America and Manufacturing

The budget deficit is about $250 Billion this year, which is to say that they're spending about 12% more than they're taking in in taxes. Notice that the budget deficit has been shrinking rapidly over the past few years:

http://www.uuforum.org/deficit.htm

 

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You surely know that a $10,000 face, 6%, 30 year bond willl sell in the market for about $5,000 if the interest rate on new bonds becomes 12% as only then are both equally attractive to the buyer I.e. earnings are the same, except 30 years later he can get $20,000 by buying two of the now half face value 6% bonds instead of one of the 12% bonds with the $10,00 he has available to invest. This diference of delayed payment, discounted to present value at 12%, does make the pair of 6% bonds a few hunderd dollars more valuable than one $10,000 12% bond, but I am sure not worth $6,000 to the buyer. That is all I stated - there is in this example a drop in value of the old Treasury debt by more than 40% of the original price paid for it.

Your opinion, but note rates have been 3 times higher and that when everyone still had confidence in the dollar!

No, that is exactly backwards. Almost all modern central banks (even Brazil) now use "inflation targeting" to set interest rates (asuming they have control over them, which is getting to be very questionable in US with its need to borrow more every year.) I.e. when inflation rate is going up, rates go up to stem the volume of sales on credit. Thus interest rates and inflation both go up (or down) together. Have you not read any of the nearly uiversal cries of Wall Street to the FED almost demanding that the FED cut rates because the GDP / economy is growing "soft"????

That would be true except for two facts:
(1)Joe American is already deep in debt, having trouble paying his mortgage, etc - He does not have any free cash assets to lend to the US government. Bill Gates, all with only even 0.0001% of his cash are already busy getting out of dollars. - I don't even come close to that 0.0001% level but did so 5 years ago (Bought ADRs) and many at my level of wealth are doing so now. Almost every investment counciler has been advising to reduce your holdings in the US and get more into emergent countires etc.
(2)Even the dumbest Americqan investor, with cash he could lend to the US, knows that he could buy a foreign bond (fund at least) and as that foreign currency increases in value wrt the dollar, he could sell it later for a profit. To take an example, if you bought bonds of Brazil only 3 years ago for X dollars, you could sell them today for at least 2X dollars (Possibly 3X dollars if the buy/sell timing was good.) IT IS MUCH TOO SIMPLE a POV to say "EXCHANGE RATES DO NOT MATTER TO AMERICAN INVESTORS" - (except for "financial idiots" who believe this, perhaps)

Where do you get the idea that foreigners will want to invest in the future US as they have in the past when emergent markets are offering much greater rates of return? Again even US investment councilors are not recomending to Americans that they invest as much as they did relative to the alternatives.

In normal times, generally true, but if rates are going up to attract reluctant foreigners to buy Treasury paper and many are refusing at any offered rate to roll their bonds and the Mint is reduced to printing new dollars to honor the maturing bonds (causing more inflation, which the FED fights with still higher rates) then that is not "NORMAL TIMES." What typically happens in periods of rapid inflation is that the saving rate goes DOWN as interest rates rise. - People want to buy some thing of value before their pay check loses more purchasing power. For example, in Brazil before the highly successful "plan Real" which killed the run away infaltion, the interest rates got above 25% and yet the people with kind employers were given a few hours off early on payday to go out and spend 100+% of their paycheck (before the merchants could mark every thing up that days 2 or 3 % !) I.e. if the US mint's presses are running to payoff the maturing bonds and FED is raising interest rates to stim the resulting rising inflation, then it is spending, not savings, that increases. (Spend more than 100% of your salary ASAP, if any one is foolish enough to lend you money that will be easy to pay back later. BTW "savings" is just lending money to the bank - few are that foolish in rapid inflation so saving rate goes DOWN, not up)

If that work is done in front of a computer - they will either soon have no job or move to India. - get realistic with what is actually happening.

 

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A 12% cut is gutting? You tell every government contractor that they're getting 12% less now if they do business with the government. Every government employee gets a 12% pay cut. Hell, let's make it 20% and pay off the debt.

 

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Dude, did you even read what I wrote? You're agreeing with me that boosting the interest rates will put downard pressure on inflation, as you repeat throughout your post. Inflation and interest rates are correlated exactly because of this causal relationship. Seems like you wrote this without thinking.

He doesn't need free cash. He'll simply sell off some of his other investments and instead invest the money in bonds, as they will offer a superior risk/reward tradeoff. Adjustments of this sort happen every time there is a change in rates or stock performance. And, for the 1000th time, it's not "Joe American" that's in debt and having mortgage trouble. That's the subprime sector, which represents a small portion of the workforce.

Currency speculation is not the same thing as investment.

Gee, I guess from the fact that foreigners have been investing heavily in the US for years and years, even while emerging markets offered higher rates of return. The reason, of course, is that those higher rates of return also carry higher levels of risk. You can't find a better risk/return trade-off than America. Notice how quickly investors around the world were to move their money back into American instruments a few weeks ago, when markets were sneezing due to the subprime mortgage fallout.

Yes, but the effect of the interest rate boosts is still to put upward pressure on the savings rate. That is, in your runaway inflation scenario, people would save even *less* if rates weren't going up.

 

I look at what the US exports. Heavily subsidised stuff, for the most part.

I defy you to prove that increased productivity has resulted in the loss of more manufacturing jobs, net, than wage-driven offshoring. Let's use the shoe manufacturing business as our model. Or textiles. Or computer parts. Or cars. Tools. Appliances.

So we have lost a lot of manufacturing base. We cannot supply ourselves with the manufactured basics of our economy, or lives. That is different for a big country, like the US, than for a small country, like Finland.

And logging, mining, real estate, medical and drug, anything defense related (like Boeing), etc.

And new jobs are created by employers who see that they don't have to pay much in wages. Raise US wages and benefits to German standard, and see what the unemployment rate is.

It makes me nervous when the manufacturing base can't make anything most people want to buy, or need to live.

And it always will be? These changes in the US economy are recent. We've already seen some basic industries get passed by in the innovation area - cars, cell phones, generators and the like, tools and machinery, say.

They are not the same thing - the correction for inflation is only part of the decline. Second: real wages have been declining, not stagnant, for the bottom third or more of the economy. Third, prices for stuff people really need have risen with respect to the inflation correction for the wages: housing and transportation and medical care, in particular. Even in the stuff that has not "risen", technically, there has been a hidden inflation in a loss of quality - ever really torque on a Chinese socket? Work in a pair of Malaysian gloves?

So:

If you don't like "lower", put "stagnant" real wages (despite the actual reduction in the lower end) (http://www.stateofworkingpa.com/SWP07/SWP07_Figures/table2.html This table shows wages dropping for the bottom 40%, but the 50 decile up six cents http://cep.lse.ac.uk/seminarpapers/18-11-03-STO.pdf This report is more detailed, from '67 to '96. Here we see wages stagnating, with decline or increase dependent on which interval is chosen. Picking convenient ten year intervals from now, we have wages declining from 14.95 in '76 to 13.97 in '96 for the "head of household" working full time. If "head" is the same as "all", we have 14.61 in '06, a net drop from '76. This table http://www.bls.gov/web/ecconstnaics.pdf shows an increase from '01 to '07, but a decrease from '01 to ' 06 - generally, then, stagnant - in "wages and salaries" as compensation cost, recently - a net decline from the 1970s).

Baloney. You must be failing to include even a share of the debt service, the various hospital and veterans and medical and such, the nuclear budget, and so forth - and including SS, medicare, and various other non-budget programs in the federal budget.

Yet the debt has been rising rapidly. How? Because large government borrowings have been moved off "the budget" - such as everything connected with the Iraq war.

The budget deficit also hides deferred maintenance, contracted costs not yet due (such as medical care for Iraq veterans), etc.

The only investment available for that is his house, for the average Joe. Only a minority of Americans own much stock. And only an even smaller minority is capable of making informed risk/reward decisions regarding stocks and bonds.

The spectacular news is the subprime sector, but the average Joe is in debt, and a lot of that debt is tapped equity on his house. This tapped house equity has been fueling the US economy for a while now, and that cannot last.

 

Do you really think that answer will convince anyone of anything other than that you're an obstinate tool?

I posted a link with a detailed analysis of this question on page 1 of this thread. You can continue to ignore it if you want, but your rhetoric here isn't scoring you any points.

Are you saying that you'd rather be unemployed than make 30% more than the average German? Seems like a simple choice to me...

Nonsense. The big leaders in cell phone innovation are all American companies (Qualcomm, Broadcomm, Arraycomm, etc.). Most of the foreign competitors maintain US branches for their high-end R&D, in order to get access to the US workforce. America is the leading exporter of electrical equipment, industrial machinery and advanced electronics. I'd also argue that the troubles that domestic car companies are having have less to do with a lack of innovation than with misreading of the market.

It's true that real wages are determined by the balance between nominal wages and inflation, but that implies that it's categorically incorrect to make statements like "inflation coupled with declining real wages." You can get all huffy and try to look informed, but debate points are not worth anything even if you were scoring them.

Yes, and they've been increasing, not stagnant, for the top portion of the workforce. What is your point? That if you focus on the worst-off sector of the American population, they face problems? What does that prove, except that America is not a utopia? Moreover, much of the wage pressure on the bottom of the workforce is due to increased *domestic* competition, not jobs disappearing overseas. It's low-skill people immigrating *to* the US that's doing it, not jobs moving away.

Yes, and total compensation, which includes compensation not reflected in wages, has also risen. In fact, this is where most of the benefits of productivity that would usually have shown up in wages went: to compensating for rising healthcare costs.

What on earth are you talking about? The numbers for 2007 are here:

http://en.wikipedia.org/wiki/United_States_federal_budget,_2007#Total_Spending

Note that Social Security, debt service, veteran's benefits and Medicare are all included. I have no idea why you'd call these "non-budget programs." They are non-discretionary, but they're definitely in the budget. Not sure what you mean by "the nuclear budget" either.

First of all, the public debt has been growing only slightly faster than the GDP, so I wouldn't call it "rising rapidly." See here:

http://en.wikipedia.org/wiki/Image:US_Public_debt_per_GDP_1791-2006.svg

The War on Terror supplementals are included in the link I just gave you. Defense spending still comes out to about %25 of the federal budget.

Yeah, it only counts the money we're actually spending this year. So what? We can have a discussion about projected costs of various programs, but that has nothing to do with the size of the budget today, or the share of it dedicated to defense.

It doesn't really matter what the Average Joe has in the market; the point is that there is enough domestically held stock (and other) assets to provide a big boost to the bond market if rates go up. Whether that comes from the "Average Joe" or from the wealthy elite (or from corporate sources) is immaterial.

Fortunately for us, they have these specialists called "brokers," "financial advisors" and "fund managers" to figure this stuff out for them.

You seem to be conflating the bottom of the American workforce's problems with fatal problems for America as a whole. This is not the case. While inequality is troubling, the US has gone through periods with much greater inequality without imploding. This is great for scoring populist points on CNN, but it's not a terribly accurate way of looking at the position of the economy as a whole. And it's certainly not compelling to people (such as myself) who are not on the bottom.

 

You asked, I answered. Which of the major categories of US export is not heavily subsidised by the US government? - considering that, for example, the US government supports even the civilian aerospace and computer and nuclear stuff on national security grounds, pays for basic medical and drug research, uses military contracting as a sort of floating R&D subsidy of various industries, etc.

It indicates that America is becoming, is headed for, a kind of non-utopia we thought we had banished from possibility - that we have no magical immunity from the consequences of bad management. Not even jacking around the inflation numbers to hide the sharp boost in the price of necessities can hide that.

But that also means any measurement of a "rise" in total compensation will mislead if measured in dollars. Employees are receiving less, not more, medical care from their employment. Given even stagnant wages (from dubious inflation calculations) total compensation has fallen. A large increase in real wages would be necessary to cover the loss of health care coverage.

Here's your link info:

That must be where you get your 25% delusion. Note my point: You are including such separate items as Social Security in your "federal budget" , and your "defense" budget does not include major military expenditures contained in other parts of the budget - interest on the debt is not even prorated, let alone rationally assigned, for example. The true percentage of the federal budget proper devoted to the military is much, much higher than 25.
Further, with regard to my original point re madanthony's take:

So no serious reduction in federal expenditures is possible without either serious cuts in the military budget or wholesale discard of ordinary governmental services vital to the economy, even when we accept the bogus assertion that the non-DOD/WOT departments are not spending money on military matters.

The bottom half to two thirds, yep.

It's been a long time since we've seen this level of inequality - and those were pretty severely bad times, and our inequality is growing still. Define "implode". There will be no discovery of enormous riches to be had for the pumping, and hopefully no global war opportunity of expanding a colonial expansion, this time around. There is no frontier. And the entire economy has left off producing basic, necessary goods. The bottom half of the US economy is furnishing its life from foreign manufactuires - whose cost is not related to anything of their own, or their influence.

There are of course many people undisturbed by the notion of America failing its promise, and becoming the sort of society we read about in old Egypt or see in Brazil now. These people seem comfortable with the notion that if the rich are doing OK, all the important problems are solved. The only defense the poor have is to make sure that the rich don't do OK unless the poor are taken care of. There are a variety of ways to go about that. Ballot box, jury box, ammo box, use in that order, is the shorthand way of describing the situation.

 

Your answer was nothing more than a reiteration of your earlier assertion, pumped up with condescension. Why you feel the need to be so argumentative is beyond me...

Well, if you count basic research funding and purchases required to fulfill vital government functions as "subsidies," then yes, these things are subsidized. Of course, by that definition, every country in the world subsidizes these same things, so you're stripping the term of any comparative power. When it is said that "Germany heavily subsidizes its export industries," it is meant that they do things above and beyond the norm types of basic research support and government demand for products that occur in every country. We're talking about a hundred billion dollars per year (or more):

http://www.ft.com/cms/s/0/4255b50a-4b4d-11dc-861a-0000779fd2ac.html

Germany has a slew of industries that would disappear tomorrow without subsidy support.

What you're leaving out is the rise in health-care costs (due to development of new drugs and procedures, particularly ones that keep alive people who would have died). That's where the increase in total compensation is going. Even with reduced coverage, the compensation received has gone up. Also, the health field and associated beaurocracy is one of the main drivers of job growth in the US, so don't start complaining that all the money is just going to doctors. To a large extent, those are the service jobs that have replaced your beloved low-margin manufacturing positions.

That's because they are part of the "federal budget." Perhaps you could clarify exactly what incorrect definition of "federal budget" you consider to be appropriate?

Such as? other than veteran's benefits and education for military bases, I'm not seeing much. Note that all of the supplemental spending for wars is included in that figure.

And by this you mean what? Do you dispute that that is the dollar figure that the federal government spent on debt service last year?

If this is supposed to alarm me, it's not working. The reason? The countries that are manufacturing the basic, necessary goods you're so fixated on are uniformly worse off than the United States, at every socioeconomic level. You keep touting Germany, but the Average German is substantially worse off than the Average American. I'd suggest you move there if you think it's so great, but of course they don't really accept immigrants there, since unemployment is already so high.

Yeah, okay Robin Hood. You have fun with your crusade on behalf of the huddled masses. Also, try to ignore the fact that poor people from all over the world are literally dying to come and work here, as there is no country in history that has offered to much opportunity for prosperity and advancement.

 

And how much are we talking about in the US? This cost plus defense contracting and R&D stuff is not peanuts.

As does the US. Especially the export ones, but including things lke ethanol.

The record of the getting and spending of federal tax dollars according to the House Budget Committee edicts - the source and sink of the government's income. The part of the government that goes into debt, and has to borrow from sources like the Chinese governemnt and the Social Security Trust fund to cover its deficits.

. I mentioned twice now at least a pro-rated share of the debt service - reading comprehension? Additionally, we know that energy, science, foreign affairs, agriculture, transportation, community and regional development, medicaid and other health related, and general government also contain military expenditures.

An honest accounting would take into consideration that most or all of the debt service is for debt accumulated in military expenditures. That with a guesswork stab at the others puts the military share of the budget well over a trillion. Subtracting SS and Medicare (the separate lines on the pay stub, revealing their off-budget status) puts the budget under 2 trillion, and that raises the military fraction to over 50% with room to spare.

A more sophisticated analysis can raise it to probably over 80%, with reasonable guesswork. But that is difficult to document - the US federal accounting procedures and official economic info sources do not make this easy.

So it's dishonest. Any business that did that, and suddenly failed due to incoming expenses left off the books, would be sued. It's management might be jailed.

People are literally dying to get into Spain, as well. And Canada. Brazil. Ethiopia. Also, Jordan and Syria. And, yes, that Germany you disparage.

For which you give credit to the current policies and circumstances. Others, looking at the consequences of the recent changes in the US economy, think the currrent policies could bring that long history to an untimely end - and, unlike you, they care about that.

 

Not sure what it would come out to, but Germany's program works out to about 4% of Germany's GDP. If America had subsidies that large, they'd amount to over $500 Billion per year (about as much as Social Security). I have a hard time believing that the actual subsidies are anywher near that large. Note that I do not count defense contracts or R&D as subsidies, but if you do, they should be pro-rated to take into account the fact that America is providing Germany with their security. I.e., a certain amount of the military expenditure goes to maintaining bases and troops in Germany, which then require the hiring of German support staff, etc. So some portion of that should be accounted as subsidies to *foreign countries*.

The ethanol industry is not typical of American production as a whole. It's a fledgling industry that explicitly receives subsidies to protect it while it rises to maturity. Outside of a few niche sectors of the food industry (sugar cane, say), I can't think of a single one that would collapse in the absense of subsidies. And, again, the export "subsidies" you're counting are in fact nothing more than demand related to regular government services. Do you also count the sale of desks and chalk to public schools as subsidies? Does the food eaten by government employees and their families count as a subsidy to grocery stores and farmers?

The only spending outside of the federal budget is emergency supplementals. And, again, these were included in the figures I provided you. Why you seem to think that non-discretionary spending should be excluded from the budget is beyond me.

It's not my reading comprehension, it's that you're being obtuse. At any rate, I now understand that you're referring to which expenditures should be considered as military-related (as opposed to which ones count as part of the federal budget). Pro-rating the debt service would add an additional $60 Billion or so. This is beside the point, however, as there is no option of cutting debt services in order to balance the budget, so it doesn't really matter where it came from.

Uh... you're inflating the definition of "military expenditure" to a pretty ridiculous degree here. Medicaid is a military expenditure now?

They're not "off-budget." They are "entitlement spending," as opposed to "discretionary spending." They are still part of the federal budget, and they can still be cut (although the process required to do so is more laborious and politically treacherous). These tactics you're employing to inflate military spending are pretty ridiculous, and moreover irrelevant. There's no requirement that cuts for balancing the budget come solely out of discretionary spending, nor is it required to avoid cutting military expenditures. Even if we wish to maintain the military, lots of the "hidden" military expenses you are so riled up about have only tertiary effects, and so could still be cut.

I guess if you consider redefining half of the federal budget as "not part of the federal budget" and then defining everything that is left as "military expenditures" to be sophisticated, then sure. I'd call it obtuse and pathological, but, hey, that's just me...

I'm sure there will be dire consequences for the leadership if the Federal Government suddenly fails as well. Yet, somehow, we've managed to survive these accounting practices thus far.

Fallacy: to assert that I don't care about that outcome presupposes that I share your view of the likelihood of said outcome. Anyone with the slightest reading comprehension, however, already knows that where I differ with you is not in my concern for the American Dream, but rather in my assessment of how recent developments will ultimately affect it. But, hey, what's the fun of populist rhetoric if you can't tar anyone who disagrees with you as unpatriotic?

 

Really.

I'm not sure how many ways there are to read that, but I can't find one that indicates your equanimity in the face of steadily increasing inequality and slide of the bottom half of the economy is due to your not recognizing its potential.

Survive, but hardly prosper. The trends are grim, the happy ending a mystery. But what is mysterious is inevitable, as Galbraith did not say.

And survival is justification, as Darwin did not say.

Brazil has survived. So will the US, if inequality continues to boom, and even more of the manufacturing base of ordinary life leaves for other shores, and we find ourselves with an economy and politics more closely resembling Paraguay's then Germany's.

Who's we, btw? Because childhood mortality is kind of high, and lifespan kind of low, among the poor of a country as rich as this one.

I am not nearly as sure the dire consequences of government failure will fall on the leadership, seeing as how they haven't so far.

They are separate agencies of income and payout from the federal budget proper. They are not part of that budget, as is shown by the fact that monies in them cannot simply be shifted to other parts of the budget, as monies in any actual part of the budget can be. If agriculture needs more money some year, transportation can be shorted and agriculture funded by changing a couple of numbers on a form - to get money from Social Security, the federal government must borrow it, formally.

SS runs a surplus every year, lately. The federal budget runs a deficit. They are separately accounted entities. SS is not in the federal budget, no matter how many times some weasel of a politician pretends its surplus balances a federal deficit.

The money owed to SS is owed by the federal government - ultimately, the US taxpayer. It shows up on the federal budget as debt, just like the money owed to the Chinese government. There is no such thing as money owed to agriculture by parks,showing up as debt on the federal budget - they are both in that one budget. Is this clear, now?

 

While I agree that there is zero "risk" of default, there certinly is not zero risk to buying US Treasury bonds (In fact in terms of purchasing power that has been a way to loss value for more than a year and certainly has rapidly fallen compared to most any equity investment) Thus, you would have a hard time convencing anyone aware of what has recently happend that US bonds are a "superior risk/reward tradeoff"

They are an INFERIOR risk/reward tradeoff and that is why almost everyone, from little guys like me to the richest central banks, are trying to get out of US bonds (or dollars, which are sort of "micro bonds" with zero interest. In some sense the US did default on the dollar in 1964 when it cancelled to promiss written on each of the "silver certificates."*) I will admit that eveyone can hold diffeent views about the future risk to purchasing power, but clearly the general opinion of US bonds as a store of value or investment has been slipping.

It is not only a few "Joe Americans" that has been hurt by the sub-prime mortgage mess. Have you not noticed that it is the bigest financial institution that have had their stocks fall the most? Several of the big brokerage firms have lost millions bailing out some of the funds they set up. Every home owner is surrfering as his equity errodes. Yes this is good for frist time buyers, if they do not end up paying more for their mortgage than prior to the "sub-prime" problem sufacing (It was there all along and just rapidly became obvious to all, just as the US's economic problems, leading to dollar collapse in a few years, are now becoming obvious to more than just me.)
-----------------
*I was there in DC the last day that promiss was honored. - I carried away one 100 and one 1000 dollar bags of silver dollars. - The most valuable one (to collectors) in my bags was worth $90. - I turned down several offers of $2000 for the unopend 1000 dollar bag as I left a side door. (About 4000 people still outside and not able to get in when the Treasury shut the window from which it gave out the bags. Many had spent the entire night on the street of DC in long line with thousands of dollars in silver certificates in their pockets. - It was crazy. When I arrived at sun rise, I calculated that only a few of them could be handed bags even if the window stayed open 8 hours. (As cleck slowly counted the bills, it took more than 3 minutes to give out a bag - 20 /hour max) I predicted the line would collapse before 8AM opening as others realized this, so I just went to near the head of it to get carried in with the surge to the door that did occur just as I had expected. (There was no point in going to end of the line at sunrise as many non-thinkers did.)Treasury shut the window after only couple of hours - but I got my 70 pounds before it did so.) When the dollar does collapse, that mob chaos will, by comparsion, look like a military precision drill team!

I do not care what it is called.
You had said:
" a small increase in the interest rates will attract lots of Americans to the {Treasury bond} market (and they don't care about the exchange rate, for the most part)"

All I did was to give examples of why that is wrong which did envolve foreign exchange. buy foreign bond for X dollars, sell it later after dollar falls more 2X dollars (or 3X if it was Brazil bond bought 3years ago.) We live in a very economically integrated / global economy. One need not be directly dealing in foreign currency to be impacted by falling dollar. For example, I am reasonable sure Americans are paying more for their milk now that China has addopted the goal that every Child should drink a liter each day. (In Brazil the price of milk is up 54% over 12 months ago as a result.) A falling value dollar hurts Americans, speculator, invester, and even patriotic "buy only US made items" citizen also. Hurts ALL as the weaker dollar is main reason oil is up so much and oil cost is in everything from corn to the deliver truck delivering that US made object, etc.

 

Way to convolute your wording. Firstly, you should be saying "bottom half of the workforce," not "bottom half of the economy." The latter term doesn't make any sense. Moreover, I don't recall saying I didn't "recognize the potential" of the trends you cite. Obviously, extreme poverty and inequality are problematic for most any polity. However, we are nowhere near what I would consider extreme, and I don't see us getting there any time soon. Note that one factor driving income inequality is exactly that the American Dream is still operating: as the existing citizenry advances, the bottom ranks get replenished by the large numbers of poor, unskilled immigrants we take in every year.

By the way, I'm all for taking certain measures to decrease income inequality. Not because I view it as particularly troubling in its own right, but because it is becoming necessary in order to maintain widespread political support for globalization (as evidenced by your sentiments). The best way to do this would be to alter regressive elements of the tax code, which is to say the FICA portion (which is so large that it nearly cancels out the progressive elements of the regular income tax).

Dude, the United States is the wealthiest country in the history of the world. You can go ahead and insist that this doesn't add up to "prosperity," but I'm non-plussed.

Do you seriously believe that we're anywhere close to this point? Maybe in 200 years.... I'm more worried about life on earth being wiped out by an asteroid hit than I am about America becoming Brazil.

And yet, these indicators are still drastically better than in most countries of the world. I'm all for universal healthcare, but to compare the position of the poor in America to that of the third world is patently ridiculous. The biggest factor limiting the lifespans of poor people in the United States is obesity, and they still have a life expectancy greater than that of the average American 100 years ago.

What "so far?" The government has yet to fail in the sense that you've been using it.

The distinction between the discretionary and mandatory portions of the budget was clear to me from the outset. Why you continue to insist that the mandatory portion is not part of the budget remains a mystery. It's very much within Congress's power to cut mandatory spending or appropriate taxes collected for them; it's just that it requires passing a new law (and would be terribly unpopular). I'm unclear on why you keep insisting on this distinction. Do you really expect that any serious attempt to balance the budget *wouldn't* include changes in entitlement spending?

 

To put highminded things aside. Service workers got it better&nicer&easier&safer than their manufacturing brethren. I've been to many surviving manufacturing plants in the USA, some look like hell, many others have jobs like from hell (hard, dirty, dangerous, unhealthy, dull if not brain (and ear, feet, hand, etc.) numbing). Besides, the biggest lie is that manufacturing workers are much better off than service ones. It's all about the same in dollar terms, if comparison is made more honestly. So, from a pure "humanitarian" point of view, service economy is better. Yes, it's superfluous, it's wasteful, it's absurd, it's ... but it's easier on the men.

 

I regard "bottom half of the economy" as more accurate. The idea that the economy is some kind of abstraction separate from the personal economies of the citizenry is a source of error, IMHO. And I was accusing you of "recognising the potential", without being bothered by it much.

The inequality of the US economy is actually getting dramatic, for the type of economy we have claimed to want (we are coming to resemble, in structure, the anachronistic semi-feudal economies more closely than than the other first world industrial economies) - and the upward mobility you describe as the American Dream (that is a modern version of it - the original Dream was a decent life, including home ownership and other such perks, for the hardworking poor. It has almost always been possible, in almost every society, for the lucky few poor to become rich and powerful) is only one decreasingly important factor. The middle class is disappearing in both directions, as a major factor, and acquiring much debt in the attempt to rise rather than fall. The economy is stratifying.

That is not the consequence of current policies and trends. They are different, and will probably have different consequences. We are discussing them, not the the past but the potential future.

We agree on the situation - except I would argue that it more than cancels out the remaining weak progressive elements. I doubt we agree on the ideal response.

One serious bout of inflation would bring us closer to Brazil than we would be to the US economy of the middle 1900s.

That wasn't the comparison. America is rich - but increasingly topheavy. And universal healthcare is farther away now than a few years ago.

The mandatory part of the budget would be things like debt service. SS is not part of the federal budget. One reason for insisting on that remaining clear is to keep straight what the tax dollar is being spent on: rich people, who pay most of the taxes, are not contributing to SS much - they are buying the military industrial complex.

 

All true and you and Quad can agree on this preference for office work over dangerous, dirty factories etc. BUT

IMHO the US economy is becoming dangerously unbalanced economically when half or more of the workers put in their 8 hours / day sitting in front of a computer instead of some machinery making something. - Their job is 100% "out.source.able" - When it is done in India / Brazil / China / etc. (any low-wage IT-savy place) how will their family eat?

 

Not to worry, pet shit scoopers, fast food workers, landscaping guys (it's a service, and it's way healthier than working at the foundry in Archer, VA + it pays better), paper shredders, pest controllers, plumbers, property managers, maintenance guys, catering guys (bring shit passing for food in the USA to office or whenever), personal trainers, self-help gurus (I doubt foreigners would cut this market), dance teachers, cops, doctors, secretaries, nurses (just to name a few non computer based services), are not outsourcable in the nearest future.

 

Yes that is true also, BUT

The economy in some ways is like a chain. One failed link and it is broken regardless of N very strong links.

Quickly pointing at that broken link in an all services economy, I ask:
WHO IS GOING TO PAY THEM?

In more detail, there are "consumbles" in any economy, such as food for the people and production of it requires tractors etc. that wear out. etc. How will tractors etc. be make by people exclusivly sitting in front of computers or providing some service to other humans such as cutting their hair or yard's grass, etc.? The "material consumables" required for human life to continue are the "broken link" in an all service economy chain. Liquid fuel is also an important consumable that must be paid for. How will that VA lawn service get to the lawn, without some oilwell drills being made? - (The drills are consumables also. Howard Hughs made his fortune by inventing AND MAKING a better drill bit.)

Certainly with automation the material needs of society can be made with less labor in the factories and on the farms, but they must always be an component of the DOMESTIC work force. No society with high living standard can import all the material consumables it needs by selling services to the nations/ people making these things for the simple reason that those producing people can always provide those service for them selves MORE CHEAPLY.

It is only for historic reasons (created when Cleveland was to "tool maker for the world" etc.) that much of the lower standard of living world now send real goods to the US and EU in exchanges for (1)services like insurance, stock markets, IT, etc. but this is rapidly changing as they "Home Depot" (do it them selves) AND (2) green pieces of paper.

BTW, your speaking of doctors reminded me of little known fact: Many routine (Not emergency) X-rays at big hospitial taken in the afternoon travel thru the internet to India, where a radiologist reads them, write the report and emails it back during the night as the patient in US is sleeping - India has both English and a 12 hour shifted work day in addition to radiologist who work for < 1/3 the cost. Patient seldom is told who read his X-ray. Very difficult surgery, requiring fine movements is not done much by the direct hand of the surgen. (He controls a machine.) Some "trans-Atlatic operations" have already been done. I have never owned it, but have a file on company call "Intutive Surgery" or something like that, which sells some of he more advanced "remote surgery" equipment. (With GPS and the internet can "remote lawn cutting service" be far behind? - Perhaps India's Tata Motor's $3000 car will drop the Chinese-made machines off, if it too is remotely driven.)

 

That's what US army is for, to be the strongest dog on the block and keep the chain intact, confidence strong. Around world, as in the USA proper, the bulk of capital and more material assets are in the very few hands. The country with 12 carrier battle groups is their natural choice for investments. You should remember that's not you/your country trade with USA, it's the "best and brightest" 10% who might have their own reasons, not only financial. Besides, USA is going to be too large to let fall

You and the rest of the world. After all good sleep and confidence of your local olygarchy is an expensive thing. To put it irrationally, it trusts USA, its Army and its future ability to collect taxes. They may know something we don't.

USA is very far from importing all the material consumables. Some things are just too expensive to ship around the world

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Hard for me to mention any. Perhaps you can?

But note Brazil world's largest exporter of iron ore, on the "wrong side" of south America, ships more iron ore to China than even close by Australia where there is also a lot of it (but not quite as rich in iron, I think) because per pound bulk ocean shipping is very cheap. In winter in US, grapes come from South Africa, at least years ago when I ate them - surely cost less now to ship them in larger more efficient planes. etc.

As far as US army protecting the "weak links" that ended with the Vietnam War when effective gerillia war was developed. For example, Iraq's oil output is much less than before the army started "protecting it." etc.