November 9, 2010
Is the American Dream Over?By Steve McCann
A major topic of conversation within the corridors of power in Europe and Asia is the decline and potential end of the United States as a major global economic power. This is in part a reaction to the desperate and foolhardy monetary policies of the Federal Reserve, trying as they are to mitigate the effect of enormous national debt and a restructured economy bequeathed to the American people by the "progressives" in the governing class over the past fifty years. But it is also a realization of what will happen to the global economic structure if the United States does not regain its previous world standing.
Recently, Der Speigel in Germany ran a six-part article entitled "Is the American Dream Over?" As expected for a left-wing publication, there is the obligatory demonization of conservatives and the Tea Party movement and a lack of acknowledgment that the policies advocated by the social democrats in Europe and the United States are the root cause of the nation's financial problems. From the article:
However, the essay does conclude that the American dream is over if the United States does not start producing products that are needed and become competitive in the world and domestic markets. Further, the U.S. must cease using the valuation of the dollar as a weapon to monetize its debt (which will ultimately bring down the global economy, with Europe and the America the hardest hit).
In an interview, Rolf Langhammer, Vice President of the Kiel Institute for the World Economy, when questioned on the issue of trade between China and the United States and the value of their respective currencies, said,
Yet the current policymakers in Washington, D.C. are focused on a schizophrenic economic policy of printing more dollars -- which threatens not only domestic inflation, but also a global currency war -- while continuing government spending on an unsustainable basis and suffocating businesses with higher taxes and new mandates and regulations.
The domestic and foreign consumption of goods and services produced in the United States is vital to reduce deficits, stabilize the dollar, and reset the U.S. economy. The overall structure of the economy must be addressed.
The service sector now accounts for over 81% of the U.S. Gross Domestic Product. An economy so dependent on services, which have no intrinsic uniqueness and comparatively low productivity, is highly susceptible to the vagaries of global and domestic economic factors. The rapid advancement in technology allows many of these services to be performed by fewer employees and, in some cases, in other countries with lower labor costs.
The statistics concerning the manufacturing sector of the U.S. economy are devastating. Per the Bureau of Labor Statistics, the percentage of workers employed in industry has declined from 21% of the workforce in 1980 to 9% in 2010. That represents a loss of nearly nine million jobs. The value of manufacturing shipments, inventories, and orders between the first nine months of 2010 and 2000 has declined 21.2% (adjusted for inflation).
Manufacturing's share of the U.S. economy stood at 11.9% in 2007. By comparison, manufacturing accounted for 16% of the economy in 1993 (a decline of over 25%). That trend is continuing. As a point of reference, the postwar peak was 28.3% in 1953. This same sector accounts for 23% of the German and 34% of the Chinese economy. Both countries are quickly recovering from the recent global financial crisis as compared to the stagnation the U.S. is experiencing.
This decline in the manufacturing base has also had a major impact on the massive trade deficit that has enriched other countries. Due to the lack of viable products produced in the United States and demanded by the American citizen, imports from other nations have taken up the slack. In 2008, U.S. manufacturers produced $912 billion worth of manufactured goods that were exported to other countries. These exports helped pay for somewhat more than half of the $1.5 trillion of manufactured imports U.S. consumers and producers consumed. This trend has been ongoing for over 25 years.
Unless and until there is a national policy established to re-industrialize the United States and reduce the size of government spending at all levels from the current 45% of the Gross Domestic Product back to the historical average of 34%, the naysayers from around the world will be justified in questioning the end of the American dream.
The steps necessary to restructure the economy and save the United States from the fate looming over the horizon are basic and achievable.
First, the American public must become aware of the true and potentially devastating nature of the nation's problems. Politicians must be willing to tell the unvarnished truth and articulate potential solutions which will require sacrifice by all citizens in order to get government spending under control.
Second, energy independence is essential. There is no viable "green" solution to our energy problem in the near future. Therefore, all geographic areas other than the extremely sensitive must immediately be open to exploration and development with suitable, albeit reasonable, environmental safeguards in place. Vast domestic natural gas and petroleum deposits are available to be exploited onshore and offshore, if regulatory and statutory hurdles are removed, and could generate huge numbers of good-paying jobs.
Third, the permitting process for industrial development, including a recognition that environmental protection has greatly improved over the past two decades, must be streamlined and given a strict timetable established by the federal government and the individual states.
Fourth, a reform of the product liability laws and the entire plaintiff/defendant relationship in court is a necessity.
Fifth, reduce or temporarily end the tax burden on corporate income derived from the production and sale of U.S. products.
Sixth, "buy American" can no longer be just a slogan, but a goal together with reducing the trade deficit by 75% through expanded exports and reduced imports.
Seventh, encourage business investment in research and development through tax credits and grants.
Eighth, assure the health of small businesses through permanent tax reductions and access to capital.
The American worker is still the most productive worker in the world and can compete with anyone. China, with a ticking time bomb of the growing expectations, both economic and political, within a massive population, should not be viewed as an invincible industrial adversary.
It is up to all Americans to continue the American dream. It can be done. It is in our DNA. We cannot allow those in Europe, whose own destiny may be that of becoming the world's largest outdoor museum celebrating its glorious past, to question our future.