|President Barack Obama talks with the media before signing an Executive Order as part of the “We Can’t Wait” campaign, to cut waste and promote efficient spending across the federal government, in the Oval Office, Nov. 9, 2011.|
Dr Peter Morici: Thursday, the
Commerce Department is expected to report the deficit on international trade in
goods and services was $46.3bn in September. This trade deficit is the most
significant barrier to jobs creation and growth in the US economy - - even more
formidable than the federal budget deficit, because its effects are more
Simply, the US economy suffers from
too little demand for what US workers make. Americans are spending again—the
process of winding down consumer debt that followed the Great recession ended in
April; however, every dollar that goes abroad to purchase oil or Chinese
consumer goods, and does not return to purchase US exports, is lost domestic
demand that could be creating American jobs.
Jobs Creation: Oil and Chinese imports account for virtually the entire trade
gap. The failure of the Bush and Obama Administrations to develop abundant
domestic oil and gas resources, and address subsidized Chinese imports are major
barriers to reducing unemployment.
The economy added only 80,000 jobs in October; whereas, 363,000 jobs must be
added each month for the next 36 months to bring unemployment down to 6%. With
federal and state government cutting payrolls, the private sector must add about
400,000 per month to accomplish this goal.
Too many dollars spent by Americans go abroad to purchase Middle East oil and
Chinese consumer goods that do not return to buy US exports. This leaves US
businesses with too little demand to justify new investments and hiring, too
many Americans jobless and wages stagnant, and state and municipal governments
with chronic budget woes.
Economic Growth: For 2011, GDP growth is on track to average about 2%, but 3%
is needed just to keep up with productivity and labor force growth and keep
unemployment from rising.
In 2011, consumer spending, business investment and auto sales added
significantly to demand and growth, and exports have done better too; however,
higher prices for oil and subsidized Chinese manufactures into US markets pushed
up the trade deficit and substantially offset those positive trends. Now
conditions in Europe and consumer pessimism are again curbing and further
discouraging new home construction and resale of existing homes.
Administration imposed regulatory limits on conventional oil and gas development
are premised on false assumptions about the immediate potential of electric cars
and alternative energy sources, such as solar panels and windmills. In
combination, Administration energy policies are pushing up the cost of driving,
making the United States even more dependent on imported oil and overseas
creditors to pay for it, and impeding growth and jobs creation.
Oil imports could be cut in half by boosting US petroleum production by 4m
barrels a day, and cutting gasoline consumption by 10% through better use of
conventional internal combustion engines and fleet use of natural gas in major
To keep Chinese products artificially inexpensive on US store shelves, Beijing
undervalues the yuan by 40%. It accomplishes this by printing yuan and selling
those for dollars and other currencies in foreign exchange markets.
Presidents Bush and Obama have sought to alter Chinese policies through
negotiations, but Beijing offers only token gestures and cultivates political
support among US multinationals producing in China and large banks seeking
The United States should impose a tax on dollar-yuan conversions in an amount
equal to China’s currency market intervention. That would neutralize China’s
currency subsidies that steal US factories and jobs. That amount of the tax
would be in Beijing’s hands - - if it reduced or eliminated currency market
intervention, the tax would go down or disappear. The tax would not be
protectionism; rather, in the face of virulent Chinese currency manipulation and
mercantilism, it would be self defense.
Cutting the trade deficit in half, through domestic energy development and
conservation, and offsetting Chinese exchange rate subsidies would increase GDP
by about $550bn and create at least 5m jobs.
Professor, Robert H. Smith School of Business, University of Maryland,
College Park, MD 20742-1815,
703 549 4338 Phone
703 618 4338 Cell Phone