The last couple of weeks, the United States is doing something we rarely do: we’re thinking in more or less practical terms about the future of our democracy, boiling our values and our needs down into numbers on a balance sheet.
President Barack Obama has laid out his budget and it’s drawing serious fire. Republicans have countered with their own spending proposals, which have also been roundly panned.
One unavoidable conclusion, looking at the mounting debt that both sides see continuing into the future, is that our current approach is unsustainable.
Put simply, our economy is no longer big or robust enough to fund through taxes all the programs and services that we want our government to provide.
Whether your particular wish-list includes an assertive global military or well-funded social welfare and education programs, the time is near when we’ll be getting big lumps of coal instead of goodies.
Yes, we can stave off the inevitable for awhile by raising taxes, but our aging population and the growth rate of health and senior care programs — not to mention the rising cost of interest on our debt — makes that a temporary solution.
The obvious solution here is to grow America’s economy as rapidly as possible, expanding tax revenues while also reducing the number of our citizens who rely on government programs. It’s a win-win.
The problem is that none of the economic plans floating around Washington DC confront the biggest single problem crippling our prosperity: protectionism and unfair trade by China.
Here’s something that might surprise you.
The United States is still the biggest manufacturing nation on earth. In 2007, we produced $1.8 trillion in manufactured goods, compared with China’s $1.1 trillion. Our goods also tend to be higher quality and higher tech.
Our workers are more efficient, better educated, and far more productive per capita.
Everyone knows, of course, that the Chinese are rapidly catching up. But the dirty secret of our looming economic crisis is that the Chinese aren’t playing fair even by the generally crooked standards of global trade.
For decades, the Chinese have competed with US firms while paying their workers brutally low wages. Even jobs that involve heavy labor and dangerous working conditions pay only around $200 a month.
In some factories, pay still hovers at less than $1 an hour.
It simply doesn’t make sense to grouse about greedy unionized workers in America when in order to compete they would have to accept wages that are literally Dickensian.
The Chinese have also failed to implement reasonable environmental protections, a huge savings in the cost of doing business, and an unfair advantage over nations that want to preserve a decent standard of living.
The Chinese have also refused to implement reasonable copyright and intellectual property rules, meaning that the “idea work” and innovation that fuels American prosperity is often simply stolen or bootlegged.
Their nation has also placed heavy-handed restrictions on foreign investment and trade, meaning that Chinese firms are free to compete in the US and Europe without fears of facing competition at home.
All of these hurdles would be enough to tilt the playing field dangerously, pushing manufacturing regions of the US — including the North Country — to the brink.
But the biggest factor crippling fair trade is the Chinese leadership’s refusal to allow its currency to float in value.
The dollar, the Euro and other major currencies rise and fall in value, a process that acts as a perfect breaking mechanism.
If one country’s economy is overheating, its currency rises in value so that its exports become more expensive, giving companies in other nations a chance to get back in the game.
But China has fixed its currency artificially at bargain-basement levels, even as their economy booms with double-digit GDP growth.
A company trying to export widgets from the depressed North Country will find that the value of the dollar alone makes it nearly impossible to compete with regions of China that are wildly prosperous.
Various studies of these unfair practices find that they cost Americans between 350,000 and 3.5 million jobs. You can do the math. Even if we take the low-end figure, New York state’s share of that would be at least 7,000 jobs.
Let me say again that I have no problem with the Chinese beating us fair-and-square. If they out-educate, out-innovate, and out-efficiency us, that will spark American firms to be more creative and resourceful.
But that’s not the true story of Chinese prosperity, which is based on protectionism, the lack of a rule of law, and brutal labor and environmental conditions.
Yes, the idea of confronting China on these unfair practices is nerve-wracking. And if the Chinese had shown the least flexibility on any of these points, it would be foolish to consider this kind of brinksmanship.
A trade war could result in impacts on our lifestyle very nearly as profound as restrictions on the oil flowing from the Middle East.
From the cheap products we buy at Wal-Mart to the municipal bonds that Chinese investors purchase, we are deeply intertwined with their economy.
Opposition to a more aggressive trade stance would also be fierce from American corporations, which have gleefully taken advantage of China’s trade policies to boost their profits.
But the time is approaching when American policy-makers simply won’t have a choice.
If our companies — especially those that provide crucial blue collar jobs — can’t compete and build prosperity on an even footing with China, then our country will surely fall into second-place status, beginning with our manufacturing sector.
In time, other parts of our economy will be exported, eroding prosperity and tax revenues even further. If that’s allowed to happen, the budget woes we face today will look like child’s play.
Put simply, we all expect our government to be the government of a rich and robust nation. But if we allow China to take away that prosperity unfairly, the downward spiral will be irreversible.