Judith Stein: The Deficit Worth Worrying About
[Judith Stein is a professor of history at the Graduate Center and City College of the City University of New York, and the author of "Pivotal Decade: How the United States Traded Factories for Finance in the Seventies" (Yale University Press). She can be reached at judithstein@att.net.]
It won't be a good Labor Day for America's jobless. August's employment report showed the economy was still losing jobs (54,000 of them in the month), underscoring the weakness of the recovery.
Politicians debate the consequences of the budget deficit, but it's the trade deficit that accounts for meager American growth and employment. Global imbalances - especially the U.S. trade deficit and Chinese surplus - were at the root of the financial crisis in 2008.
For the past 40 years, American leaders assumed high-tech services, finance, and housing could sustain prosperity. They stood by as East Asian and European governments promoted manufacturing and manufacturing exports. Too much U.S. investment went into non-tradables: finance, housing, retail, personal services....
America does have industrial policies by default: Sugar, housing, finance, and pharmaceuticals get breaks, for example. But we need to ask whether those are in the nation's interest.
To begin to rebalance, we could reduce aid to the housing industry through tax deductions, mortgage guarantees, and other incentives. That could be coupled with an infrastructure program employing construction workers no longer needed in housing. The Bush tax cuts for the wealthiest should lapse not to reduce the deficit, but to fund infrastructure, which could be the core of a manufacturing renewal....
Read entire article at Philadelphia Inquirer
It won't be a good Labor Day for America's jobless. August's employment report showed the economy was still losing jobs (54,000 of them in the month), underscoring the weakness of the recovery.
Politicians debate the consequences of the budget deficit, but it's the trade deficit that accounts for meager American growth and employment. Global imbalances - especially the U.S. trade deficit and Chinese surplus - were at the root of the financial crisis in 2008.
For the past 40 years, American leaders assumed high-tech services, finance, and housing could sustain prosperity. They stood by as East Asian and European governments promoted manufacturing and manufacturing exports. Too much U.S. investment went into non-tradables: finance, housing, retail, personal services....
America does have industrial policies by default: Sugar, housing, finance, and pharmaceuticals get breaks, for example. But we need to ask whether those are in the nation's interest.
To begin to rebalance, we could reduce aid to the housing industry through tax deductions, mortgage guarantees, and other incentives. That could be coupled with an infrastructure program employing construction workers no longer needed in housing. The Bush tax cuts for the wealthiest should lapse not to reduce the deficit, but to fund infrastructure, which could be the core of a manufacturing renewal....