Dr. Peter Morici: On Thursday, the Commerce
Department is expected to report the deficit on international trade in goods and
services was $49.5bn in March, up from 46.0bn a month earlier.
The $600bn annual deficit is the most significant
barrier to achieving a robust economic recovery and creating jobs, and oil and
consumer goods from China account for virtually the entire problem. Economists
agree the pace of economic recovery has been too slow, because of too little
demand for what Americans make.
Consumers are spending again—the process of winding down household debt that
followed the Great Recession ended more than a year ago; however, too many
consumer dollars go abroad to purchase Middle East oil and Chinese consumer
goods, but do not return to buy U.S. exports. Consequently, businesses can’t
justify expanding U.S. facilities and hiring workers.
Since the economic recovery began in June 2009, the trade deficit has doubled
and GDP growth has averaged a disappointing 2.4% a year. Unemployment has fallen
from 10 to 8.1% mostly because Americans have quit looking for work, not found
Like Mr. Obama, Ronald Reagan inherited a deeply troubled economy. He too
implemented radical measures to reorient the private sector, and accepted large
budget deficits to buy time for his measures to work. As Mr. Reagan campaigned
for reelection, his recovery posted a 7.1% growth rate and unemployment fell
much more rapidly than it has during the Obama recovery, even as more adults
joined the labor force and looked for work.
Obama Administration regulatory limits on conventional petroleum development are
premised on false assumptions about the immediate potential of electric cars and
alternative energy sources, such as solar panels and windmills. And those make
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 U.S. petroleum production by 4
million barrels a day, and cutting gasoline consumption by 10% through better
use of conventional internal combustion engines and fleet use of natural gas in
To keep Chinese products artificially inexpensive on U.S. store shelves, China
undervalues the yuan by 40%. Faced with mounting difficulties in its real estate
market and banks, Beijing is boosting tariffs and putting up new barriers to the
sale of U.S. goods in the Middle Kingdom.
President Obama has sought to alter Chinese policies through negotiations, but
Beijing offers only token gestures and cultivates political support among U.S.
multinationals producing in China and large banks seeking business there.
The United States should impose a tax on dollar-yuan conversions until China
revalues its currency. That would neutralize China’s currency subsidies that
steal U.S. factories and jobs. The duration of that tax would be in Beijing’s
hands—revalue the yuan and the tax ends. Such a policy would not be
protectionism; rather, in the face of virulent Chinese mercantilism, it would be
Cutting the trade deficit in half, through domestic energy development and
conservation, and offsetting Chinese exchange rate subsidies would increase GDP
by about $525bn a year and create at least 5 million 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
Check out our new
subscription service,Finfacts Premium
, at a low annual charge of €25 - - if
you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to
support the service.
It's a simple fact that in the
prevailing economic climate, the provision of high quality content cannot be
sustained through advertising alone.
Business executives who put a
premium on time and value high quality information, should use our service.