| What makes a nation great? Is it what it consumes, or what it produces? A casual look at America’s recent spending habits leaves little doubt that our country has bought into the lie that consumption is the key to prosperity rather than wealth production. Consider the facts on debt. U.S. household debt has soared to an all-time record of $2.25 trillion, with the average household now owing $20,000 in personal debt. Since 1990, the United States has run a cumulative trade deficit of almost $4 trillion, meaning that the United States now consumes $1.25 million per minute more in goods and services than it produces. Finally, the U.S. government’s cumulative budget deficit approaches a staggering $8 trillion. Washington decision makers must take responsibility for the polices that have produced these massive debts which, in turn, have brought economic insecurity to both our homes and country. Over the past decade, a series of free trade agreements, like NAFTA, linked the U.S. economy to countries paying penny-wage labor. The slave wages, state sponsored subsidies, and non-existent environmental regulations of those countries resulted in a rash of outsourcing of U.S. jobs and a flood of cheap imports. While free trade policies might make a t-shirt at the local discount store a few cents cheaper, one must ask whether the costs paid to achieve those savings represent a real bargain for America. Over the past thirty years, the United States has moved from balanced trade to running astonishing annual trade shortfalls that weaken economic growth. Last year’s $617 billion trade deficit meant that the United States exported almost two-thirds of a trillion dollars in wealth offshore. The exploding trade deficit has destroyed millions of high-paying jobs and hampered the creation of new employment opportunities with similar salaries and benefits. Since January 2001, the number of private sector jobs in the United States decreased by 446,000 while our population increased by more than 8 million. The damage was most severe in the manufacturing sector, where the United States lost nearly 2.8 million jobs. Because manufacturing jobs pay an average of 33 percent more than service sector jobs, industrial job losses have had a disproportionately negative impact on wage growth. In real terms, the average American is earning the same amount of money today as in 1972; meaning for a full generation, increases in standards of living were achieved by putting more family members to work and having them retire at an older age. These trends will continue as the U.S. government predicts that job creation over the next decade will be dominated by lower-end service sector positions such as waitresses, sales clerks, temp positions and health care aides. Flawed trade policy also factors into the health care crisis in our country. While most manufacturing jobs offer good benefits like health insurance and pensions, many service sector jobs do not. Is it any coincidence that 43 million Americans are uninsured when the United States has offshored manufacturing jobs by the millions? In addition, the Federal budget deficit is exacerbated by our trade policies. Unemployed workers do not pay taxes and those who are underemployed pay less. As high-wage jobs are shipped offshore, outsourced workers and their families become dependent on government entitlements such as welfare, Medicaid, unemployment benefits, and worker retraining programs, contributing to the $412 billion U.S. budget deficit in 2004. State and local governments suffer as well. The local manufacturer forced to close down is often the largest taxpayer in the county or community. The reduction of the local tax base usually results in higher taxes on private citizens to cover budgetary shortfalls or cuts in basic services for police, fire fighters, schools and the like. The most dangerous cost of America’s import spree, however, is our severely weakened national security. Manufacturing strength transformed America into the greatest superpower of the last century. Nevertheless, Washington policy makers are ignoring the roots of that rise to power by allowing the export of critical sectors of our industrial base needed to sustain military strength and readiness. Moreover, as we weaken our own defense structure, America’s $162 billion trade deficit with China foots the bill for that country’s rapid modernization of its military. If China becomes the world’s greatest industrial power, can there be any doubt that it will become the world’s greatest military power? Even more troubling, America is now dependent on China for many of the electronic components necessary to operate our military hardware. If China decided not to sell to the United States during a period of crisis, would America have the ability to replenish its stocks without an adequate industrial base? What would happen if China were an adversary, a scenario not far-fetched given tensions over Taiwan? In conclusion, the price we pay for our cheaper t-shirts is no bargain at all. The higher cost of producing less than we consume is evidenced by our stagnant wages, falling tax bases, weakened national security, and slower economic growth brought on by our astronomical trade deficit. Policy makers must wake up to the real costs of free trade and act to balance the short-term needs of the consumer with the greater long-term interests of our country. That balance must include policies that provide high-paying jobs with benefits, revitalize manufacturing, balance the trade deficit, and grow America’s military industrial base. Only then can the United States get back on track to economic strength and security. Auggie Tantillo is the Executive Director of the American Manufacturing Trade Action Coalition. |