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Obama administration is impoverishing the U.S. middle class
Howard Richman, 5/2/2010

On Friday, the BEA reported its preliminary report of U.S. GDP during the first quarter of 2010. One thing that struck me, when looking at the statistics, is that the U.S. trade deficits are coming back strong. The following is the quarterly trade deficit (reported on an annualized basis):

TradeDeficit20081to20101.gif

I expect the trade deficit for the first quarter to be revised downward after the March data is reported, because of China's decision to buy lots of commodities that month, instead of running a trade surplus. But, I expect that the U.S. trade deficits will be $50 billion higher when the second quarter statistics are reported.

University of Maryland economist Peter Morici's take on the statisitics (This Recovery is Anti-Middle Class) is that the recovery from the recession is quite weak and that it won't benefit the U.S. middle class. He wrote:

The Commerce Department reported GDP grew a modest 3.2 percent in the first quarter, further confirming the end of the recession and that the recovery is only moderate and disappointing. Half of the growth came from inventory adjustments, and the prospects for future growth and wage gains are only modest....

Unemployment will hang above 8 or 9 percent well into 2011, and most workers will continue to face a tough job market and declining living standards.

Wages will not keep up with rising prices, health care premiums and taxes. A good deal of the gains, so far, are going to Wall Street and the medical and intellectual property industries.

At 3.2 percent, first quarter GDP growth was pumped up by an end to inventory draw down and some rebuild — in the arcane world of GDP accounting, ending depletion of inventories adds to growth. Although the inventory rebuild has begun, the pace is slow reflecting tepid sustainable demand for U.S. goods and services....

The growing trade deficit is caused by the Obama administration's inexplicable decision to allow China to continue its currency manipulations, letting China keep stealing U.S. manufacturing and R&D jobs. Thus, if Morici's predictions about the recovery are correct, the Obama administration's policies are impoverishing the American middle class.

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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]

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  • [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....

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  • 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]