Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
The New Jobs and Trade Numbers are Related
President Obama claims to be a champion of U.S. manufacturing workers. In his advertising, he accuses Romney (falsely) of outsourcing jobs when he was CEO of Bain Capital. In his stump speech, he claims to be the champion of "made in the USA." But the latest economic reports from the U.S. Labor and Commerce Departments tell a different story:
The relationship between trade and unemployment was first observed by John Maynard Keynes. In a chapter toward the end of his 1936 book, The General Theory of Employment, Interest and Money, he discussed the danger of tolerating mercantilism, the trade strategy designed to produce trade surpluses. Keynes wrote:
Of the overall U.S. trade deficit of $42 billion in July, about 2/3 ($28 billion) could be attributed to China. The following graph shows that our merchandise trade deficit (negative net exports) reached a record $310 billion for the twelve months ending in July:
The Chinese government keeps out American products through high tariffs and through government fiat. For example:
Instead of demanding reciprocity from China (we will buy your products only if you buy ours), as he could under WTO rules, the Obama administration dispatched Secretary of State Hillary Clinton to China to beg the Chinese government for loans. The Taipei Times reported on February 23, 2009: “In Beijing, she called on Chinese authorities to continue buying US Treasuries, saying it would help jump-start the US economy and stimulate imports of Chinese goods.”
In a study of recent worldwide economic statistics for all countries with GDPs of at least $100 billion, my son, father and I substantiated Keynes claim for a strong relationship between trade balance and unemployment. We found that a country with the U.S. budget deficit and debt levels, but no trade deficit, should have an unemployment rate about 2% lower. We also found that government deficit spending has much less effect upon unemployment in trade deficit countries than in trade surplus countries.
In his acceptance speech, Republican presidential candidate Mitt Romney said:
We don't yet know whether a President Romney would be able to move U.S. trade with China toward balance. We do know that President Obama has failed in this regard.
Comment by Ken McClenton, 9/20/2012:
Dr. Jesse Richman,
Thank you for explaining the principles of balanced trade on The Exceptional Conservative Show (http://www.blogtalkradio.com/theexceptionalconservativeshow/2012/09/20/the-exceptional-conservative-show). I hope to have you back in October to discuss the Economy and the Elections.
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