."
This position on our economy ranges from cherry picking very superficial numbers - to making completely false statements. There are an excruciating number of factors that must be taken into consideration when putting together a real picture of our nation's economy. The following only begins to review a couple of them but directly addresses claims made by this administration.
We do not actually see 41 months of uninterrupted job growth. First, the quoted number does not factor in population. Our economy falls millions of jobs short of keeping up with the population growth. Also, the growth spouted as evidence of a booming economy reflects growth only in service providing industries - i.e., health care, food service (waiters, waitresses and bartenders).
The United States secured its place as the preeminent economic superpower with dominance in both manufacturing and technologies. Globalization will create many shifts, but critical to the US economy is that the process maintain a multi-dimensional balance. We should not underestimate the peril to the US economy in mismanaging this balance. We have witnessed the pummeling of the US manufacturing sector as the US trade deficit has grown. At present, it is reported that nearly half of all US-owned manufacturing capacity is found outside of the US. The "sell" line to Americans was to not focus so much on the loss of manufacturing jobs as they will be replaced with knowledge or information positions as the US maintains its information based dominance. We do not at all see this trend in our economic indicators. US manufacturing lost 2.9 million jobs, almost 17% of the manufacturing work force. Not a single new manufacturing job. The information sector lost 17% of its jobs, with the telecommunications work force declining by 25%.
A popular rationalization now being spun is that the main factor behind our trade deficit is not failed trade policies but rather the American worker is responsible due to a lack of education. The suggestion is that re-educating or further educating the worker is the solution to long term unemployment created by the loss of manufacturing jobs. A spectacular and predictable excuse with a pretty major flaw in its logic. Only 21% of positions actually require a college degree, a full third of the workforce holds one. As convenient as it might be to place this at the feat of ignorant American workers, it doesn't really hold up under the weight of fact.
First consider these statistics:
Salary of a full-time minimum wage employee without vacation: $10,712
Average time for top CEOs to earn that sum: 2.06 hours
(Forbes Magazine. "What the Boss Makes." April 20, 2006)
Federal minimum wage in 2000: $5.15/hr
Federal minimum wage in 2006: $5.15/hr
Loss in purchasing power, full time worker annually: $1,562
The average hourly wage is now .69 cents higher than it was at year end 2005. Based on averages, this amounts to a wage increase of roughly $1,207.50 per year with a loss in purchasing power of $1,562. It may be superficially true that the average wage has gone up (over the year, and not from 11-06 to 12-06 as that has been adjusted with the CPI to reflect a wage drop of 0.1% for the month), it does however, border on irresponsible to boast "wages are rising" when there is no real gain seen in examining the entire picture.
The current published unemployment rate is 4.5%, unchanged from 11/06; up from 10/06; down from 4.7% at the beginning of the year; and up from 3.9% during Bush's presidency. A critical element when considering unemployment is that the number of "discouraged workers" are not calculated into the published unemployment rate. These are individuals who are currently unemployed, want and are available for work but cannot find positions available to them. The actual unemployment rate is estimated between 7% - 8.3%. In thinking about the looming unemployment picture, a sidebar consideration should be the 100's of thousands if not millions of dollars spent on education that will never be recovered as job potential in so many key industries is no longer readily available to the American worker.
To measure the state of the economy by the GDP can arguably be a little misleading. Even if we accept the current GDP growth rate (up for considerable debate), it means our trade deficit increased nearly seven times faster than our GDP. The trade deficit represents such a large (and growing) percentage of the GDP. As more and more growth is owned by debt, the GDP becomes a less viable measure of our economic standing.
Debt and the US Dollar:
First consider these statistics:
Monthly U.S. Trade Deficit in October 2000: $33.8 billion
Monthly U.S. Trade Deficit in October 2006: $58.9 billion
(U.S. Census Bureau Foreign Trade Statistics. Jan. 10, 2007)
U.S. Current Account Deficit, FY 2000: $435.4 billion
U.S. Current Account Deficit, FY 2006: $900 billion
(Economic Policy Institute. March 14, 2001; Economic Policy Institute. March 14, 2006)
US National Debt in FY 2000: $5.7 trillion
US National Debt in FY 2006: $8.5 trillion
(Bureau of the Public Debt, Jan. 16, 2007)
US Budget Deficit in FY 2000: $230 billion surplus
US Budget Deficit in FY 2006: $423 billion deficit
(White House Office of Management and Budget)
Loss of value of U.S. dollar relative to the Euro,
Jan. 24, 2000 to Nov. 23, 2006: 27 percent
The United States possesses a crushing debt that can never be amortized. A debt that is financed 100% by financiers and central banks outside the US. This is a vicious economic circle. We buy more from other countries than we sell. Those countries accept our dollars for that. Those dollars flow back in to purchase US assets and revenue generating companies. Hence, we no longer own those job producers and revenue generators. The Unites States no longer has the ability to produce what we consume. This gives foreign countries enormous leverage over US assets and US decision making. It has also made us vulnerable to decreasing confidence in the US dollar.
No nation wants to experience a rapid decline of the USD, however there are very real and unavoidable factors in motion. Should foreigners feel forced to begin dumping US dollar holdings, the US government would be powerless to avoid the resulting catastrophe. Even if the factors in play shifted negatively to a lesser degree, isn't it quite conceivable that global markets could panic, ending in the same result? Consider these few disturbing developments:
China has indicated that it will continue to accumulate dollars, but at a slower rate by trading some of the dollars for other currencies.
On Dec. 18, Iran announced that it will cease to use the U.S. dollar as reserve currency.
On Dec. 28, United Arab Emirates, a close U.S. ally, announced that the weakening U.S. dollar has caused its central bank to move some of its foreign exchange reserves from dollars to euros.
Are foreign interests really going to continue financing the unstoppable consumption of a bankrupt nation?
Clearly I am not an economist. I am informed, I research, and I study. I mean no presumption at all. I welcome any factual corrections, should there be a call for any, and of course I welcome logical debate.
Sources of information (not already listed):
U.S. Department of Labor
Bureau of Labor Statistics
Campaign For America's Future
Bush, budget, deficit, economy, wages, unemployment, employment, inflation, GDP, globalization, trade, debt, currency, euro,