Alan Tonelson and Kevin Kearns of the U.S. Business and Industry Council were published today on the NY Times op-ed page.  They explained why productivity gains in a free trade environment produce wage stagnation.  The reason is that productivity increases do not exist.  Rather, if we offshore most of a supply chain, but do final assembly here, we have fewer U.S. workers that appear to produce the same finished goods.  The Dept. of Labor statistics say that those fewer workers produced the same amount of product, when the reality is that foreign workers did most of the job.

I explained in this previous blog post:

So, if an plant makes 50,000 widgets per year at $100 per widget, the [gross] output [value] is $5,000,000 (50,000 widgets x $100/widget).  Assuming it takes 10 workers for a complex widget fully manufactured in the U.S., then each worker produces $500,000 in value per year.

Conversely, if only widget assembly occurs here, while all other widget manufacturing is offshored, then "productivity" skyrockets.  The [gross output value] of 50,000 widgets at $100 per widget is the same (again $5 million gross output).  But for assembly, it only takes one worker per widget.  Thus each worker is now producing $5 million in value each year, a 10 fold increase.

So Tonelson and Kearns have now made this point to a much wider audience, and used it to knock down one of the fundamental tenets of "free trade."  That tenet (basic assumption) is that free trade will cause the U.S. to move from low productivity to high productivity (or low tech to high tech) sectors thus improving our economy and well being.  But it simply is not true.  Productivity trends published by the government (Dept of Labor) appear to support that "free trade" tenet, but like everything else they promised us... it is and was destructively false.

Read the whole article below the fold. 

Washington engages in the grandest fraud on jobs.  The people are led to believe that tax cuts stimulate growth and jobs and that borrowing and spending money stimulates jobs.

I’ll never forget as Chairman of the Budget Committee briefing Ronald Reagan with Alan Greenspan in the Blair House just before Reagan was sworn in as President.  The economy was not good, and I can hear Reagan exclaiming now:  “I promised to balance the budget in a year, and there’s no way to do it.”  I explained it would take three years, and I would be glad to help in a bi-partisan effort to try to bring it in balance.  The rest is history.  President Reagan launched the policy of “growth” to stimulate the economy by cutting taxes, giving the United States its first trillion dollar debt in his first term, with another trillion dollar growth in debt in his second term.  President George W. Bush, bragging that he was a Reaganite, stimulated the economy by cutting taxes, which increased the national debt $5 trillion.  Instead of growth, the economy lost 673,000 private jobs in eight years under President George W. Bush.

Which manufacturing operations should return to the United States?

by William J. Holstein

For years, the NCR Corporation simply followed the pack. Like many other large U.S. manufacturing companies, in the past couple of decades the maker of automated teller machines (ATMs) relied heavily on offshoring and outsourcing to trim factory costs. By making much of its equipment in cheaper offshore locations in the Asia/Pacific region, and by hiring Singapore’s Flextronics International Ltd. to make other equipment, NCR could slash hundreds of millions of dollars in plant expenses and be reasonably certain that its ATMs met quality standards.

We hear about the unemployment rate and lack of jobs.  But we hear sporadic statistics which are hard to internalize.  We feel our own employment or unemployment.  But we can't feel the pulse of the trends in numbers.

This link gives you a visual progression on unemployment in the U.S. from 2007 through 2009.   Starting in 2007, there are pockets of higher unemployment, but this video progression takes off in 2008 and 2009.  It feels, when watching, like a disease that has gained the upper hand on the body's immune system and is running rampant.

This is a big job... getting folks back to work.  Three percent growth only stops job losses, according to most.  It does not lower the unemployment rate. 

We need to restructure our economy by eliminating the trade deficit/offshoring drain.  Fixing trade policy, with an integrated economic plan, is the only way to do this.