Thursday, September 18, 2008

campaign response #3: trade deficit

I'd like to continue exploring, in a bit more detail, some issues I mentioned in my last two blogs. I stand by my emotional frustration with the current campaign. Admittedly, I've addressed the campaign broadly, and now I'd like to get a little more specific.

Overall, please know that one of my main points is that we have a flawed representative system of government and election; the two major parties are largely responsible for this. With very few exceptions, Republicans and Democrats comprise all three branches of government. Each party takes an opposite stance on major issues. When the congress votes on minor issues, representatives refuse to cross party lines in fear that their disloyalty may give the opposite party a victory. This is not a petty issue: small congressional victories mean a lot when a congress is nearly even-split between to parties. And why are senators, representatives, presidents, and judges so loyal to their party? Because corporations, lobbyists, and people with money invest in those parties, convincing each party that they are essential in properly representing the interests of America.

I plan on returning frequently to this issue. In the meantime, let's look more specifically at some issues that our candidates are glossing over. In my last post, I mentioned that our Federal Reserve operates without a lot of oversight from the government, let alone from people like you and me. I'd like to move slightly from that topic to address our Federal Trade Deficit—a related topic—for this reason: the Federal Reserve makes powerful policies and statements about the U.S. economy. For better or worse, these actions are part of the Federal Reserve's responsibility to keep inflation reasonable. The
Bureau of Labor Services calculates the rate of that inflation—a rate that is used when the Bureau of Economic Analysiscalculates the GDP.

So, for example, Ben Bernanke (who is in charge of the Fed Reserve) might tell us that, even though our trade deficit is high, our GDP is also high, meaning that business is still growing. …unless, of course, the GDP is overstated, which should be a big controversy right now.

So, backing up slightly, the GDP is a rough sum of all the economic activity in the country. Usually, if the GDP increases, that usually means that our businesses are making us money, which is good. The
trade deficit is the difference between the amounts of goods we import versus the goods we export. If we continually import more than we export, that's bad, and if our deficit continues to grow, this acts as a disincentive to our own investors.

Economists and bankers have several big questions related to our growing trade deficit ( is a great place to get info on all this.) The biggest question, currently, is: how much of our trade deficit can we attribute to the rising cost of oil? Keep in mind that we import the vast majority of our oil, so high oil prices obviously contribute to higher import costs. However, oil is NOT completely responsible for our deficit. Check out the latest trade analysis spreadsheet which I found at the BEA's website. Click on Exhibit 11 and compare Non-Petroleum exports to Non-Petroleum imports. The difference is huge! For a general breakdown of the types of stuff we import, read the latest newsrelease. The types of imports we're talking about are goods and services like food, vehicles, insurance, travel, technology, and technology support.

Anyone who listened to the RNC recently and heard crowds chanting "drill, baby, drill!" might assume that "oil-drilling will decrease our support for dangerous regimes" (
Sarah Palin on YouTube) and help solve an energy crisis. But we're also talking about a huge trading and credit crisis here, for which oil-drilling is not necessarily the answer.

What will decrease a trade deficit? The meaningless answer is: U.S. business which investors believe in. How do we get business we believe in?

I'm not a businessman, I'm a musician. Still, I sell myself and I sell my ideas to a degree that won't make me uncomfortable: I want to speak about things that move me, I want to use music in my discussions, I want to stay away from impractical ideals, I might think ideals are impractical. Those who invest in ME, believe in the tenets of my business, to some small degree. It sounds dry and heartless but it's true.

If it sounds like I'm saying "we need more businesses with HEART," I'm not. We already have them. I work for one. There are willing entrepreneurs everywhere, especially here in the NW. The meaningful answer is that the public and the government must create conditions which allow theses businesses to flourish. This means government subsidies and tax incentives. During the Reagan administration, the Republicans cut subsidies for alternative energy and fuel companies. Over the next ten years, the top wind and solar energy companies were purchased by foreign nations like Denmark, Germany, and Japan. They were officially "off-shored," and now, years later, we import their goods and services. Even worse, our government refuses to pass meaningful economic stimulus to these industries.

I barely feel the need to mention the massive migration of I.T. work to India over the past 10 years, do I?

And, while I'm not saying the U.S. government was wrong in discontinuing funding to the Texas Supercollider of the 90s, this is another example of forward-thinking research and investment, from which hundreds of businesses would benefit.

Obviously, consumers can play an important role in trying to consume local goods and services. We can also start making noise about exciting business we believe in: business that might change the world, like, oh I don't know, solar power, hydrogen power, wind power, sustainable food sources, weather research and control, satellite-cellular technology, black holes, the fourth dimension!

We can also refuse to support giant parties that will NEVER be able to address business ideas like these until the country/world demands it, in a drastic economic depression or an environmental catastrophe.

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