ARE YOU READY FOR A NAP?

WILLIAM PENN FALLIN
Columnist
Douglas, GA Enterprise
Natchitoches, LA Times
Camden County, GA Courier

ARE YOU READY FOR A NAP?

LET’S EXPLORE A BORING SUBJECT

Let’s discuss the trade deficit. That ought to immediately put you to sleep unless you’d like to take another look from a different angle.

If there are no consumer goods being manufactured in your county it’s a pretty safe bet you are not personally feeling any negative effects of America’s just announced $710 billion trade deficit for 2005. However, when you buy stuff in your local Wal-Mart, Target, Ace Hardware (or virtually anywhere else) you are seeing the positive effects because you are benefiting from lower priced imported goods. That’s the upside and it’s an important one.

Let’s look at this from a slightly different standpoint. Just how much is $710 billion dollars? Do you have a good feel for such numbers? Most of us don’t. Relating them to something familiar just might make the subject more interesting.

Let’s compare our trade deficit to the recently announced 2005 sales totals for four of America’s largest and best known corporations.

WalMart $286 billion
GM 184 billion
Ford 171 billion
Boeing 60 billion
Total $701 billion

US Trade deficit: $710 billion

Now let’s discuss the deficit as it applies to people. Perhaps that will help keep the numbers less boring.

In 2005 our imports totaled about $1.64 TRILLION dollars. And we exported $930 billion so the trade deficit was $710 billion.

It takes about 10 people working on production lines (and in supporting jobs) in the United States to produce consumer goods worth $1 million. Now let’s extrapolate.

$10 million requires 100 workers. $100 million requires 1,000 people, $1 billion 10,000 people, $10 billion 100,000 people. $100 billion 1,000,000 people and $700 billion requires 7,000,000 US workers. That simply means that 7,000,000 Americans have lost their jobs to 7,000,000 Chinese, Mexicans and other non-American workers.

Today there are only about 14,000,000 Americans DIRECTLY employed in US manufacturing jobs. The loss in the last 25 years of 7,000,000 jobs is roughly equal to a third of the approximately 21 million who were working in American manufacturing jobs when this drain began in earnest about 25 years ago. And the loss continues to grow each day.

Who is negatively affected? Most workers support someone other than themselves. If each working employee is supporting one additional person that means that 14,000,000 Americans are being adversely affected by our trade deficits. Based on an average state population of 6,000,000, an average of 280,000 per state are in this category.

Many argue that most of those people have found other work. That is obviously correct, based on the current low mark of less than 5% unemployment. However, US labor department employment statistics never mentions how many of those 7,000,000 workers have had to take jobs at dramatically lower pay.

There is no question that virtually all of us benefit from lower prices in our retail stores as a result of exporting those jobs and importing those goods. A set of aluminum cookware for example would cost you about 35% more if it were made in the USA. Textiles of all kinds would be dramatically higher as would anything else that is labor intensive. I could go on and on with examples but you get the point.

A strange phenomenon occurs in some product categories however, once the entire category has been moved overseas. No longer is it possible to compare prices to US made goods so the retail prices gradually rise until they approach their former levels. I’m sure I could bore you with many examples but shoes and consumer electronics are sufficient to make the point. Both categories are almost exclusively made overseas so we have no way to compare or determine if we are still getting a bargain.

So, is a trade deficit good for you? As someone said, “it all depends on your definition of ‘IS’.” If you lost your job when your factory closed and you had to take another job that pays less, it matters little what you must pay for a set of Chinese cookware because you are not likely to be buying new cookware. On the other hand if you are still employed at the same level as before you are surely benefiting and less likely to notice the financial problems of your neighbors.

One final note of interest: Foreign countries and foreign investors now own approximately $3 TRILLION dollars of America’s corporate assets. What should that number mean to you? It means that foreigners already own about 20% of those assets. If this trend continues how much will they own in another 25-30 years?

Enjoy your day.