Wednesday, April 8, 2009

Open markets create customers for US business

This has be an article of faith to almost all economist for my entire lifetime. Calling it into question is treated by both economists and politicians as heresy and the people who question this particular “faith” are treated as economically challenged.

Well lets look at the results of this particular idea.

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced on Friday, March 13, 2009 that total January exports of $124.9 billion and imports of $160.9 billion resulted in a goods and services deficit of $36.0 billion. That means we bought 36 billion dollars from foreign companies than we sold.

Somehow these practices didn’t create more customers for US businesses it created more customers for the foreign companies. And in creating those customers, Americans lost their jobs.

According to the US government Bureau of Labor Statistics web site as of March 2009 the total unemployment was 8.5%. With 301,000,000 people in the US, that’s 2,558,500 people.

In addition to spending that $39 billion somewhere else, we gave up a huge amount of money in salaries for people who lost their jobs.

Lets suppose that each person earns a salary of $25,000 per year. That means the nation as a whole is loosing $63,962,500,000,000.00 each year they are not working.

The entire trade deficit as of January 2009 was $36,000,000,000.

If we subsidized US companies by the amount of the deficit ($36,000,000,000.00) we could put at least half the unemployed back to work. I say at least half, because those people would be buying things and paying taxes and that would spark the economy to hire even more people.

The biggest problem with the proposed solutions is that the “usual suspects” who advised us to make the trade policies and business regulations that got us here are the people being asked for the solution! Let me make sure I understand - the people who recommended policies that failed are now being touted as the experts who can solve the problem.

If your mechanic hosed up your car, would you take it back to them to fix it? And why should economic advisers be treated any differently?

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