Robert Samuelson Again

Remind me never to open Newsweek again when I have real work to do. Robert Samuelson tries to play the tough guy yet again in his column, saying that we face either major entitlement cuts or major tax increases and we have to buck up and take it like real men. I agree that we need to do something about the long-term debt problem, and the sooner we come up with a solution the better. But this was what set me off: “There is no way to close the massive deficits without big cuts in existing government programs or stupendous tax increases.”

This leaves out the obvious and best solution: reduce the growth rate of health care costs. Democrats and Republicans differ on how to do it–the former put a large package of cost-cutting measures in the Senate version of the health care reform bill, the latter want to kill the tax exclusion for employer-sponsored health care (and some Democrats would be fine with that as well). But everyone knows that the long-term debt problem is a health care problem, we spend far more on health care than we get back in outcomes, and cutting health care cost growth is the key. If we don’t, then we’re completely screwed no matter how much we cut Medicare–someone has to pay those health care costs, and if we cut entitlements we’re just shifting the problem onto individuals. (Put another way, Medicare is largely a redistribution system–as Samuelson recognizes–and if you kill it, you haven’t done anything about the fundamental mismatch between aggregate income and aggregate health care costs.) You may prefer that politically, but it’s still not a solution.

Samuelson says, “Even with these cuts [proposed by him], future taxes would need to rise. Unless you’re confronting these issues–and Obama isn’t–you’re evading the central budget problems.” Does he not realize that health care reform was the centerpiece (now perhaps failed, but at least he tried) of Obama’s first year in office, and that Obama himself insisted that cost reduction was more important than universal coverage, to the chagrin of his own political base? Oh, wait. Samuelson doesn’t realize that health care is the central budget problem.

I’m sorry to belabor the point. You all know it. But apparently Robert Samuelson doesn’t.

By James Kwak

67 responses to “Robert Samuelson Again

  1. “Republicans … want to kill the tax exclusion for employer-sponsored health care”

    How could any self-respecting, Reagan-loving Republican support a tax increase?

  2. “health care is the central budget problem”

    this is the central issue in the debate, and the “ryan budget” is the latest gambit in the GOP battle to keep the dominant theme of the media narrative on deficits instead of health care

    sure hope obama’s approach will work

  3. It is not a tax increase; it is the elimination of a market-distorting government subsidy.

    Thanks for asking.

  4. Wasn’t the tax exclusion just a middle-class bribe to begin with?
    Seems like “self-respecting Reagan-loving republicans” need to follow Greenspan’s lead and re-think their philosophy given causes of recent events.

  5. Does the Military budget exist in a parallel universe per chance?

  6. “we spend far more on health care than we get back in outcomes”

    Proof by assertion?

  7. Actually, what it leaves out is the most important component of reducing the deficit: increase the number of taxpayers, by getting people off of unemployment and back to work. There is almost no problem in this country that couldn’t be solved by returning to full employment, even if it takes Reagan-endorsed “workfare” or the return of FDR’s WPA as the employer of last resort. I mean, seriously, people, how did something endorsed by both Ronald Reagan and Franklin Roosevelt become not discussable in Congress, off the table, impossible to consider?

  8. Proof by allusion to many studies in health care economics.

  9. at one time, I would read this blog with interest. But, it now appears to be so politicized that critical thinking has evaporated.

  10. “no matter how much we cut Medicare–someone has to pay those health care costs, and if we cut entitlements we’re just shifting the problem onto individuals” That doesn’t make any sense. So you’re saying if we cut Medicare, it will have no dent at all on the demand side? Let’s just look at one aspect. If medicare is cut, you’re saying that all those scam artists will just pass their fraudulent bills to the individuals to pay?

  11. Be specific.

  12. That assumes consumers are largely in control over the amount of medical care they demand, not providers like doctors or hospitals. Most of the studies I’ve read about say chronic conditions like diabetes and heart disease along with end of life care are what’s driving cost growth. I’m a strong believer in consumer-driven medicine, but I just don’t see how more consumer choice is going to do much to contain costs for these kinds of things. Nemo is fond of saying if we want to tackle health care costs we have to create policies that either increase supply or decrease demand. I largely agree with that sentiment, it’s just that I think targeting the supply side (doctors and hospitals) is a much more practical way to proceed than trying to fiddle with demand. Ideally, we should be trying to do things about both.

  13. Agoraphobic Kleptomaniac

    “elimination of a market-distorting government subsidy.”

    Taxes, almost by definition, are market-distorting. That’s the second reason for taxes to exist, to provide incentives/disincentives to a market that otherwise wouldn’t support certain policies that are good for the nation as a whole. The arguement needs to be which policies are good for the nation.

  14. Exactly right. See here and here for some back of the envelope figures concerning how much money there is to be had by implementing policies that move us toward full employment:

    http://bilbo.economicoutlook.net/blog/?p=7308

    http://bilbo.economicoutlook.net/blog/?p=7717

    Short story: anyone worried about the deficit should be screaming for policies that move us toward full employment. There’s nothing else that even comes close to producing as much revenue, not Social Security reform, not decreasing the size of the military, not even Health Care reform.

  15. dear mr kwak,

    it has been a saddening experience to watch your thinking devolve as you progress through a “leading” law school at a highly ranked university. no wonder our government, traditionally filled with “ivy” graduates, continues its history of grandiose, delusional, and destructive “solutions” to unintended consequences of its past grandiose solutions (see, e.g., the “Great Society” and Mathews v. Eldridge).

    to reinforce m. baskerville’s comment, you argue that “if we cut [health care] entitlements we’re just shifting the problem [of high health care costs] onto individuals”. you fail to consider the most likely consequence of this truism: the individuals will not pay the high costs.

    underlying your argument is a failure to apprehend the root cause of upward-spiraling health care costs. health care cost inflation stems mostly from the presence of government-subsidized middlemen (e.g., insurers cum bank holding companies, state agencies funded through title xix, etc.) between consumers and providers. the middlemen exempt individuals from considering the cost-benefit trade offs essential to a free market, and exempt providers from considering the true market price of their services.

    the deeper reason for our present health care set-up is that we live in an era of vast and unjustified entitlement, where every citizen feels that they have a “right” to things that require a great deal of skill and effort to provide. our culture’s childish feeling of entitlement, in turn, arises from intentional changes made to the legal framework of our society between 1932 and about 1980.

    making individuals accountable for their health care costs would be a great measure toward correcting the present moral retardation of our country. absent further government tampering (such as making health care debts non-dischargeable in personal bankruptcies), health-care providers then will be forced to re-structure their pricing to accommodate individually perceived values of essential health care relative to other non-discretionary goods and services. this adjustment would provide a lasting solution to the projected problem for individuals.

    moreover, making individuals bear the burden of their health care costs would immediately and permanently resolve the projected problem for federal budgets.

  16. Agoraphobic Kleptomaniac

    Two words: Teh Google.

    Or, since you seem to be just joining this site, you can cruise back several months of discussions on this topic proving the point. Or, for a cliffnotes version, watch PBS’s “Sick around the World” (free streaming on Netflix, if you have it, and probably PBS’s website). It’s not our job to catch you up on where the health care system is, considering this conversation has been going on for over a year now…

  17. This conversation has been going for decades. At least since General Electric v. Gilbert in 1976.

    My nonspecific opinion is that political scientists, economists, and PBS know as much about health care costs as the imbeciles that purchased sub prime loans.

  18. Could someone please address tooearly’s comment? Why is military spending so sacrosanct, when it comprises the largest share by far of the Federal budget? See for example http://ciahart.blogspot.com/2010/02/cost-of-war.html

  19. Actually, the best way would be to grow the economy per capita, and the only way for that to happen would be for Congress to grow a pair and revisit our trade policies and labor laws that have hollowed out this country over the past thirty years.

    China and India are NOT entitled to grow at our expense. Anyone who says we can’t get back the manufacturing and tech service jobs that have been shipped overseas are defeatist fools and losers. Not only can we get the jobs back…we MUST get the jobs back because there is no new technological revolution in sight to fill the gap.

    Road repair and green energy jobs at the taxpayer’s expense are not the answer. Yes, they’re necessary and should have been pursued for the past 10 years instead of tax breaks for the rich, but that’s nothing to hang your hat on compared to perpetual new job creation created by private industry.

    Until “the next big thing” comes along that creates a private sector fueled explosion in industry, we need to start playing tough with corporations who are trying to squeeze the American working class dry of its last drop of blood.

    Sure, repatriating labor and service jobs will mean a decline in corporate profits and a redistribution of wealth to the middle class, but what’s wrong with that? Five percent of households own 85% of the equities. The other 95% of households who own the remaining 15% of equities are far more concerned about having a dependable, decent-paying job year after year than about a 25% drop in their meager equity portfolios.

    If we don’t start doing something about the growing plutocracy in this country, it’s going to be absolute anarchy in five to seven years.

    If American companies balk and threaten to move overseas, let them. New companies will rise who will be happy to take advantage of proposed tax incentives for not sending jobs abroad while those who do will become subject to “FAIR TRADE” policies that slap massive tariffs on products created with uncompetitive labor. The idea is, all things being equal, let the best product win. As it stands now, the playing field is so lopsided, American workers don’t stand a chance.

    These principles do not reflect protectionism. Not sending our jobs overseas is not protectionism, it’s survivalism.

  20. Daniel Habtemariam

    Those of us with anything critical to say about the military budget don’t have megaphones loud enough to be heard by many people. It’s not part of the media narrative.

    I’ll just leave these here:
    http://www.nationalpriorities.org/
    http://www.house.gov/frank/articles/2009/03-02-09-cut-military-budget-the-nation.pdf

  21. Agoraphobic Kleptomaniac

    “you fail to consider the most likely consequence of this truism: the individuals will not pay the high costs.”

    And the next consequence would be… those people get No health care. If you cannot afford it, and you do not use it, that leads to a sicker populace or more emergency room visits. If my health insurance company isn’t able to balance the books based on my premiums (hiding the cost?) then it’s time for them to raise premiums to sustainable levels. However, with their current rash of profits, I don’t think that it’s an issue.

    “every citizen feels that they have a ‘right’ to things that require a great deal of skill and effort to provide.”

    Bull. I just expect that if I hold health insurance, and a full time college degree job, I shouldn’t be worried about bankruptcy or health care costs, which I am. Most American’s don’t want handouts.

  22. the entire debate over medicare contradicts your statement that “most american’s [sic] don’t want handouts.”

  23. Agoraphobic Kleptomaniac

    So, Financial Experts, political experts and Journalists don’t know anything about health care costs? Who does that leave? the health care industry itself?

    http://en.wikipedia.org/wiki/File:Health_care_cost_rise.PNG

  24. Agoraphobic Kleptomaniac

    “[T]he entire debate over medicare contradicts your statement that ‘most Americans don’t want handouts.’”

    Services for taxes are not a handout. It’s a complex social contract.

  25. No. It leaves himself, and Rush Limbaugh.

  26. You’re arguing with someone who doesn’t believe in social contracts.

  27. That’s Ben Franklin-type wisdom there. Thank you, and ‘China and India are NOT entitled to grow at our expense’ should be our siren call.

  28. First, greetings to Ato Habtemariam!

    Second: I wish a few of the readers of this,
    who also live in the D.C. area, would help
    with our megaphone: http://www.waifllc.org . We
    routinely sell $35 worth of our buttons at
    any famers market in the area, and we use
    our profits to get yard signs installed,
    “Free to a Good Yard!”

    _Everyone_ understands $2 billion per week!

    But we don’t have enough workers. If we had
    20 colleagues we would cover the D.C. area in
    yard signs(again, see http://www.waifllc.org for
    pictures) That would obviate the need for
    MSM.

    Best wishes to all,

    Alan McConnell, in Silver Spring MD

  29. Forget it, medical is the next business segment to be outsourced overseas. It’s already happening

    http://tinyurl.com/ylkfda9

  30. so a GOP version of a tax increase

  31. and i suppose the Kaiser foundation might know a thing or two about health care and its costs too

  32. well its either the patients pay it or they die. i see another version of the death panels right there!

  33. yup i am sure they won’t pay for it..they will be dead

  34. Moreover, how can anyone think that looking at projections now, near the nadir of our economic woes, and think that they represent reality going forward?

  35. ” you fail to consider the most likely consequence of this truism: the individuals will not pay the high costs.”

    Yes, this crossed my mind too. However, you will note that the same problem exists in the economic of ANY kind of health insurance. And in fact, Medicare – government run insurance – has done a BETTER job at containing costs, than private insurers.

    “making individuals accountable for their health care costs would be a great measure toward correcting the present moral retardation of our country.”

    I really don’t understand what you are proposing. Are you saying we should ban health insurance companies?

  36. in response to your inquiry, no, i don’t support banning any form of business. i would support opening up state regulation to permit mutual health insurance companies, since in other lines the mutual companies tend to have much lower administrative overhead and better premium structures. i also would support eliminating the “pre-tax” nature of employer-paid health insurance premiums – so long as there was a matching reduction in the tax on earned income.

    regarding medicare and medicaid cost containment, my anecdotal understanding from about a half-dozen health care providers of various ages is that the “statistical audits” conducted by these agencies border on fraud. each audit is supposed to statistically extrapolate a random sampling of patient files to determine whether any inaccuracies occurred in billing, and, if so, the extent of the inaccuracy. the number of files reviewed by an auditor tends to be larger than the statistically required sample size, yet, in the end, the extrapolation is performed based on only the required number of files. essentially the auditors can pick their sample to obtain the desired cost reduction. the net result is that providers raise unit prices to compensate for excessive take-backs. the next audit is directed to find more cost savings, and the escalation repeats.

    private insurers _could_ contain costs as well as does government-run insurance, if only the private insurers could insulate themselves from liability for fraud. one of the most troubling aspects of the anti-trust exemption for health insurers is that market dominance can provide impunity for similarly extortionate behavior, thus exacerbating the upward pressure on provider “list” prices.

    so the bottom line is that, in health care, government spending has introduced inefficiencies that upwardly distort the market price of an essential service.

  37. Over and over the private sector reduces costs of products and services while the government makes products and services more expensive. This is not a complex issue.

    Has anyone noticed that we did not have this problem when gov’t was not involved?

    Around half of healthcare spending is already from the gov’t.

    It hasn’t worked for 40 years.

  38. Taxes are a reasonable method for citizens to invest in their well being, current and future.

  39. Rational Adult

    I think you are ignoring that it is much cheaper for individual manufacturers to ship products here and sell them instead of making them here. There is no financial incentive to make many products here, or to pay a software developer to do the same thing another offshore will do for less than half. The problem is more complex than just saying make it here. The resolution will not be swift or painless.

  40. I’m not ignoring anything. Read the post. I fully recognize the hit to profits companies would take. I also realize that for first five decades in the post war era it would’ve been cheaper to produce everything overseas as well, but we didn’t, and the middle class was much stronger. That’s the financial incentive…a healthy middle class.

    Furthermore, you don’t need to tell me the problem is complex. I hold a half-dozen patents. I know all about complex. But there’s the choice. Stanch the flow of jobs out of the country and begin the repatriation process or face a completely hollowed out country on the path to economic anarchy.

  41. About 40 years ago we didn’t have much in the way of health insurance companies either. Costs were low enough and salaries high enough that people could pay most expenses out of their own pocket. All that has changed dramatically, partially as a result of technology and partially the result of biotech meds.

    When I read opposing views on health insurance and costs, I often get the feeling that most people really don’t know how medicine works in this country. For example, say you’re looking for a good but cost-efficient doctor who is also part of your insurance company’s network. How do you find one in your area? Ask your neighbors? There are no rating agencies or organizations like Consumer Reports to help you. You just guess and hope.

    Then the doc tells you to get a bunch of tests. Usually the ins. co. gives you the choice of one provider. Cost be damned. What if the doc wants you to take a bunch of tests. Do you say, “hey, doc, how much is that gonna cost and why should I take them?” Probably not. Most people just do what the doc says *because* he’s the doctor. Then say you have to go the hospital. Oh, there’s only one in your immediate area? Guess what, regardless of cost you go there. Or maybe there are several in your area. But guess what your doctor only has practicing privileges at one hospital. It may not be the most cost effective, but it’s the one you have to go to if you want your doc to manage your care.

    See what I mean? As a patient, most people just do what the doc says and orders because he knows more than we do about medicine. He’s the pro. And older people on Medicare are even more prone to do exactly what the doc says. That’s one of the reasons they end up taking so many tests.

    Talking about liberal vs conservative on this issue ignores the dynamics of the both the medical industry and people’s psychology as it relates to the actual practice of medicine.

    The real issue is cost containment and reduction. Not getting more people insured, but reducing costs. One thing that would help is if people actually knew what the costs were before hand and how much was actually spent. Another would be for insurance cos to allow more competition into their contracting system. Believe me, I’ve learned that their contracting systems are not always the most cost effective for a number of reasons. Third, how about State “Consumer Reports” type of reporting on docs, labs, hospitals, and clinics with costs included for average services.

    Finally, to reduce the budget busting costs of Medicare, services will have to be reduced or an increase in premium costs (i.e., seniors paying more) and probably an increase in Medicare taxes for everyone else to sustain the system. In addition, the part of Medicare RX that prevents Medicare from using its huge negotiating power to buy drug at lower prices must be overturned. Heck, does anyone think that WalMart doesn’t use its huge buying power to negotiate lower prices? Why should the Fed. Gov’t not use its buying power the same way? It’s utterly stupid. Then, to compensate drug companies for the lower prices, give them a tax deduction for R&D.

  42. your comment re: “services for taxes” is puzzling. The big problem right now is that the entitlement programs are funded by borrowing (that ol’ structural deficit) because politically palatable taxes are not high enough to fund the services. again, i challenge your statement that “most American’s don’t want handouts.”

  43. Read Chalmers Johnson’s Nemesis, if you haven’t already. We all know that it is really military spending (read 737 bases outside of this country in 130 foreign nations, many of them supporting despots). If we cut military spending in half, we could quickly restore balance to our budget and free up the economy to do something other than new weapons and an attempt to militarize outer space. But, we all know that speaking against military spending is “un-American” and is truly the third rail of budgetary reform. If we cut military spending the used Medicare for all (single payer) to cure our future budget problems, we’d be able to solve the problem AND cure global warming in a heartbeat, but we have legislators who would rather blather than act logically and lead us back to real prosperity.

  44. tooearly — say SO ! — i couldn’t believe curtailing military spending wasn’t even mentioned as a possibility. I am losing faith in this website. Slogan: Support Our Troops, Die at Home in Bed Untreated

  45. Right Fred. That was my first reaction to the article. How can it not even be on the table? Why indeed. Belly of the beast.

  46. . . and I’d like to add — now that I think of it, I have seen a lot of circle graphs of US budgets with health care expenditures shown as a large slice of the pie, but military expenditures NOT EVEN REPRESENTED.

  47. It hit me a few weeks back that in all but four of my 62 years on the planet, my country has been in a full-fledged war or some kind of military conflict. For some, it truly is the “gift that keeps on giving”. Too bad for the rest of us, not to mention the dead.

  48. “the deeper reason for our present health care set-up is that we live in an era of vast and unjustified entitlement, where every citizen feels that they have a “right” to things that require a great deal of skill and effort to provide.”

    Do you have any kind of reference for that assertion or did you just pull it out of some part of your anatomy? What makes you feel you’re capable of identifying the “deeper” reason of the problem? I’m guessing it has to do with God and his preference for hard-working, family-loving, gun-bearing whites.

    “making individuals accountable for their health care costs would be a great measure toward correcting the present moral retardation of our country.

    Perhaps, perhaps not. In fact there are a lot of people in the US today who are accountable for their health care since they don’t have any insurance at all, so your hypothesis is testable. Are they less morally retarded than the rest? Considering that they are mostly poor and unemployed (non to mention non-whites) I’m sure they are not the kind of people you consider examples of morality.

    “moreover, making individuals bear the burden of their health care costs would immediately and permanently resolve the projected problem for federal budgets.”

    True. It would simply deprive more millions of people of healthcare while making it a priviledge of the rich. In the long term (neither immediately nor permanently) perhaps this would reduce demand enough to push for a reduction in cost of drugs and services, but I wonder how many millions would have to die / go bankrupt in the meantime and if there isn’t any better way to get there. Or perhaps if something like this happened big pharma would lobby for some kind of government subsidy so it could maintain it’s profits even with reduced demand.

  49. Geez, I don’t know how to address such an uninformative and uninformed post as this.

    The absolute and major causes for both the debt AND the deficit are: (1) creating and giving all those Treasuries to the banks in exchange for their worthless derivatives they’ve made billions off of; and (2) all that war spending for the death profiteers and war profiteers.

    Why in perdition are you talking about anything else?

  50. Don’t see the words “defense spending” anywhere in his article

  51. Military spending is less than $800 billion and expected to decline in the coming years. If you eliminated the military budget, next year’s deficit would still be $800 billion, and over time the deficit would expand due to the growth rate in Medicare and Medicaid spending. But government health care spending isn’t the only problem. Because total health care spending sucks up so much in U.S. resources without providing a decent return, it is a drag on the rest of the economy. Like Samuelson, it seems that many commenters don’t get it, either

  52. because your statements are completely misinformed and unfounded in any actual numbers.

    (just to clarify my position on defense spending and federalizing fraudulent banking practices: i was, and remain, completely opposed to the TARP, the AIG bailout, the GM bailout, and all the other socialist nonsense … i also oppose the foreign entanglements that continue to suck resources from our domestic welfare and to diminish our real security.)

    nonetheless, a mature review of the relevant numbers should indicate to you that these blunders, no matter how corrupt, do not make any major contribution to the “structural deficit” that threatens our national finance.

  53. The reason that gov’t shouldn’t use buying power for healthcare is the same reason the gov’t shouldn’t use its buying power for your food or your housing or your entertainment.

    The gov’t doesn’t have buying power. It only has the power to (mis) direct the people’s buying power.

    Insurance companies are more than large enough to obtain the benefits of buying power. At some number there is limited return on enlarging the group. That number is much smaller than 300 million people.

  54. Of 2009 government expenditures, Medicare and Medicaid was 19%, and TARP was just 4%. Defence was 29%, and who knows how much more for the black budget stuff. Yet all the noise has been about health spending and bailouts.

  55. Typo — sorry. Defence was 23%.

  56. All true. but the federal gov’t was really created largely for the purpose of a common defense. The fed gov’t was never intended to get involved with healthcare or welfare. Pray to God that defense maintains its lead in the federal budget.

    The state governments (if any) are where healthcare and welfare should be battled out. The founders of our country actually meant for the states to compete, or at least be able to choose their own destiny on these issues. The individual states are where healthcare ideas should be tried and you will quickly see what ideas work and what ideas do not work. Its very simple.

  57. Daniel Habtemariam

    As a Boston resident, I’m going to repost Alan McConnell’s link for any DC-area residents who haven’t gone there yet:
    http://www.waifllc.org

    To Simon and James (and all your geek followers here), Robert Samuelson appears to be concerned solely with the federal budget deficit, so if you ignore the more generally threatening problem of rising healthcare costs, then his solution is valid. It shifts Medicare’s future cost increases from taxpayers back to seniors. It’s the same solution Congressman Paul Ryan (R-WI) is proposing as the official Republican solution to the healthcare/budget deficit problem.
    http://www.cbo.gov/ftpdocs/108xx/doc10851/01-27-Ryan-Roadmap-Letter.pdf

    Here’s another useful graphic about global U.S. military activity.
    http://www.miprox.de/USA_speziell/US-Military-Bases-Worldwide.jpg

  58. “China and India are NOT entitled to grow at our expense.” Japan already did grow at our expense – millions of manufacturing jobs went there via rich American companies profiting using cheap materials and Japanese labor. Does anyone remember “Made in Japan?” Now the Chinese get blamed. “Made in China” is an expletive, while it’s the rich American corps. using the cheap labor and materials there profiting. And the Chinese get blamed. Their GDP increases at a rate of 9%/year because of high employment and their government spending on infrastructure. So if you want American jobs back, look at the modern powerhouse “Japan” we provided them. Doomsayers believed Japan’s co-opting of American jobs would destroy the U.S. and we are still here.

  59. That’s not accurate at all. Japan’s economy grew because they mimicked our industry and built companies that made products more efficiently and, eventually, with much better quality control. We did not ship jobs over there wholesale. They created companies that competed with us based on quality and then sold us their products.

    Their labor was never cheap. In fact, their employees had greater entitlements than our employees up until recently. That’s why American cars were never built there and American textiles were never made there. Or American appliances, etc., etc.

    In short, there’s no similarity between the U.S./Japan dynamic and the U.S./China/India dynamic.

  60. Beg to differ. You describe the Japanese economy of the mid-70′s to the present. In the fifties, after WWII, the situation exactly paralleled China-US now. Basic, everyday necessities were all manufactured in Japan. Most clothing is manufactured in China now. Most textiles and basic consumer goods are made in China, just as in Japan four and five decades ago. Just as in China now, high employment rates increased the Japanese per capita income level and GDP. THEN Japanese entered electronics, cars, machinery etc. when their workers had skills and the country had infrastructure and basic manufacturing capabilities created by U.S. corporations and Japanese exports to the American consumer. The situations are exactly parallel. The interesting question is, why economic war? Japan has had the largest trade surplus with the US for decades, by far, starting when China was a backwater. Now the huge Japanese and Chinese trade surpluses and supply of U.S. currency reserves are at similar levels. The US has allowed both Japan and China to peg their currency to the dollar for decades, making their exports cheap to the American consumer. Look at Japanese cars and electronics and all Chinese products. China is a small player if you look at their nominal GDP and per capita figures. Yet China is the center of attention in US news and has been for a while. There are other interesting data that make me wonder what’s going on.

  61. Er, uh, I think you’re overlooking the fact that there has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. That is reflective of the fact that virtually every single thing in every single store in this country, save food, is made in China. American companies no longer have a vested interest in the American middle class. They just chase the cheapest labor just as they chase the cheapest materials. They couldn’t do that until our legislators let them going back four administrations. China just happened to be the cheapest play on the street while all this was allowed to happen. That’s why China is the center of attention.

  62. Er, uh, I think you’re overlooking the fact that there has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. That is reflective of the fact that virtually every single thing in every single store in this country, save food, is made in China. American companies no longer have a vested interest in the American middle class. They just chase the cheapest labor just as they chase the cheapest materials. They couldn’t do that until our legislators let them going back four administrations. China just happened to be the cheapest play on the street while all this was allowed to happen. That’s why China is the center of attention.

  63. Daniel Habtemariam

    I just wanted to say I’m impressed with your comments here.

    Do your neighbors know as much as you on these matters? I’m not originally from America, but when I say things like you said, I’m written as some sort of radical socialist. The fact is, in America, the working man hasn’t a chance. Lobbyists and politicians have spent decades eradicating unions and creating legislation to make this capitalist paradise…They’ve suceeded in creating a waged slave.

    When I suggest fair trade, they call me a protectionist. When I suggest investments in industrial policy, they call me a socialist. When I bring up the minimum wage or tax policy, I’m a redistributionist. I’m dumbfounded as to how to respond, sometimes…

    Then, I turn on CNN and Fox News, and I see why. Academic professors and scientists debating media personalities and politicians? Low-wage workers protesting universal healthcare? Again, I’m dumbfounded…

  64. I was born and raised here, and I’m also dumbfounded.

  65. The other interesting data that makes me wonder what’s going on: Chinese nationals make up 40% or more of many US public universities, all over the country. Far more Chinese students than any other nationality. Undergraduate, graduate both. Here in California, entire localities are now Chinese – the suburban San Gabriel Valley, for example. The dominance in public universities is decades old, while the geographical ubiquity is newer.

    China’s real per capita income is something like $1,100.00. Per capita in the US is something like $35,000.00. A unique method is used for computing Chinese GDP – Purchasing Power Parity – which increases their figures by a factor of 5, still very small for their large population.

    Through the media fog, China is huge, an economic threat, a military threat, the next superpower etc. These are the same people who uniformly reported that maintaining Clinton’s budget surplus would result in no US Treasuries to lend, destabilizing the world economy (because US Treasuries are such a reliable investment). Anyway, the media encouraged the Bush Adminiatration tax cuts, which have helped erase Clinton’s surplus and put us hundreds of billions in the red, national-debt wise.

    The media are also the prescient folks who reported the Iraquis would welcome US troops by throwing flowers at their feet. Probably 90% of media reported this.

    So their is some slant. What is the angle in all this?

  66. The other interesting data that makes me wonder what’s going on: Chinese nationals make up 40% or more of many US public universities, all over the country. Far more Chinese students than any other nationality. Undergraduate, graduate both. Here in California, entire localities are now Chinese – the suburban San Gabriel Valley, for example. The dominance in public universities is decades old, while the geographical ubiquity is newer.

    China’s real per capita income is something like $1,100.00. Per capita in the US is something like $35,000.00. A unique method is used for computing Chinese GDP – Purchasing Power Parity – which increases their figures by a factor of 5, still very small for their large population.

    Through the media fog, China is huge, an economic threat, a military threat, the next superpower etc. These are the same people who uniformly reported that maintaining Clinton’s budget surplus would result in no US Treasuries to lend, destabilizing the world economy (because US Treasuries are such a reliable investment). Anyway, the media encouraged the Bush Adminiatration tax cuts, which have helped erase Clinton’s surplus and put us hundreds of billions in the red, national-debt wise.

    The media are also the prescient folks who reported the Iraquis would welcome US troops by throwing flowers at their feet. Probably 90% of media reported this.

    So their is some slant. What is the angle in all this?