Where is the US economy headed?

...... and we depend every day on their willingness to buy more of our debt, denominated in dollars, just to sustain our growing deficit spending. That simply can't continue without a financial crisis of some kind.

The dumbmasses want a 'single payer' system because they don't understand what it means, Duh!

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The dumbmasses want a 'single payer' system because they don't understand what it means, Duh!

Doctors, lawyers, journalists don't know what single payer means? You dislike intelligent people. The right generally dislikes people who know what they are talking about.

Of course, instituting a retail sales tax should only be done, if and only if the income tax is abolished.

I think the tax reform I am talking about could in fact bring about one of the largest economic booms in the history of the country. What is your opinion about this?

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The dumbmasses want a 'single payer' system because they don't understand what it means, Duh!

The right generally dislikes people who know what they are talking about.

We like POM.

"The right generally dislikes people who know what they are talking about."

okie wrote:

Of course, instituting a retail sales tax should only be done, if and only if the income tax is abolished.
I think the tax reform I am talking about could in fact bring about one of the largest economic booms in the history of the country. What is your opinion about this?

I've heard references to the "fair tax" and understood that it was not a sales or value added tax on goods and services, but rather a flatter (and lower) version of our graduated income tax with most exemptions and deductions eliminated.
The complete elimination of the graduated income tax and replacement of it with a national sales tax would, in my opinion be a great injustice and an economic disaster. It is a tax on consumption, not wealth or income and, as such, would hurt low wage earners a lot.

I have no problem with the graduated income tax we have, but believe it has accumulated, over the years too many exceptions, special provisions and far too much complexity. It badly needs a systematic overhaul.

Independently of that, I strongly believe the Federal government has become too big and far too intrusive in our economic and social lives, invading wide areas thaat were once the preserve of the states. All this primarily benefits entrenched legislators of both parties, who have become accustomed to passing out public money as though it was their own to constituents and organizations that support them. Expanding government regulation means expanding opportunities for shysters and crooks of various kinds and persuasions to pay for and get special favors from an ever more powerful, intrusive and corrupt government.

For all of those reasons I want to see significant reductions in the activities and spending of the Federal government. I don't believe that can happen under our current political structure without meaningful caps on government spending and limits on its income. For those reasons I reject the notion put forward by self styled progressives that we need higher taxes on the wealthy in order to feed the appetite of an ever more intrusive government. I don't want to feed an ever more intrusive government by that or any other means. With a better, more responsible government that was less dedicated to the perpetual expansion of its own powers and less bent on regulating every aspect of our lives, I would be willing to pay higher taxes.

I don't think we can tame this beast merely by changing the tax code, though I am willing to starve it if that is necessary.

May 19, 2011
Making Things in America
By PAUL KRUGMAN

Some years ago, one of my neighbors, an émigré Russian engineer, offered an observation about his adopted country. “America seems very rich,” he said, “but I never see anyone actually making anything.”

That was a bit unfair, but not completely — and as time went by it became increasingly accurate. By the middle years of the last decade, I used to joke that Americans made a living by selling each other houses, which they paid for with money borrowed from China. Manufacturing, once America’s greatest strength, seemed to be in terminal decline.

But that may be changing. Manufacturing is one of the bright spots of a generally disappointing recovery, and there are signs — preliminary, but hopeful, nonetheless — that a sustained comeback may be under way.

And there’s something else you should know: If right-wing critics of efforts to rescue the economy had gotten their way, this comeback wouldn’t be happening.

The story so far: In the 1990s, U.S. manufacturing employment was more or less steady. After 2000, however, it entered a steep decline. The 2001 recession hit industry hard, while the bubble-fueled expansion of the decade’s middle years — an expansion marked by a huge rise in the trade deficit — left manufacturing behind. By December 2007, there were 3.5 million fewer U.S. manufacturing workers than there had been in 2000; millions more jobs disappeared in the slump that followed.

Only a handful of these lost jobs have come back, so far. But, as I said, there are indications of a turnaround.

Crucially, the manufacturing trade deficit seems to be coming down. At this point, it’s only about half as large as a share of G.D.P. as it was at the peak of the housing bubble, and further improvements are in the pipeline. The Boston Consulting Group, which is now predicting a U.S. “manufacturing renaissance,” points to major U.S. firms like Caterpillar that once shifted production abroad but are now moving it back. At the same time, companies from other countries, especially European firms, are moving production to America.

And one potential disaster has been avoided: the U.S. auto industry, which many people were writing off just two years ago, has weathered the storm. In particular, General Motors has now had five consecutive profitable quarters.

America’s industrial heartland is now leading the economic recovery. In August 2009, Michigan had an unemployment rate of 14.1 percent, the highest in the nation. Today, that rate is down to 10.3 percent, still above the national average, but nonetheless a huge improvement.

I don’t want to suggest that everything is wonderful about U.S. manufacturing. So far, the job gains are modest, and many new manufacturing jobs don’t offer good pay or benefits. The manufacturing revival isn’t going to make health reform unnecessary or obviate the need for a strong social safety net.

Still, better to have those jobs than none at all. Which brings me to those right-wing critics.

First, what’s driving the turnaround in our manufacturing trade? The main answer is that the U.S. dollar has fallen against other currencies, helping give U.S.-based manufacturing a cost advantage. A weaker dollar, it turns out, was just what U.S. industry needed.

Yet the Federal Reserve finds itself under intense pressure from the right to make the dollar stronger, not weaker. A few months ago, Paul Ryan, the chairman of the House Budget Committee, berated Ben Bernanke for failing to tighten monetary policy, declaring: “There is nothing more insidious that a country can do to its citizens than debase its currency.” If Mr. Bernanke had given in to that kind of pressure, manufacturing would have continued its relentless decline.

And then there’s the matter of the auto industry, which probably would have imploded if President Obama hadn’t stepped in to rescue General Motors and Chrysler. For those companies would almost surely have gone into liquidation, closing all their factories. And this liquidation would have undermined the rest of America’s auto industry, as essential suppliers went under, too. Hundreds of thousands of jobs were at stake.

Yet Mr. Obama was fiercely denounced for taking action. One Republican congressman declared the auto rescue part of the administration’s “war on capitalism.” Another insisted that when government gets involved in a company, “the disaster that follows is predictable.” Not so much, it turns out.

So while we still have a deeply troubled economy, one piece of good news is that Americans are, once again, starting to actually make things. And we’re doing that thanks, in large part, to the fact that the Fed and the Obama administration ignored very bad advice from right-wingers — ideologues who still, in the face of all the evidence, claim to know something about creating prosperity.

Surely no serious economist believes the basic competitive factors in U.S. industry have changed in any lasting way as a result of the GM bailout.

The inflation that will surely follow will create new long-term problems for us, reminiscent of the Carter years.

Tell me - why should I take what you say here, seriously? Why does what you write, represent analysis, while what Krugman writes is 'nonsense?' You certainly are no more credentialed than he and have no more experience dealing with fiscal issues. You also don't present any higher level of factual attribution than he does.
Cycloptichorn

Cycloptichorn wrote:

Tell me - why should I take what you say here, seriously? Why does what you write, represent analysis, while what Krugman writes is 'nonsense?' You certainly are no more credentialed than he and have no more experience dealing with fiscal issues. You also don't present any higher level of factual attribution than he does.
Cycloptichorn

Probably a good enough excuse for one not accustomed to thinking for himself. The little weasel serves many like you very well in that respect. However, in this matter his analysis is unlike that of a very large number of economists, including notably Gary Becker from whom I heard the inflation prediction quite recently.

America’s industrial heartland is now leading the economic recovery. In August 2009, Michigan had an unemployment rate of 14.1 percent, the highest in the nation. Today, that rate is down to 10.3 percent, still above the national average, but nonetheless a huge improvement.

I don’t want to suggest that everything is wonderful about U.S. manufacturing. So far, the job gains are modest, and many new manufacturing jobs don’t offer good pay or benefits. The manufacturing revival isn’t going to make health reform unnecessary or obviate the need for a strong social safety net.

Still, better to have those jobs than none at all. Which brings me to those right-wing critics.

First, what’s driving the turnaround in our manufacturing trade? The main answer is that the U.S. dollar has fallen against other currencies, helping give U.S.-based manufacturing a cost advantage. A weaker dollar, it turns out, was just what U.S. industry needed.

Yet the Federal Reserve finds itself under intense pressure from the right to make the dollar stronger, not weaker. A few months ago, Paul Ryan, the chairman of the House Budget Committee, berated Ben Bernanke for failing to tighten monetary policy, declaring: “There is nothing more insidious that a country can do to its citizens than debase its currency.” If Mr. Bernanke had given in to that kind of pressure, manufacturing would have continued its relentless decline.

And then there’s the matter of the auto industry, which probably would have imploded if President Obama hadn’t stepped in to rescue General Motors and Chrysler. For those companies would almost surely have gone into liquidation, closing all their factories. And this liquidation would have undermined the rest of America’s auto industry, as essential suppliers went under, too. Hundreds of thousands of jobs were at stake.

Nonsense from someone who should know better. Surely no serious economist believes the basic competitive factors in U.S. industry have changed in any lasting way as a result of the GM bailout.

The inflation that will surely follow will create new long-term problems for us, reminiscent of the Carter years.

The recovery in U.S. exports of manufactured goods is primarily the result of the debasement of our currency in the Fed's program of "ouantatative easing" QE2 i.e. flooding the market with new dollars.

union infested industries

They can tell us there's no inflation going on, but food and gas prices have gone up substantially in some places and people are struggling.

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union infested industries

I respect your writing, Georgeob, but I don't understand your logic that suggests that all of our woes can be laid at the feet of the unions. You have repeated that several times.