The Unsustainable U.S. Economy

Spend, spend, spend.  Borrow, borrow, borrow.  Waste, waste, waste.  No person or entity – company, agency or government – can do one or two of these, much less all three year after year, decade after decade and expect to come out on top in the financial game.

By all measures it looks like the financial malfeasance of the U.S. Capitol Hill gang has come home to roost and is pushing out all the little chicks.  There is much finger pointing to go around and one could lay the blame at any number of doorsteps.  But let’s look at a few common sense ones that any 5th grader could deduce the obvious answer.

For the past few years the annual U.S. trade deficit has been around $500 billion to $700 billion and is currently running at about $60 billion per month.  That is getting real close to 3/4 of a trillion dollars.  You can not have that much cash leaving the country every year and expect to have nice clean and healthy Balance of Payments blotter.  Eventually you run out of places to get a cash infusion to supplement your reckless spending habits.

A country also cannot scuttle its manufacturing industries and outsource jobs abroad year after year and expect to maintain a healthy economy or infrastructure.  According to the Alliance for American Manufacturing, over 40,000 manufacturing plants in the U.S. have closed since 1999.  From 2000 to 2008, over 4 million manufacturing jobs have been lost or 17% of all manufacturing jobs in the U.S.  Depending on the state in which these job losses occurred during the period of 2000-2004, 52-88% of the losses were due to increasing trade imbalances.

Such job losses started to escalate shortly after NAFTA (North American Free Trade Agreement) went into effect on January 1, 1994, followed by the admittance of China to the WTO (World Trade Organization) and the granting of “Favored Nation” status by the U.S. for trade purposes.  Of course, American companies, eager to become “multinational” players, fled the U.S. after NAFTA to seek the panacea of the foreign worker that they could hire for pennies on the dollar and work 60-80 hours a week with no benefits to pony up.  This great flood of outsourcing has cost the U.S. worker and the U.S. economy dearly and will for many years to come.  Why pay an American mechanical engineer in the U.S. $60,000/year when you can get a person in India for the same work for only 10-15% of that wage?  And why buy American goods when China-made goods are so much cheaper, even though they are made with child and slave labor making as low as 13-cents/hour?

Now the price is being paid in human numbers at home.  November unemployment up to 6.7% and December came in at 7.2% – the highest since 1993.  Over 10.3 million Americans are now unemployed.  Don’t be surprised if you see unemployment shoot up to 10% in the next 12-18 months.

Will a President Obama bail-out/economic recovery plan bring us out of this recession or keep us from a depression?  I’m not optimistic.  It is possible that conditions have deteriorated too far and for the Feds to borrow even more money to bail out all the economic failures in our midst will more than likely only precipitate a greater collapse – now or in the near future.  I smell socialism right around the corner.  How about you?




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