Killer Politics (16 page)

It will be a test for the Obama administration to try to relax tensions between the United States and our old adversary. Certainly, dismantling the missile shield sent a positive signal. If Russia joins the United States and other countries in negotiating an agreement with Iran on the nuclear issue, it could go a long way toward elevating Russia's stature and improving its relations with the West. Also, when it comes to Afghanistan, Russia should be encouraged to take a role in stabilizing the country—after all, they spent twenty years destroying it.

While these issues cannot be solved in the course of one administration, I believe that President Obama's overall direction is correct. That's why it will be crucial that America continues to elect like-minded individuals in the future. In my perfect world, Barack Obama serves two successful terms and then makes way for another Democratic administration.

While George W. Bush may have broken more in eight years than can be fixed in that same time frame, many of the underlying issues
have been brewing for decades—centuries, even. Those plotting the course today will not live long enough to see the eventual destination, but it doesn't make the cause any less urgent or noble.

Plans and intentions all look good on paper. The reality most administrations discover is that
events
dictate the direction of presidencies more often than presidencies dictate events. It's like being the bartender on a Saturday night—the chances of an uneventful evening are slim.

Selling Out the American Worker

THE FIRST SHOT IN DEFENSE OF THE AMERICAN WORKER WAS FIRED
by Barack Obama in September 2009 when he put a tariff on Chinese tires. Some 46 million tires in 2008 alone not only put Chinese rubber on the roads, they put American workers on the streets, as the Chinese share of the U.S. tire market grew from 4.7 percent in 2004 to 16.7 percent by 2008, from 14.6 million to 46 million tires.

As reported in the
Wall Street Journal,
four U.S. tire plants closed in 2006 and 2007 and more than 5,100 workers lost their jobs. Three more plants were in the process of shutting down, which would put another 3,000 workers out of a job.

This “dumping” was yet another in a line of trade violations perpetrated on the United States, but for the first time in a long time, an American president stood up for American workers.

Leo Gerard, president of USW (United Steel Workers), which brought the suit against the Chinese, wrote on the
Huffington Post
in mid-September 2009, “Don't kid yourself. This is a battle…. The U.S. economy is under attack by countries engaging in unfair trade. In the past decade, we've lost 40,000 manufacturing facilities…. Since the Great
Recession began, more than 2 million manufacturing workers have lost their jobs, making their unemployment rate 11.8 percent.”

While all eyes were on Wall Street and the investment bank shenanigans that triggered an economic heart attack in the economy, most people didn't realize that there was an underlying cancer eating away at America, which had weakened us and made us more vulnerable to an economic crisis.

THE RIDICULOUS REWARDS WE GIVE OUTSOURCERS

North Dakota senator Byron Dorgan, a Democrat, detailed the insidious way bad trade deals and bad policy are rewarding the turncoat companies that ship jobs overseas in his book
Take This Job and Ship It:
“When a U.S. company closes down a U.S. manufacturing plant, fires its American workers and moves those good-paying jobs to China or other locations abroad…the tax code allows these firms to defer paying any U.S. income taxes on the earnings from those new foreign-manufactured products until those profits are returned, if ever, to this country.” Contrarily, a domestic manufacturer “is required to pay immediate U.S. taxes on the profits it earns here.” Dorgan proposed legislation to close the tax loophole, which would not only save jobs but save taxpayers $15 billion over ten years. Sadly, the American worker will lose Dorgan's voice in Congress. He has announced that he will not run for reelection in 2010.

When it comes to bad policy, the North American Free Trade Agreement was a whopper. NAFTA alone increased the trade deficit with Mexico and Canada from $9.1 billion to $138.5 billion between 1994 and 2007, according to the Center for International Policy. The net loss in jobs attributed to NAFTA was almost a million.

Bad trade agreements are at the core of the problem, and when countries like China violate trade agreements, it begins to erode the economy even faster. Part of the problem with these bad trade deals is
the indifference and ignorance of the American consumer and international businesses like Walmart, whose drive to squeeze every last penny of profit from each transaction has been pursued at the expense of the American worker.

No, this won't be another long-winded harangue about the evils of Walmart. I documented that in my last book, and Senator Dorgan and a host of others have dissected the issue even more thoroughly in theirs. But when the world's largest retailer exploits the global job market to buy goods as cheaply as possible, and American consumers go along with it, it truly becomes, as I've mentioned before, a race to the bottom line. American manufacturing jobs go to China.

“The simple reality is that what these trade policies are about—and [they] have been forced upon us by large multinational corporations—they are asking American workers to compete against desperate people in the developing world, who in some cases make pennies an hour,” said Senator Bernie Sanders (I-VT) in a statement in 2007, which can still be found on his website. “And if you are a large corporate leader, it doesn't take a Ph.D. in economics to understand that, yes, you will throw American workers out on the street, who make $20 an hour, have health care, and where you have to obey environmental regulations. And yes, you'll run to China, pay people 30 cents an hour. If they stand up for a union, they go to jail. If they stand up for environmental regulations, they go to jail. Why wouldn't you go to China? And of course, that's exactly what many, many American corporations are doing.”

The Department of Labor reports that the U.S. manufacturing sector lost 791,000 people in 2008 and 4 million manufacturing jobs since 2000. Unemployment rises. With a glut of workers available, it becomes an employer's market. Employers can keep wages down. Wages stagnate. From 2000 to 2007, according the U.S. Commerce Department, the median income actually fell by $324. Thanks, Dubya. But I guess those tax cuts for the richest of the rich worked out OK for them, didn't they? Hey, will someone please remind them to trickle down?

With so many American factories shuttered and so many jobs lost to the Great Recession, what happens? The unemployed and underemployed start to put more pressure on social programs. They stress the health care system. They get food stamps. Fuel assistance. Your taxes rise. Why? Because you are subsidizing underpaid Walmart employees and the people in international corporations that profited by putting Americans out of work. What drives me crazy is that Republicans, who spent the last decade cheerleading outsourcing, now complain about the added pressures the unemployed are putting on social programs. I don't think it is simple hypocrisy—most of them just don't get it! The rest don't care.

Here's an example of how the deck is stacked against American manufacturers. In 2006, according to the
New York Times,
only 5,000 American cars were sold in South Korea, because of trade barriers. Meanwhile, 800,000 South Korean cars were sold in America. Even more ominously, the U.S. auto industry is bracing for Chinese cars, which will be test marketed in other countries before hitting the U.S. market within five years. GS Motors, a Mexican company, imports the cars from China's First Auto Works—4,000 in 2008—but expects the cars to be built in Mexico by 2010. The cars sell for $5,500. Is Detroit in any condition to withstand any meaningful pressure from Chinese/Mexican automakers? I don't know the answer, but I do know that if the cars are allowed to flood the market, Detroit may be sunk.

Among the industries in America that are virtually extinct is the garment industry, once the largest employer in America. Today, according to the HBO documentary
Schmatta: Rags to Riches to Rags,
95 percent of all garments sold in the U.S. are made mostly in sweatshops in China, Vietnam, and Bangladesh.

When Levi Strauss, which had employed 37,000 American workers, moved its operations to China in 2003, Clara Flores, an employee of the company for twenty-four years and president of the plant's union, told the
New York Times
that the $18-an-hour job and benefits would be
hard to replace. Marivel Gutierez, another twenty-four-year employee, told the
Times,
“There still probably is an American dream. But what about us? What happens to our American dream?”

It's obvious that when trade policy is constructed in America, the focus is on what's good for international corporations and not the American worker. The American worker is not regarded as a flesh-and-blood human being, a mother, a father, a son, or daughter. No! You are an expense, an impediment to profit.

WE DESERVE SOME OF THE BLAME

As American consumers, we have encouraged this behavior because we're like shoppers at a shady pawnshop. We don't want to know the story behind the goods; we just want them cheap. It's cool until you get your pink slip. It doesn't matter
until it matters.
You have to ask yourself, How much am I really saving when I don't buy American?

For eight years we heard the mantra “Support the troops,” despite Republican efforts to cut troop pay, their votes against funding the VA, and stop-loss programs. Damn right we should support the troops, but while we're at it, let's start putting up ribbons for the American Worker, too. We ought to tie a blood-red ribbon on every tree and light pole in America to signify the jobs shipped overseas. I'm serious. It'll be good for the ribbon business. I hear they're on sale at Walmart.

The trade deficit in 2008 was $677 billion, which, due to a floundering economy in the second half of the year, was actually down from $700 billion in 2007. One word you will hear from economists about the deficit is that it is “unsustainable.” Peter Morici, a former director of economics at the U.S. International Trade Commission, said in February 2009, “To finance the deficit of recent years, Americans have borrowed more than $6.5 trillion from foreign sources, including foreign governments, and the debt service comes to more than $1,500 for each working American.”

This transfer of wealth from America to the Chinese and the Middle East (oil accounts for $450 billion of the trade deficit) gives these countries the ability to buy up America piece by piece—real estate, stocks, bonds, and businesses.
Translation:
If we don't buy Ameri
can,
they buy Ameri
ca.

The Bureau of Economic Analysis reports that foreign investors own more of America than American investors own of the rest of the world.
Fortune
magazine's Geoff Colvin wrote in 2008 that as foreign ownership grows, “we must send more dividends and interest to foreign owners, giving them more money with which to buy more U.S. assets, earning more dividends, and so on.” I don't want to sound like Lou Dobbs with hemorrhoids, but we need to be talking about this issue now. At what point do we draw the line?

It is just one of many reasons for making the trade deficit more manageable, but the key to our economic resurgence is the awesome power the engine of job growth can provide. After World War II, with favorable economic conditions, the middle class grew and thrived, becoming the backbone of an economic juggernaut.

So even though the stimulus package has boosted the U.S. economy and job retention and growth, one of the main drags on the economy—the trade deficit—will have to be addressed in order for the U.S. economy to recover in the long term. Otherwise, Morici warns, “a pattern of false recoveries, much as occurred during the Great Depression, will likely emerge. Conditions will not be as bad, and unemployment will stay at unacceptable levels.”

When it comes to trade, the Chinese do not play Ping-Pong. They play hardball. According to Senator Dorgan, China has pressured Boeing, saying that if they want to sell planes to China they must open a factory there. It sounds like something you'd hear from the Mob.

I wrote earlier in this book that America never seems to muster the will to react until it perceives a crisis. The trade deficit is a crisis, but it is subversively quiet—it's like slowly bleeding to death. It hurts a little at
first, then you get sleepy…and then you wake up dead. I believe the Obama administration understands how important this issue is to America's future. However, there are many supporters of free trade who are seemingly oblivious to the harm the agreements have done to American workers. There will be millions and billions of corporate lobbying dollars spent to fight what they will brand protectionism and I will call survival.

SETTING GOALS

Our goal should be to cut the trade deficit by half in the next decade—and that may be too modest a proposal. Meeting such a goal will require a national focus on energy independence, since that is a huge part of the problem. When it comes to other imports, we will need to exhibit the same kind of toughness Obama showed on the tire issue. By all means, let us encourage trade, but we no longer need to treat all of our partners like ninety-eight-pound weaklings. Those with mature, robust economies cannot be allowed entry into our market without extending the same invitation to U.S. exporters.

I recognize that trade is necessary. I also recognize that unless we renegotiate bad treaties and enforce the laws of existing ones, we cannot hope to have a stable economy. Trade wars serve no purpose, but we have to stick up for the American worker and give the American manufacturer an even playing field. Obama has already taken the first step, which is to
enforce
trade agreements. Second, we must renegotiate NAFTA and other suspect agreements. Third, we have to amend U.S. tax laws so that we stop rewarding companies who outsource and start punishing those who do.

Finally, we have to address the issue of international currency “fixing.” As discussed in the chapter on China, by keeping its yuan pegged artificially low to the dollar, China's goods remain attractively priced in
the U.S. market and American products are at a price disadvantage. Specifically, the Obama administration has to follow through on its challenge to China over currency manipulation.

This is all eminently doable, but it will not come without fits and starts and bumps in the road as each trading partner negotiates for the best possible advantage. I'm not sure who has negotiated some of these past treaties, but if his name was Curly, Larry, or Moe, I wouldn't be shocked.

IT'S ABOUT BASIC HUMAN RIGHTS

At its core, the whole issue of outsourcing is really a reflection of the value we put on human dignity and human rights. Ultimately, if we are to stop this devastating race to the bottom, we have to include in these agreements workplace protection and economic standards for workers in emerging economies, just as unions did in America.

Rather than forcing American workers to compete in the gutter, this serves the purpose of elevating abused workers, including child laborers, in other countries. Under no circumstances should we be encouraging and enabling workplace abuses in other countries by allowing the import of goods produced in that manner.