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November 16, 2009

Washington Times Against Protectionism Before They Were For It

-- by Dave Johnson

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

President Obama is visiting Asia, and is blasted over and over about America's supposedly "protectionist" policies.

"China on Monday accused the United States of increasing protectionism..."
Think about it, the country with the massive trade surplus accuses the country with the massive trade deficit of being "protectionist." Call it The Audacity Of Projection.

Our trade opponents have learned that all they have to do is shout the word “protectionist” and their American enablers will quickly run from doing anything that might help American companies and workers. But what happens later, when the consequences start hitting home? Do the "free trade" shouting, foreign-competition enablers take the blame and accept responsibility when Amercan dollars are spent overseas and American workers lose jobs and American factories close? Who could have known that they would point the finger at the President instead of themselves?

Here is what I am talking about:

On February 8, 2009, during the debate over the stimulus package, the conservative Washington Times joined the "free trade" chorus, denouncing the package's proposed "Buy American" requirements as the same kind of "protectionism" that conservative mythology says caused the Great Depression: EDITORIAL: How to cause a depression,

...Tucked within the economic stimulus bill the House passed last week was a clause requiring state and local public works agencies to buy American iron and steel for their reconstruction projects, and the Senate expanded it to all manufactured goods.

[. . .] The stimulus bill has a way to go before it reaches Mr. Obama's desk, but if strong "buy American" mandates are present at that time, he will have no choice but to veto the bill. Otherwise, he will be forever known as Barack H. (Hoover or Hawley) Obama.

Conservative free-traders got what they demanded. In response to these and other cries of “protectionism!” the Senate backed away from the Buy American clause, changing it to vague language requiring that the money be spent in ways consistent with existing treaties.

Since this wording gives the President some discretion in how the money is spent conservatives started demanding the President spend it ... outside of the country. For example, a Washington Times editorial on March 24, EDITORIAL: The Mexican-American War of 2009, ended by blasting President Obama for wanting American stimulus dollars to stimulate America's economy:

"Wasn't Mr. Obama going to be the "international" president who was going to get the rest of the world to love us? The path to improving relations does not involve destroying jobs in other countries as well as in our own."
So now it turns out that many stimulus dollars are being spent according to the wishes of the "free trade" conservatives, with money to purchase wind turbines creating jobs in Europe and China, and who could have known, the very same free-trade conservatives are JUST OUTRAGED that President Obama is sending American stimulus dollars out of the country! For example, a Washington Times editorial on November 13, EDITORIAL: Stimulus creates jobs in China, begins,
Of the $1 billion in clean-energy stimulus money spent since the beginning of September, $850 million has gone to foreign wind companies. It doesn't take a bunch of experts at a hastily planned "jobs summit" to discover this isn't the way to bolster employment in America.

Indeed, the 11 U.S. wind farms that received stimulus money from the Treasury have imported 695 of the 982 wind turbines to be installed, creating 4,500 jobs overseas. That's far more overseas work than the stimulus money has created in the United States.

Yes, how DARE they not require that American stimulus dollars be spent in America! This from the very same Washington Times editors who earlier in the year demanded exactly that.

Who could have known that conservatives would attack President Obama for the consequences of giving in to conservative demands??!! The Washington Times was against protectionism before they were for it. Call it The Audacity Of Hypocrisy.

The lesson to be learned here is to stop listening to these conservative, "free trade" clowns. They are only interested in making the rich richer at the expense of the rest of us and will say whatever advances that goal. We should start just doing what is right for the country, our workers, our factories, our companies and our jobs.

Posted by Dave Johnson at November 16, 2009 3:30 PM


Comments

Posted by: Mace [TypeKey Profile Page] at November 16, 2009 8:16 PM

Ooops. Specifically see Merideth Whitney and put on your helmet.

http://globaleconomicanalysis.blogspot.com/2009/11/bernanke-vs-meridith-whitney.html

Posted by: Mace [TypeKey Profile Page] at November 16, 2009 8:22 PM

A last item. Thought you'd enjoy Porter Stansberry's assessment of big corporations getting bailed....banks that is.... subscription at Stansberry and Associates...

QUOTE
"Hedge-fund manager John Paulson, known for his prescient short of the mortgage market, bought 300 million shares of Citigroup – debatably the weakest of all the large U.S. banks – in the last quarter. Meanwhile, he dumped his entire stake in Goldman Sachs and sold 2 million shares of JPMorgan Chase (bringing his holdings to 5 million shares). Goldman and JPMorgan are two of the strongest banks in the world.

Paulson is no doubt betting the current interest-rate environment (free money for banks) will help Citi earn itself out of the hole. Paulson is an arbitrageur, and this trade is a bet Goldman and JPMorgan's overperformance relative to Citi over the past few years will end (see the five-year chart below).

If you'll look at Goldman and JPMorgan's two-year charts, you'll see their recoveries formed perfect V's. In contrast, Citi's chart shows the bank is still trading toward the bottom of its range. Shares are already up more than 4% on the news of Paulson's buy.

Lots of people realize the government is propping up the banks with their repeated bailouts. But most folks don't understand the real way the government is saving the banks. It's not the shares the feds bought (and paid too much for). It's the whole system of paper money.

The government is deliberately keeping short-term interest rates super low, so the banks' funding costs almost disappear. Then, by running a huge budget deficit and spending record amounts of money on domestic programs, the government insures inflation (and longer-term rates) will remain high. The banks make money on the spread between short-term rates and long-term rates.

And just to make sure nothing goes wrong, the Fed has promised to buy $1.75 trillion (yes, that's trillion) worth of mortgages, many of which come directly from troubled banks like Citigroup. In short, there's no way these banks can lose.

And here's the best part... According to the Congressional Budget Office, this secret plan to save the banks is free. No line item anywhere in the budget accounts for interest-rate manipulation or the Fed's mortgage buying. It's all "free."

But of course, there is a real cost. The value of our currency goes down with every new dollar the Fed prints and with every dollar of new deficit spending. But the politicians can all pretend inflation doesn't exist. When it shows up in our economy, they can lay the blame with "speculators" and oil companies...

The government can manipulate the dollar like this because it's not backed by gold. President Nixon "temporarily" cut the tie between the dollar and gold in August 1971. You can see the video here. In it, Nixon promises the dollar won't be devalued – "your dollar will be worth just as much tomorrow as today"...

At the time, $35 would buy an ounce of gold. Today, it takes more than $1,100. That's a 97% decline in purchasing power. It's fascinating how many people believe this won't happen again... despite the fact that we've got runaway deficits, we're trying to fight two overseas wars, we're about to pass the largest new entitlement program in history... and we're propping up every major bank in the United States. I'm not surprised gold is trading at $1,100. I'm surprised it's not trading for more than $5,000. " UNQUOTE

Posted by: Mace [TypeKey Profile Page] at November 16, 2009 8:32 PM

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