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A Quick Economic Recovery With Jobs, Jobs, Jobs
Raymond Richman, 2/8/2011

We have the means but not the will to recover from this recession in no time at all. What is preventing it are a President and a Congress more concerned with satisfying those who contributed to their election than the welfare of the nation. What is  preventing it are the nation’s economists who are committed ideologically to false economic theories. What is preventing it are organized groups dedicated to destroying capitalism. What is preventing it are naïve self-described idealists who believe in a false theory of man-made global warming . Oh, why—oh why can’t a majority of voters think like us. Here is our program for a quick economic recovery and we shall follow it with our reasons for believing the President, the Congress, the academic economists, and the leftists are pursuing policies detrimental to our nation’s future and why a majority  of our citizens are going along with these policies of self-destruction.

1.  Get our foreign trade in reasonable balance. How do we accomplish this? We have invented what we call the “scaled tariff” which is imposed only on those countries with which we are experiencing large chronic trade deficits. Balancing trade will put million workers back to work in a very short time, some almost immediately, because of the stimulus of simply announcing the policy. Following are our trade deficits in goods and services in 2009 and the first three quarters of 2010 with Germany, Japan, China, and OPEC (US$ millions) :

Trade Deficits in 2009 and first three Quarters of 2010
Country 2009 2010
Japan -26,503 -28,761
Germany -34,559 -29,277
OPEC -52,282 -67,937
China -219,357 -194,138
Total -332,701 -320,113

Each worker in manufacturing produces about $100,000 in gross value-added (GDP). Balancing the trade deficits with these countries would create about 3 million jobs nearly all in manufacturing.

Why did we stand by and do nothing while the trade deficits grew and grew? The answer is that leading economists of both parties have turned free trade into an ideology. Indeed, there is nothing in economic theory which justifies free trade as a policy except where all are subject to the same rules as is the case with the states of the United States under the U.S. Constitution. To economists, protectionism is a dirty word. The writer, too, believes in free trade so long as our trading partners also practice free trade. Taking action to achieve a trade balance is no vice and unilateral free trade that mortgages our country’s future is no virtue.

Under World Trade Organization rules, countries are permitted to take measures to balance trade with any of their trade partners with whom they have chronic trade deficits. They can employ tariffs and other barriers. We’ve done nothing because of what could be described as the ideological bias of economists who favor free trade. Like the President, economists talk about the jobs created by increased exports but never mention the job losses created by increased imports. That this is designed to deceive the public should be obvious to anyone who has taken an economics course in high school or college. (You will recall this GDP equation: GDP=C+I+G+(X-M). GDP is the sum of consumption goods produced, investment goods produced, government investment and consumption, plua EXPORTS MINUS IMPORTS.) They are afraid they will arouse a demand for protective tariffs. We, too, oppose protective tariffs that  protect single industries. That is why we propose scaled tariffs that apply only to offending countries and to all the goods imported from those countries. We do not single out any product for protection.

The scaled tariff acts like a currency revaluation, it makes all the goods imported from an offending country higher in price to Americans but Americans will be compensated by the huge revenues the scaled tariff will produce or the jobs that will be created. 

2.  A new technology has unleashed a glut of natural gas from shale. American natural gas resources were slowly declining for decades.  Only a few years ago, the talk was about building liquefied natural gas (LNG) ports to import natural gas (many were built).  Now the talk is about building LNG ports to export LNG from the U.S.  In the past few years U.S. gas reserves have essentially doubled and stand nearly triple the energy value of domestic oil.  Drilling from Texas to Pennsylvania and in many more states now provides nearly half of America’s gas production.

We should move immediately to convert buses and trucks to natural gas as T. Boone Pickens has urged. His consistent message has been to reduce foreign imports of oil (especially from “hostile” nations), use what we have in the U.S., create domestic jobs, develop and stick to a national energy plan. Pickens wants to convert all 18 wheeler trucks to natural gas. A proposed bill in Congress offers about $4.5 billion in incentives for the purchase of natural gas trucks, along with incentives to build refueling stations.  By doing so, Pickens says we can reduce imports up  to 1.2 million barrels a day for trucks alone.  Many houses and commercial buildings currently rely on fuel oil for heating. Converting them from fuel oil to natural gas would reduce our imports of crude oil. Many jobs would be created quickly.  A natural gas spokesman says one million new jobs would be created just drilling and probably another million to convert and build trucks, buses to run on natural gas.

 3. Suspend the environmental restrictions on the drilling and refining of oil which resulted in the banning of exploration and drilling for oil on all public lands and offshore in the Atlantic and Pacific. The result was the increasing dependence of the U.S. on imported oil and the loss of millions of productive jobs in exploring, drilling, processing, transporting, and marketing oil. These restrictions were imposed at the request of environmental groups like the Sierra Club and scoress of other non-governmental organizations who are ideologically, not scientifically, committed to the notion of man-make global warming. Thank God for the global warming that gave us the Great Lakes and a temperate climate without man being around to burn fuel. 

The truth is we have an environmentalist-caused energy crisis. One has to be wary of any group that politicizes science. In the name of science, environmentalists claim global warming is man-made. They want immediate action to confront global warning. They oppose drilling and every attempt to close the trade gap in crude oil. A sizable group of scientists, including a number of eminent physicists and Nobel Prize-winners, are skeptical and argue that global warming is not caused by carbon emissions but by periodic changes in emissions of energy from the sun. An experiment is actually under way at CERN, Europe’s great research institution, to test this hypothesis and will soon publish its results. The environmental fanatics are unwilling to wait a few weeks which makes one question their real motives.

 Moreover there is a  third group, including the writer, who argue that reducing carbon emissions by denying the use of coal and oil and natural gas costs much more than the claimed benefits warrant and therefore merits a low priority. We need a lot more research. But our first priority should be to end the recession and prevent a depression.

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]