Rising Exports — and Imports — Are Good News for U.S. Economy
The U.S. trade deficit rose in 2010, and the bilateral deficit with China reached a record high last year, according to the monthly trade report released this morning by the U.S. Commerce Department. The usual critics (such as Peter Morici of the University of Maryland) are already spinning it into yet another indictment of trade, but the report contains a lot of good news for the U.S. economy.
Last year, Americans bought $2,330 billion worth of goods and services from other countries, while selling $1,832 billion, for a trade deficit of $498 billion. Our bilateral deficit with China grew to a record $273 billion.
Politicians and commentators love to focus on the trade deficit, as though it were a scorecard of who is winning in global trade. But the real measure is the total volume of trade. As economies expand, so does trade, both imports and exports. Exports help us reach new markets and expand economies of scale, while imports bless consumers with lower prices and more choices, while stoking competition, innovation, and efficiency gains among producers.
By this measure the trade report was good news all around, and one more sign that the U.S. and global economies continue to recover from the Great Recession. Last year, U.S. exports of goods were up 21 percent from 2009, while imports were up 23 percent. In contrast, in the recession year of 2009, exports of goods dropped 18 percent from the year before while imports plunged 26 percent. (Unemployment soared in 2009, but, hey, at least the trade deficit was “improving”!)
Our trade with China last year tells the same story. The value of goods imported from China rose 23 percent in 2010 (the same rate as imports from the rest of the world), while the value of the goods we exported to China jumped by 32 percent. That’s a rate of export growth that is 50 percent higher than export growth to the rest of the world. Members of Congress who complain that China’s managed currency is somehow a major barrier to U.S. exports should take note.
Young Man Control
Instead of directing their energies on gun control, P. J. O'Rourke says liberals might want to focus on the real source of violence in our society and propose some "Young Man Controls," such as longer young man waiting periods and young man registration. Not a ban, but common sense young man controls.
Hey, there's already some movement in that direction—in the crucial pre-young man phase.
For Cato work on gun control, go here.
Administration Punts on Reform of Fannie and Freddie
Remember that “tough study” promised by Senator Chris Dodd to deal with Fannie Mae and Freddie Mac? Well it is finally out. All 22 pages (of doubled-spaced large font). And less than half those pages actually discuss Fannie and Freddie.
While the report does say a lot of the right things — such as protecting the taxpayer — it is awfully short on any real details. And in many areas, the report makes clear that the Obama administration intends to keep the taxpayer on the hook for future losses arising from Fannie and Freddie. For instance, after assuring us that the GSEs will have sufficient capital to meet their obligations, including debt, the report tells us that such capital will not come from investors, but from the taxpayer. One has to wonder whether this report was written for the benefit of the Chinese Central Bank (one of the largest GSE debtholders) or for the benefit of the U.S. taxpayer.
Equally vague is the discussion of “winding down” Fannie and Freddie. While that sounds great, how is this to be accomplished? And how long will it take? Again it seems that this “wind-down” will be financed by the taxpayer. It is suggested that the GSE guarantee fees will increase. Again, by how much and when?
Paragraph 2 of Section 1074 of the Dodd-Frank act, which required this study, also requires an “analysis” of various options and impacts. In all due respect to HUD and Treasury and their efforts, there is nothing in this report that remotely resembles an “analysis” — just vague generalities.
I appreciate the administration’s stated desire to move us closer to a private market solution, but we’ve heard these empty promises before. Remember that financial reform was going to end “too big to fail” and bailouts? Health care reform was going to “bend the cost curve”? It is past the time of fluff. We need actual details and an actual plan.
For details of immediate action that can be taken, see my testimony from earlier this week.
Mubarak Steps Down … Finally
Hosni Mubarak's decision to step down as president of Egypt is welcome news. He could have taken a cue from Tunisia's Zine El Abidine Ben Ali, resigning quickly in the face of overwhelming popular opposition. Such a move on Mubarak's part would have avoided much of the confusion that has gripped Egypt for more than two weeks. At least 300 people have been killed during the protests, but thankfully Mubarak's exit was achieved without even more bloodshed.
These protests were driven by popular discontent with Mubarak, rising food prices, rampant corruption, and limited political and economic opportunity. The Obama administration generally resisted calls to place the United States in the middle of what was a purely internal matter.
Those who called for a heavy-handed U.S. role in this whole affair—many of them the same people who have called for U.S. intervention in dozens of other places over the the past few decades—have been proven wrong once again. While the ideas of liberty are universal, the spark for change, and the energy that carries it forward, must come from within. The Egyptian people started this, and the Egyptian people should finish it.
Discussing Afghanistan at CPAC
I'm speaking on a panel at CPAC tomorrow discussing Afghanistan ("How to Think about Afghanistan," Marriott Ballroom, 2:30 to 3:15 pm), and I'm inclined to include a few new data points, and one fresh anecdote, in my brief remarks.
The first piece of information has to do with money. Our deepening military presence in Afghanistan will cost American taxpayers in excess of $100 billion in FY 2011. Some estimates put the figure closer to $120 billion. This in a country with an official GDP of about $16.6 billion (and not more than $30 billion using purchasing power parity).
The second thing to consider is the current mission in Afghanistan. President Obama claimed in his December 2010 policy review that the focus of the U.S. mission is al Qaeda, but it doesn't take 100,000 U.S. troops and a few tens of thousands more of allied troops and civilians to hunt a couple hundred al Qaeda, most of whom are in Pakistan. Claims that al Qaeda and the Taliban are synonymous, and therefore that preventing the Taliban from returning to power is essential to preventing future terrorist attacks in the United States, were always dubious. A just-released report casts still further doubt, and recommends renewed attempts to peel the two unlikely allies apart from one another. That wise strategy would not require us to build a capable, credible government on the shaky foundation that is Hamid Karzai.
I'm likely to close with some recent polling statistics that reveal deepening public discontent with the Afghan mission. (For example, here and here.) Even many conservatives, a majority in some surveys, question the known cost and the anticipated benefit. They worry that the mission — standing up a functioning nation-state, complete with a national army — is likely to fail and would not be worth the time and money that would be required to eventually succeed. ("Eventually" being synonymous with "many decades.")
TSA’s Pistole Says ‘Risk-Based,’ Means ‘Privacy Invasive’
There is one thing you can take to the bank from TSA administrator John Pistole's statement that he wants to shift to "risk-based" screening at airports: it hasn't been risk-based up to now. That's a welcome concession because, as I've said before, the DHS and its officials routinely mouth risk terminology, but rarely subject themselves to the rigor of actual risk analysis.
What Administrator Pistole envisions is nothing new. It's the idea of checking the backgrounds of air travelers more deeply, attempting to determine which of them present less of a threat and which prevent more. That opens security holes that the risk-averse TSA is unlikely to actually tolerate, and it has significant privacy and Due Process consequences, including migration toward a national ID system.
I wrote about one plan for a "trusted traveler"-type system recently. As the details of what Pistole envisions emerge, I'll look forward to reviewing it.
The DHS Privacy Committee published a document several years ago that can help Pistole with developing an actual risk-based system and with managing its privacy consequences. The Privacy Committee itself exists to review programs like these, but has not been used for this purpose recently despite claims that it has.
If Pistole wants to shift to risk-based screening, he should require a full risk-based study of airport screening and publish it so that the public, commentators, and courts can compare the actual security benefits of the TSA's policies with their costs in dollars, risk transfer, privacy, and constitutional values.
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