By THE WITNESS STAND BY CLIFF NICHOLS
We as a country need to wake up and smell the coffee, even if it is imported from Columbia. Last year the U.S. trade deficit was $804.9 billion, and for 2006 it’s estimated to top $1 trillion. I have a hard time getting my mind wrapped around numbers that big, but I’m pretty sure that it’s probably too big to fit into even Mr. Holland’s Opus.
For those who may need a visual aid to grasp what’s going on, I would suggest they take a trip to an international commercial harbor like San Pedro or Long Beach and watch the cargo containers being unloaded off the many ships arriving daily. On an average day, they will see stack after stack of containers marked simply with one word, “China,” as far as the eye can see. They contain the goods arriving into our country that are stocking our store shelves — from clothing to toys to sporting goods to almost every type of household item. They are the products for which we trade our money, but the trouble is because they are not manufactured by Americans, that money is being shipped overseas. Some have called it the “Wal-Mart effect.” I think of it as the financial gutting of America. Last year the trade deficit with China alone was $201.7 billion.
The implications for the U.S. economy are ominous, yet America appears to be asleep at the switch. Our country is being plundered, yet we sit by idly fiddling with our iPods. Since 2000, our country’s manufacturing sector has lost 3 million jobs. That equates to an economic blood letting. According to Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business, the record trade deficits of recent years have resulted in the U.S. economy being about $1 trillion smaller than it would have been without the deficits. That equates to approximately $7,000 less per U.S. worker than he/she would have had otherwise. In turn, that reduces tax revenues and that ripples onward toward an increased federal budget deficit for which we and our offspring will pay dearly in the years to come.
In the meantime, to make up for the cash shortfall we are bringing upon ourselves by exporting our jobs and money abroad, we are at the same time selling or leasing our assets in this country to foreign interests. Take for example the plan of the governor of Indiana to lease the Indiana toll road to a foreign consortium in order to get $3.85 billion needed for highway construction money. As one opposed to the plan put it, “Selling (the) prime productive assets (of this country) is a sure sign of desperation and mismanagement.” Another put it this way, “We’re the crossroads of America. Spain and Australia are going to be in charge of the road that goes across the top of us. What happens if the wrong person starts buying all these roads up?” Good question. Oh, and let’s not forget that the president wanted to award the contract to manage our major ports to Dubai.
Practically speaking, all of this miscreant economic behavior on our part simply means that we as a nation have become cash exporters. For example, Japan alone has accumulated more than $1 trillion in American dollars, and who knows how much other countries around the world have accumulated in recent years. To understand the impact this could have consider this: General Motors has a stock market value $12 billion. That means Japan could buy General Motors with only 1 percent of its American dollars and put it out of business — if they wanted to. For the time being they don’t, probably only because it would embarrass us and, since we are the largest consumer of the cars they manufacture, they probably don’t want to do that. But that doesn’t mean they aren’t using their American dollars to buy other U.S. companies and put them out of business.
The transfer of our nation’s wealth to foreign ownership is occurring at the rate of $2 billion a day, according to some sources. That’s $1.4 million flowing out of this country to foreign nations every minute. At that rate, if we do nothing to reverse the trend, our nation will in time be impoverished. It’s inevitable. Spin-meisters, however, blur the implications of this by giving it a warm and fuzzy patina of acceptability. They tell us we are witnessing the natural course of “economic globalization.” Who, after all, could be against anything called that? It sounds so egalitarian, one-worldish and tolerant of diversity. As long as you are still able to make a living in this country, it may even make you want to join Michael Jackson and his international multi-cultural choir to sing an updated rendition of “We Are The World” followed by a chorus of “Kumbayah.” But, when you lose your job, you just may find you have more important things to be doing with your time.
The bottom line is the lifestyles we are enjoying today are being bought on credit, without our giving any thought as to how we’re going to pay the bill when it arrives. When it does arrive, however, be assured we will no longer be able to afford to pay even the electric bill necessary to keep the toys and appliances we have bought from foreign manufacturers playing, spinning or rolling.
We need to recognize quickly that our current standard of living is not an entitlement. It was handed down to us from parents who labored hard to earn it. We, however, are spoiled and so somehow think of it as our birth right. But also because we are spoiled, when our lifestyles vanish we will not comprehend it — much less be able to accept it gracefully. To say we will be shocked and angry will be the least of it. Warren Buffet has been credited recently with saying that “(the) U.S. trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil.” In hindsight, that may well turn out to be a tremendous understatement. Anarchy and revolutions have been caused by less than the economic collapse of this country that could foreseeably result from what we are witnessing today. The question is, “Is there anyone who can do anything to prevent it?” If there is, now would be a good time to hear from them. (Cliff Nichols is an attorney practicing criminal defense/entertainment law in Santa Monica. He may be contacted at either 310-917-1083, or www.cliffnicholslaw.com. You may join his blog at www.thedailystand.com.)
Originally published in the Santa Monica Daily Press print edition on March 22, 2006. Read the original PDF.