The Times crafts an excellent editorial on the economy

The Times has an excellent editorial today on the challenges the economy is posing to policy makers.   It is deeply consistent with what NDN has been advocating for these past several years, and makes a strong case for why we need a New Economic Strategy for America:

How Slow Can It Go?

Last week, when the government reported that the economy had slowed to a crawl in the first quarter of the year, any lingering hope for robust employment growth was tempered accordingly. But no one was quite prepared for a job report as weak as the one released yesterday. Only 88,000 jobs were created in April, the smallest gain in nearly two and half years and a sharp deceleration from job growth in the recent past.

Predictably, the slowdown was reflected in Americans’ paychecks. Weekly earnings are up over the past year. But of late, the rate of increase has dropped significantly. A squeeze on jobs and paychecks is the last thing Americans need right now.

Though the economy has been expanding for more than five years, wages and salaries for most workers have picked up in earnest only in the past year. And now hiring and pay increases appear to be slowing before many families have had the chance to rebuild their finances. For many people, mortgage payments are also being adjusted upward as home prices fall, making it harder for them to refinance their debts. At the same time, the price of everyday essentials, like food and gasoline, is rising. And life’s big-ticket items, like health care and education, are increasingly expensive, even as employers and government shoulder less of those costs.

If this strain on family finances ends up curbing consumers’ spending, the economy at large will be in danger of a recession. The Federal Reserve would probably try to counter such a downturn by cutting interest rates. But rate cuts are not magic. Their effectiveness would depend on the depth of the recession and the ways the lower rates reverberated through global markets.

More likely, the real solutions will have to be political, not merely technical. When the next downturn hits in force, it will become painfully clear that American workers have not shared in the benefits of Bush-era economic growth in any way commensurate with their hard work and productivity.

The nation will need policies — and leaders — to reconnect economic growth with rising living standards, for all.

New NDN Paper: A Laptop in Every Backpack

Today, the NDN Globalization Initiative is releasing the first paper in A Series of Modest Proposals to Build 21st Century Skills offering innovative ideas on the steps that can be taken to help our children and workers right now, today.  This first paper A Laptop in Every Backpack suggests that:

Achieving the American Dream in this century increasingly requires fluency in the ways of this network and its tools – how to acquire information and do research, how to construct reports and present ideas using these new tools, how to type and even edit video.  We believe we need a profound and urgent national commitment to give this powerful new 21st knowledge, essential for success in this century, to all American school children.

Feel free to comment on the paper or pitch us on some additional ideas here on our blog.

MyDD on Rob Shapiro's carbon tax paper

Matt Stoller over at MyDD is talking about a carbon tax versus the cap and trade approach and he had only good things to say about NDN Globalization Initiative Director Robert J. Shapiro's paper on the carbon tax.  Read the entire post here.

The Cap and Trade Scam
by Matt Stoller, Tue Apr 24, 2007 at 11:46:18 AM EST

Alright, it's time to understand the global warming debate, and who's selling what.  And basically, the state of the policy world is pretty bad.  The urgency on the problem is high, and paradoxically, Bushnik's refusal to admit the problem exists has obscured the choices we'll have to make post-2009.  But the choices exist, and all the major Presidential candidates are pushing policies that are not only ineffective, but subject to massive corporate corruption.  Like with Iraq, it's time for us to engage. Thankfully all of them are bad on this, so I don't want to hear any secret agenda whining, though I do have an emerging secret agenda in favor of Chris Dodd, as you'll soon see.

Economist Robert Shapiro has a very important and readable paper on different ways to deal with the carbon problem.

India: launching itself ahead of the US?

India launched it's first commercial rocket today, a major technological and entreprenuerial milestone for the world's second largest nation.  I was reminded of a great post by former NDNer James Crabtree on the phenomenon that is "Chinarunindia."  Read on...


by James Crabtree -- 7/21/06 

It is now almost a political trope that Chinarunindia threatens American jobs. And so it does. But not in the way people often think. Case in point are the statistics people use. You see this often, of the following type...

Such statistics are part of statistics-as-metaphor. Whether or not they are true is not the point. You should treat them in the same way people say "Eskimo's have 27 words for snow" or "half the world has never made a phone call." Are these true? They might be. They probably are not. [Read for instance this superb essay by technology thinker Clay Shirky on exactly this point, examining the truth behind the second quote.] But that isn't the point. The point is that they are meant to tell you something bigger: namely that language responds to circumstance, and the technological revolution is confined to rich countries. My favourite is: "1 in 7 people is a chinese farmer." This one is actually true, with 6 billion people and 900m employed in chinese agriculture. But what it really means is nothing to do with farming. It means: holy hell! there are a lot of people in China!

The same habit crops up with the statistics politicians use to describe Chinarunindia. They are trying to make the point - quite correctly - that the world is changing fast. They want you to understand that this brief period of history when the US is the (as Rob Shaprio, our Globalization Initiative directorl likes to say) only global power with no peer since Rome, will be just that. Brief. But in the course of making this point, some real whoppers emerge. As the FT explains:

Although both countries produce millions of graduates annually, the raw numbers are a misleading metric for employable skills. China produces 600,000 university-trained engineers every year, for example, a figure often cited to illustrate the country's inexorable rise as a technology power. But a McKinsey survey of nine occupations including engineers, accountants and doctors found that fewer than one in 10 were employable by multinationals.

The rest of the piece is similarily on the money, and you should read it. It highlights something almost no one seems to understand, namely that (unbelievably) Chinarunindia are running out of workers. They aren't running out of people exactly. But because they invest so little in education, they are running out of employable workers. These labour shortages will ripple out accross the world economy in the coming years. But because politicans use these misleading stats, they miss the bigger point. It is this. Imagine how much Chinarunindia will change our economy when 9 out of 10 of their professionals are employable by multinationals? Makes you think. Have a great weekend............

Thinking About Our Trade Deficit With China

As the United States files a major case at the World Trade Organization charging China with wholesale piracy of U.S. intellectual property, especially copyrights covering books, music and videos, let’s pause and think about our trade deficit with China.  The administration is entirely right to file the case – though a little late, given that it’s only our third complaint with the WTO over intellectual property violations since George W. Bush took office, compared to fifteen cases filed at the WTO by the Clinton administration in its second term alone.  We’ll get to why those violations matter economically, but first let’s look at an even bigger picture.

It may not be politically satisfying, but the truth is, we cannot blame any other country’s trade practices for the size of our trade deficit.  We run trade deficits for one reason: We consume more than we produce and then purchase the difference from abroad.  When China sells paper or t-shirts for less than they cost to produce and ship them here, it increases our imports of Chinese paper and t-shirts, hurting American workers and companies that still produce them here. But if China charged three times as much, and we bought more paper and t-shirts from American or other foreign suppliers, it could affect the composition of our trade deficit, but not its overall size: That’s because the size is locked in by how much we consume of everything, relative to how much we produce of everything.  The only way to reduce the trade deficit is to either consume less – which is what economists mean when they say that the answer is to save more – or to produce more. It’s used to be the case that the two were closely linked: In order to produce more, you had to invest more, and to invest more, you had to save more (and so consume less).  Global capital markets have changed that for the United States, where everyone wants to invest: Now, we can invest more even without consuming less – we just have to borrow the investment funds from foreign savers. There’s a big cost down the road, since foreigners end up owning more of our companies and real estate, and then taking home their profits and rent – but at least we get to invest.

Force China to play fair with her trade policies (if we can, which is often doubtful), and we’ll end up importing a little less from China and exporting a little more to China. But unless we also begin to consume less overall or to produce more overall, it won’t affect the total trade deficit at all.  There is one, possible way it could do so -- if demand for our exports to China goes up, it may lead to greater production at home to fill the need (after it had led to greater investment to expand production) -- and the increase in our production can bring down the trade deficit.

The one exception to all this is what the administration is finally focusing on -- foreign violations of the intellectual property rights of American producers.  If we could get China, India, Russia and Brazil (the four biggest offenders) to stop appropriating or pirating our pharmaceuticals, software or music and films, it would directly reduce our trade deficit. Our own consumption wouldn’t change, but foreign payments back to U.S. companies would increase, just as if our production had increased and all been exported. Stealing our intellectual property, in short, has the effect of reducing our production (more precisely, taking part of our production and pricing it at nothing), which in turn drives up the trade deficit.

So, now there are two reasons to crack down on intellectual property violations by our trading partners.  It’s the only cost-free way to reduce our trade deficit, and it should increase the returns and incentives for producing more of it, at a time when globalization and technology make intellectual property a central factor in U.S. economic growth and progress.

One more word on our trade deficit with China: Half of it comes from U.S. companies bringing back products they’ve produced in China by their Chinese subsidiaries. China’s currency is undervalued by all the standard economic measures. But if China does revalues its’ currency, so its exports become more expensive, it will raise the price of products produced by American companies there for sale here – and by itself can’t affect the overall trade deficit.

Rudy's "Four Pillars of Prosperity"

Rudy Giuliani describes his "four pillars of prosperity" in today's Financial Times (note: the article is limited to subscribers only). Just what are his pillars of American prosperity?

1 - Reduced spending growth
2 - Lower tax rates
3 - Regulatory reform
4 - Sound monetary policy

Giuliani writes:

"When economic policies are built on the four pillars of prosperity, economic growth, upward mobility and more efficient government are the result ... Fiscally conservative leadership will help restore the confidence of our shareholders: the American people." 

For more information on NDN's coverage of the 2008 Presidential election, click here.

Immigrant Communities Hit Hard by Mortgage Crisis

In the Senate, Chris Dodd is making his displeasure known, on the subject of lax oversight of sub prime mortgages, which offer tantalizingly low initial payments, followed by sudden increases.  These loans, issued willy-nilly during over the past few years, are leading to a spike in delinquency and foreclosures, and nowhere are the effects being felt stronger than in immigrant communities.  Today's WAPO article is a good way to learn more about the expanding and very negative economic phenomenon, but NDN readers will also find the metric they use interesting: calls to a Spanish language radio talk show.

Tysons Corner mortgage broker Jose Luis Semidey, who has a popular Spanish-language real estate talk show on Radio Universal, is being deluged with calls from desperate homeowners who are falling behind on their mortgages. The calls started in late 2005 and have steadily risen; he now receives 40 to 50 calls a day from throughout the area.

"I see more coming," Semidey said.

NDN works with Spanish language radio stations, shows and personalities across the country to help them engage their listeners in the comprehensive immigration reform debate, and other issues that impact their communities.  Click here to learn more about NDN's innovative ad campaigns on Spanish language radio.

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