I have read every word you fellows have written and I am just amazed about the truth that has come out in the posts.I wish they could be published for everyone, including government officials to read.Maybe it would help make appropriate changes.Thank You and Good Luck!

 

An Excellent question.

 

Geez, the last time I checked the state of economies throught out world (which is at least weekly) our economy is, and has been, second to NONE in growth among the 'industrialized' countries, and among the lowest in unemployment and inflation. Who's doing relatively well - I'm very happy to say the leaders are largely those that are our best friends - Ireland, Australia, Great Britian, among others. Take a look at France and Germany to see economies that are struggling - ones with high taxes, high % of union workers, low growth and high umemployment (which increased again, and are at or 10% - can you imagine the ranting is ours was even 7% - BTW, the US rate has been falling). Certainly not an economic 'blueprint' I'd ever want to see here. [And with the addition of lower cost countries into the EU, the whining in these countries is just starting.] Compare that with, say, Ireland - a country a short time ago that was struggling and is now one of the fastest growing economies around (and more importantly, check out WHY they've been successful).
Foreigners invest a whole lot of money INTO this country - just take a look at all those mfg plants for Honda, Toyota, Nissan, etc - these are investments in THIS country, which create jobs for AMERICAN workers. Is our trade imbalance huge? - yup, and a lot of it comes back as these types of investments (and money to fund private and public borrowing) - I'd like to see this as a much smaller percentage, but its not a 'doomsday' signal. Do Americans borrow too much, and save too little? - most likely, yes. But it is the strength of our economy and economic system that allows us to do so, so cheaply (don't think its just the government borrowing all the $'s - you would be sadly mistaken). Are some executives crooks? - certainly, just as there are in every profession (and I'd love to see a much more aggressive approach to such theivery!). Are costs out of line with income? - the worst is housing costs, they're further out of whack than they've probably ever been, but sorry, these increases aren't directly related to 'executives' or government (and one area of the economy that you'd think is ready to burst and cause sgnificant damage). Are things perfect? Ahhh...no. Could they be a lot better - absolutely. But I'm not into the sky is falling mentality, certainly not the US economy when compared to ANYBODY elses.
Didn't mean this to be a 'political' statement, but I'd recommend that we not think things are terrible - and the state of the Big3, although certainly important, is not a good indicator of the overall economy, actually its getting to be less and less representative of the economy, and our 'industries' in general. OK I'll get off my horse. . .

 

Polarbear I agree absolutely about consumer spending habits and the indiscriminate use of credit. I also agree that US consumers drive much of the worlds economy. However, a significant part of the unfavorable balance of trade comes from practices in other counties that freeze out US goods for example farm products in Europe are protected against US imports by huge govt subsidies and tariffs and government owned taxpayer supported European Airlines do not have to worry about their "bottom line" as much as US Airlines do. In Japan US made automobiles are kept out by imposing inordinately high standards that Japanese domestic companies dont have to meet. Additionally, Japanese govt subsidies allows Japanese companies to sell products to US distributors below cost of production (its called dumping and it is common in the electronics industry). In China the govt manipulates the currency so Chinese products are cheap in the US but competing Us products are extremely expensive in China.
All of these tactics give foriegn products an unfair advantage in US markets in other words the "free market" is not really free.
I know the US has some tariffs and price supports in place but they are practically non existant when compared to the competition. It seems our government, and I do not mean just the current administration, is much more comitted to the "free market" concept than other governments around the world.
When you take the trade problems into consideration and add the very high cost of production in this country it becomes impossible for US goods to compete, even in our own country.
There are few actions we can take to overcome the problem after all increasing tariffs and adding price supports will only generate reciprocal actions by foriegn govts. Our best bet is to negotiate some true fair trade agreements but that is very difficult, remember the farmers rioting in France a few years ago when the French govt tried to cut price supports on produce. We can; however, take some individual some individual actions that may help:

1. Reduce dependance on credit and start to live within our personal means.

2. Realize that the single biggest inflationary pressure comes from increasing labor costs and that increasing your wages by $1.00/hr may well end in a net loss of real income because the price of what ever it is you make is going to have to go up so someone else is going to need a raise to purchase it. Then the price of what they make will have to go up and so on and so on. Its a vicious circle. So don't support the next strike.

3. Realize that every time you buy a foriegn made product you put an American out of work. Buy American made products. It amazes me to hear American core industry workers complaining about the economy then see them jump into a Subaru or Kia and drive off. Bythe way I totally reject the "better quality" arguement. I've owned Fords and Chevys all my life and get just as good service out of them as any of my friends that own rice burners.

4. Get these ridiculous lawsuits under control. If you misuse a product and end up getting injured realize that you did it to yourself and that the manufacturer is not responsible for your actions. I fully understand that lawsuits for truly defective products are proper and necessary but a very high percentage of the lawsuits filed are just a fishing expedition to extort money from a perceived endless source of money. Many of these suits are dismissed for having no merit but the defendant had to spend thousands in legal fees to get to that point.

 

Phydeaux88, I'd agree with some of your thoughts here, incl protectionism, #1, and #2, but I see a big conflict between #2 and #3. I too would prefer to 'buy American' (and even locally, I prefer an establishment in my town if possible), but its far more complicated than the idea that buying a Toyota (or anything else 'non-American') is putting an American out of work. . .

 

I realze it is complicated and often difficult to determine the country of origin of many products. All anyone can ask is that you give it your best effort and if you have a clear choice buy the American product. If every one shopping at Walmart stopped buying the products clearly marked "Made in China" and opted for the slightly more expensive product clearly marked "Made in USA" what do you think would happen. I bet Walmart would stop selling "Made in China". Remember when Sam Walton used to get on TV and say "Everything we sell is made in America". They need to go back to their roots and we consumers can force them to do that.
Please note I avoided listing foriegn companies that manufacture products in this country and if I inadvertently included some I apologize. These companies are contributing to the economy they are exploiting. I know that the profits end up in the homeland but they are due some reward for their capital investment in buildibg a plant and employing workers here.

 

1. Reduce dependance on credit and start to live within our personal means.
We could start by bringing back interest rate ceilings. Banks wouldn't get that thrilled about loaning money to everyone with a pulse if they couldn't get 30+%.
2. Realize that the single biggest inflationary pressure comes from increasing labor costs and that increasing your wages by $1.00/hr may well end in a net loss of real income because the price of what ever it is you make is going to have to go up so someone else is going to need a raise to purchase it. Then the price of what they make will have to go up and so on and so on. Its a vicious circle. So don't support the next strike.
We could start by removing the tax deduction/credits that companies take when they move jobs/production facilities out-of-country. Often the tax advantages outweigh having a bona-fide wage negotiations.
3. Realize that every time you buy a foriegn made product you put an American out of work. Buy American made products. It amazes me to hear American core industry workers complaining about the economy then see them jump into a Subaru or Kia and drive off. Bythe way I totally reject the "better quality" arguement. I've owned Fords and Chevys all my life and get just as good service out of them as any of my friends that own rice burners.

4. Get these ridiculous lawsuits under control. If you misuse a product and end up getting injured realize that you did it to yourself and that the manufacturer is not responsible for your actions. I fully understand that lawsuits for truly defective products are proper and necessary but a very high percentage of the lawsuits filed are just a fishing expedition to extort money from a perceived endless source of money. Many of these suits are dismissed for having no merit but the defendant had to spend thousands in legal fees to get to that point.
That would sure help bring healthcare costs under control too.

 

88 , cstang , polarbear : It is good to see an open discussion of other's opinions of our economies and their future that are not hindered by tunnelvision .

I have never on this forum ragged on about the US or any other countries political activities or beliefs or expressed my personal opinion on any actions related to these beliefs .

Whether it be on BSE beef , softwood lumber , or the occupancy of Iraq , My personal opinion has no bearing on these decissions or the outcome of these decissions so therefore is moot when discussing global economics .

I very seldom disagree with the actions our neighbour and long time protector
to the south embark on to protect our freedom and remain the 800 lb gorilla
in the park but as I say my opinions are not relevent here so why initate a pi--ing contest about the domestic politics of either country and inturrupt the real train of thought that seems to be producing some pretty insightfull observations of the facts ?

A political form could probably produce many more clear observations in that area but as we all know would also bring those that froth at the mouth at the mere mention of many subjects from the woodwork as well :

Here's something to contemplate in deep thought : "For every freethinking spirit there are 100 mediocre minds appointed to guard history".

 

I disagree with this statement. The biggest inflationary factor today and for the last ten years has been energy cost. This is up by well over 100% in this time. This also has a ripple effect as everything that is produced must be transported.

The second largest is the cost of medical care. Double digit increase for probably the last 6 years. Add to this more and more employers are passing this cost on to the workers eating up all if not more than any pay raise they may see. In the worst cases you have companies like Wal-mart that don't offer coverage at all and tell workers to get state insurnace that is paid for by tax payers.


Inflation has been below 3% for awhile now when you subtract energy and housing. I think that is what the government subtracts. I don't see the american working causing big inflationary swings in that figure.

This economy today is driven by the consumer. Non discretionary cost like transpotation, food, housing and the associated costs of lights and heating, medical care do nothing to help the economy but this does eat into discretionary spending and this does help the economy by putting more people to work.

If a company wants to move its manufacturing out of the country then by all means let them. But I think we should put large tariffs on all imported items even if the company is US based. Lets make it cheaper to build things here than oversea's. Lets also offer the samething that forign countries offer our large manufactures, little or no tax, free land, even building the facility. This is what we are competing against. The only area we can't compete if we chose to do so is wage. We can make that difference up by tariffs. Free trade is good provided that you have a level palying field to start.

 

tmyers: Here here , well stated . One other thing that greately increases our production costs that seems to escape most is the cost of enviromental and health and safety and working conditions which are second to none in both the US and Can .

These regulations and requirments are not in place and enforced in the countries we try to compete with including Mexico which is part of NAFTA and if you gaze across the Rio Grande you can see the raw industrial waste being dumped that would be adding to the costs of our production here .

The Oil and Gas industry is a prime example of how the costs of these advancements can influence the price of our end product .

Even as a contractor to these giants it would cost us $1200 per head in compulsory training and courses before we put a person to work . This cost would have to be recovered from the wages at a maximum 37% bump which
is fine when the employee is around long enough to make it viable . We had to eventually have a waver signed to insure this recovery from those that did not stay working .

There are many other costs related to producing products in our countries that others do not have to deal with .

Our own runaway energy and medical costs are a major contributing factor for sure though.

 

The tax breaks pale in comparison to the labor cost difference.


I agree that interest rates border on abussive and usurious. I remember when the regulated ceiling was removed, it was in the 70s and double digit interest rates were common. I think they should be reinstituted and may well get the credit card craze under control. I sure hope you aren't paying 30% cause there are a lot of better rated cards available.

 

Jacking up tariffs might garner some short term benefits to a few chosen companies or industries, but in the long term higher tariffs are not the answer. Other countries will undoubtedly respond in kind, as history has demonstrated time and again. Having higher tariffs and duties thrown back at us would further stifle the ability of US companies to export their goods at a time when the trade deficit is ballooning out of control. The last thing the USA wants to do right now is get into a tariff war with the rest of the world. The reaility is that it's a global economy out there, and we are just but one trader, only one partcipant (albeit a large one). Free trade is a two-way street, and protectionism is not the answer.

 

The reality is that we will always have a trade defict with other countries that have a lower standard of living than us. They can't buy our products unless it is the only product available i.e., planes, military hardware or food stuffs. We will buy all there products because it is made cheaper and sell for less than products made here.

Take China. We sell them lumber from the NW. They ship it to there country turn it to funiture then ship it back and still sell it for less money than you can by the comperable piece.

Sorry I agree that we should be in a global economy but until the field is level the only thing that will happen is the slow erosion of the US standard of living. If you want a example look at England, prewar and postwar.

 

Terry, I think we both agree 100% on the need for leveling the playing field. I suppose we might go about it differently, though.

 

I don't know how to go about it though. In business if I can make something cheaper than the other guy I win as it should be. But when we as a nation pay our people about 1000% more than the nations that are killing us in trade what can we do.