Nearly everything about President Obama's economic record recommends that he be replaced in November. The problem is his opponent in Mitt Romney. Not only are his attempts to out-tough Obama with regard to China economically illiterate, but they're also insulting to American workers. If people don't recognize Obama's America, they also shouldn't recognize Romney's in which skilled American workers allegedly can't keep up with their unskilled counterparts in China. Forbes.com.
TIME FOR MITT ROMNEY AND HIS ECONOMIC TEAM TO GROW UP
by John Tamny
FRIDAY'S JOBS report offered yet more confirmation that President Obama's economic program isn't working. Unemployment is a wholly unnatural phenomenon always and everywhere caused by government error, so with the jobless rate high, Obama deserves and should receive a major rebuke come November.
Economics is really so basic, and because it is, the alleged mystery behind the unemployment rate is very basic too. As consumers all, we know that when businesses are having trouble selling inventory, they reduce prices to a level that brings in buyers willing to take it off of their hands.
Considered in light of today's high unemployment, we have a great deal of labor inventory, and a major factor here is 99 weeks of unemployment benefits that make luring potential workers from the sidelines too expensive amid modern market realities. After that, whatever one's opinion of Obamacare, the latter foretells great per employee expense for companies; the law making it even more expensive for businesses to hire workers. Labor is a cost, and governmental mistakes at the moment are not allowing the cost of labor to fall to market clearing levels.
Beyond the hiring basics, the Obama administration is violating the four essential inputs to economic growth. Taxes are set to go up, meaning the costs of investing in a business, starting a business, and working for a business, are set to rise. Regulations are more and more onerous, and while they've time after time proven ineffective in rooting out mistakes or corruption, they're major burdens that detract from profit-seeking effort.
Trade is of course the purpose of our work, yet the Obama administration has shown an unwillingness to remove the barriers (a tax like any other) to exchange so essential to growth. And then most important of all, the Administration continues to pursue a weak dollar that is repelling the very investors without which there are no companies and no jobs. Investors, when they provide capital to new and existing companies, are buying future dollar income streams, but with policy heavily tilted toward dollar weakness there's greatly reduced incentive among those with funds to offer them up to new ideas.
Obama is seemingly begging voters to make him a one-term president, but what remains unknown is whether or not his competitor in Mitt Romney deserves to fill his seat. Recent comments from his campaign should at the very least give voters pause.
Indeed, it was just last week that the Obama administration made some typically foolish pronouncements about the need to get tough on China on the way to a complaint lodged with the WTO. Funny here is that trade is surely not war, instead it's a happy process whereby individuals exchange what they don't need for what they do. But rather than take Obama to task for advertising his economic ineptitude, Romney policy director Lanhee Chen told the Wall Street Journal that the Republican nominee supports Obama's actions while stressing that Obama had finessed an "election-year conversion on China", that Obama's policies wouldn't do enough to "level the trade imbalance" between the two countries, and that Obama's China stance seemingly wasn't tough enough.
The Romney campaign's China position on its face speaks to economic illiteracy, and worse, it's an insult to all Americans. Are we so pathetic now that we need to essentially pick on the little people to feel better? Are we so hopeless in the present that we're not offended when leaders essentially insult our work capabilities by saying they'll go after lesser skilled individuals in poor countries seeking to compete? If it's true as so many conservatives say, that "Obama's America" is not one they recognize, can't it also be said that "Romney's America" in which we'd use governmental force to weaken our trading partners is similarly one we wouldn't recognize? Wouldn't it at least embarrass us?
Beyond that, China's economic rise since the late '70s is easily one of the most exciting stories of modern times. Though China as a country remains very poor, that its citizens are increasingly able to taste the fruits of capitalism is beautiful, and something a pro-business candidate like Romney should trumpet. Would we prefer the China enemy of old where the country's people were being slaughtered by its cruel leadership, or would we prefer the modern China whose citizens have a direct stake in our economic health?
At first glance that's what this comes down to. Thanks to an increasingly free economy rooted in the profit motive, every day that China's vast population goes to work is yet another day that living standards for all Americans increase. This is the gift that keeps on giving. The Chinese make for us at low cost the things we want, and their doing so boosts the prospects for peace with the rising country given the massive costs that would result from invasion. As Kennedy family patriarch Joseph Kennedy told his son John, "War is bad for business." And so long as we trade heavily with the Chinese, the prospects for war are greatly reduced.
Importantly, the benefits of vibrant trade - trade greatly enhanced by a tight currency link between the two countries - with China don't end there. They don't because contrary to what you hear from most politicians and economists, the fact that the Chinese have been "taking our jobs" is yet another beautiful economic story that's revealed itself modernly.
Politicians and economists who should know better bemoan the loss of manufacturing jobs, but in truth, those "losses" explain why we're such a rich country today. That we regularly send low value work to China is what makes us so rich, and because it does, if the outflow were to reverse itself that would be a signal of looming impoverishment in the U.S.
Simply put, manufacturing is something workers in seemingly any country can do, and that's why so much manufacturing work has migrated to China's vast population of unskilled workers. Those workers, for engaging in labor that the investors who create all jobs put a very low value on, are paid the cost equivalent on a daily basis of a Starbucks' latte. Assuming an ability stateside to lure manufacturing work back to the United States, the pay for this backbreaking work would be a fraction of the minimum wage.
Figure Nike is one of the world's most important brands today not despite, but because it's never wasted precious American labor on manufacturing processes. And because Nike hires unskilled foreign workers to manufacture its goods, its U.S. based workers luxuriate at one of the nicest company campuses this writer has ever seen. Apple products are all the rage today, and Apple's profitability is a function of it retaining for American workers the high margin iPad design work, all the while sending to China low value manufacturing contracts necessary to complete the iPad.
We're once again exceedingly rich in the U.S. precisely because unskilled workers around the globe take on the labor that investors don't value, and this allows us time to toil in areas that investors do. Backwards moving economies are capital repellents, there are no jobs and no wages without capital, so the American ability to constantly migrate away from the jobs of yesterday is what makes us so prosperous. In short, if readers think we live in tough economic times today, and we do thanks to government error, they might stop to contemplate just how exponentially worse things would be if China and other countries weren't taking off of our hands low value work. Put plainly, we'd be much worse off, and because we would be, it's wise for us to cease criticizing a China the rise of which sustains our relative prosperity.
Back to the Romney campaign, its defenders would probably say he's just playing politics with all of his China bashing; that in fact he "gets it." If so, Romney's playing dumb politics, and he is because now more than ever voters need the truth over sleek candidates offering economic falsehoods. Basically, it's time for Romney's economic team to grow up, and to start treating voters like adults rather than insulting them with pledges to "get tough" on China that would ultimately bring great harm to workers in both countries.
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