Friday, 27 February 2009

How Can the U.S. Economy Recover Without Manufacturing Capacity?

"The United States' lack of a manufacturing capacity makes it even less likely that anything resembling a lasting recovery can emerge from President Obama's approach to the economic crisis. The infrastructure projects that are supposed to be central to the recovery scheme are only valued at $150 billion - which is not much of a jolt, especially when much of what will have to be bought is only available in other countries, made by foreign workers. Barack Obama has put a huge emphasis on building a green economy. However, according to the New York Times , most of the sources of solar panels and wind turbines are located in Europe and Asia. There can be no green economy without a mass transit makeover of the United States, but the U.S. hasn't made subway and light rail cars in many years.
http://www.marketoracle.co.uk/Article9109.html

There will be no immediate economic recovery in the USA.

[Posted at the SpookyWeather blog, February 27th, 2009.]

4 comments:

steven andresen said...

I thought the Germans and the Japanese have economic planning. They decide in a committe consisting of gov, bus, and labor leaders what the country needs to do over the next decade, or two, and what needs to be done to get those goals accomplished. This leads to them having better manufacturing base, a welfare state, and so forth. The economies that they have.

Whereas, around these parts no one plans anything.

If Obama wants a green economy, doesn't that require a kind of planning that the U.S. has refused to do because business has refused to have gov. get any part of the profits or control.

There will be as much chance of a planned economy to get green as there will be to get insurance company skimming out of health care.

steven andresen said...

spook,

There are several problems with the economic plans that both the repubs and the dems are promoting.

I have a very hard time giving the repubs any credibility when they start talking about the problems of borrowing and spending. When Bush was in charge the Repubs in congress ran up a very large bill. Now they are trying to criticize Obama for doing the same thing, although for supposedly different reasons.

I am willing to give Rep. Paul credibility on this issue because he was against the major spending and tax cut plan of the Repubs even when his party was pulling the strings.

However, I do give Keynesians like Krugman credibility because, as I have said, I think they recognize that with the economy tanking, you can't let people starve in the present.

However, I believe there is not enough work being done by Obama to bring manufacturing back, for example. In order to do that, I believe, he has to revisit the bad trade agreements that makes offshoring so profitable for corporations.

There is another problem. I thought the problem with the social security system was tha fact that when the 'baby-boomers' retire there will be more people sucking money out of the system than there will be putting into the system. This was the argument from the Repubs when they wanted to privatize the thing. They thought that if we invested in the stock market bubble, we'd be able to keep the financial market floating that much longer.

However, there should be that same problem now and, if there is going to be more people sucking than putting in, how are those same workers putting into the social security system inadequately going to be able to also pay back these massive budgetary deficits we are now making?

I suspect, that both the dems and the repubs are aware of the coming problem and they are being asked to suck as much wealth out of the system as they can before it all collapses.

How will Obama be able to say he can keep the social security system going and pay off the debt without dealing with the corruption that caused the bubbles, without dealing with the fact people have no work, no jobs, no productive industry, and when they also have to take care of their aging baby boomers...

Have you heard anyone on this issue of the coming reduction and aging of the work force?

steven andresen said...

spook,

And I've been reminded of pension funds and the fact that corporations have been required to keep them funded, in order to pay their obligations, but these laws have not been enforced.

I found this,

"...Exploding pension fund shortfalls are blowing billion-dollar holes in the balance sheets of some of the Chicago area's biggest companies, forcing them to make huge contributions to retirement plans at a time when cash flow and credit are already under stress.

Boeing Co.'s shareholder equity is now $1.2 billion in the hole thanks to an $8.4-billion gap between its pension assets and the projected cost of its obligations for 2008. At the end of 2007, Boeing had a $4.7-billion pension surplus. If its investments don't turn around, the Chicago-based aerospace giant will have to quadruple annual contributions to its plan to about $2 billion by 2011.

Stock market losses also pounded pension funds at Abbott Laboratories Inc., Caterpillar Inc. and Exelon Corp., with others sure to emerge as companies file their annual financial reports with the Securities and Exchange Commission in coming weeks...."

http://www.chicagobusiness.com/cgi-bin/article.pl?articleId=31402

I'm sure there will be a request from corporations to have the government bail them out of these obligations.

steven andresen said...

spook,

I'm sorry for bringing up the issue again, but it seems that the social security issue is being discussed. There was this , in an article by Greider in the Nation,

"...Defending Social Security sounds like yesterday's issue--the fight people won when they defeated George W. Bush's attempt to privatize the system in 2005. But the financial establishment has pushed it back on the table, claiming that the current crisis requires "responsible" leaders to take action. Will Obama take the bait? Surely not. The new president has been clear and consistent about Social Security, as a candidate and since his election. The program's financing is basically sound, he has explained, and can be assured far into the future by making only modest adjustments.

But Obama is also playing footsie with the conservative advocates of "entitlement reform" (their euphemism for cutting benefits). The president wants the corporate establishment's support on many other important matters, and he recently promised to hold a "fiscal responsibility summit" to examine the long-term costs of entitlements. That forum could set the trap for a "bipartisan compromise" that may become difficult for Obama to resist, given the burgeoning deficit. If he resists, he will be denounced as an old-fashioned free-spending liberal. The advocates are urging both parties to hold hands and take the leap together, authorizing big benefits cuts in a circuitous way that allows them to dodge the public's blame...."

http://www.thenation.com/doc/20090302/greider

Both health care reform and entitlement reform seem to be efforts to reduce the amount of money corporations are obligated to spend on the sick and retired. It may seem like a great thing for young people with their head in the sand. Sounds like an issue to rally the republican base around. But, it will destroy families and the country totally.