[Bryan]

Originally Posted by JerryLove

Considering I failed on the basic math the first time (accidentaly lowering the costs of power), way too long.

I'm surprised the "money leaves the US and doesn't come back" was insufficient.

Jerry's right, when our net exports are negative it is a bad thing. It cause the economy to shrink by removing money from the circular flow.

[smhatahy]

Originally Posted by Bryan

Jerry's right, when our net exports are negative it is a bad thing. It cause the economy to shrink by removing money from the circular flow.

correct me if im wrong but isnt the only time importing is actually good is when your importing raw materials?

[JerryLove]

correct me if im wrong but isnt the only time importing is actually good is when your importing raw materials?

import/export is good if you are exporting more than you inport... though in the big picture, what you want is trade balance.

[Yojimbo]

OK, Jerry, I'll accept your math, though I've read your post a couple of times and I won't say I understand it. My question is, outsourcing of manufacturing has been going on for decades...most of our clothing, for example, is made in Asia. Why did our economy and quality of living increase those past decades? Do you think our economy would experience a recharge if all of our clothing was made by 10$/hr American workers?

[JerryLove]

My question is, outsourcing of manufacturing has been going on for decades...most of our clothing, for example, is made in Asia. Why did our economy and quality of living increase those past decades?

One reason is that we have filled in the gap with other jobs (such as those now being off-shored); the other amounts to deficit spending... we have been building up a trade deficit and fiscal deficit for generations... we are essentially living off our credit cards.

And our economy has not been on a steady anything. We had a pretty poor economy under Regan as manufacturing left, and an upsurge under Clinton during the IT boom (which is now offshore), and (based on jobless rates) are currently in a down economy.

Do you think our economy would experience a recharge if all of our clothing was made by 10$/hr American workers?

I would not be so bold as to pick a particular industry and say "this one is the one that should be done here"... If I tried, my bias would lead me to "software development" and "IC design".

I'm all for competition... I just want competition on a level playing field. A person in India can live on $5,000 per year... I cannot. It is not possable for me to compete with him because of cost difference.

[Bryan]

but the problem comes when we force companies to operate at higher cost. Higher cost will cause inflation. When inflation gets too high people stop buying. This brings about recession which leads to higher unemployment. Prices continue to fall until they bottom out and people start buying again. When people start buying again we begin to recover, until the cost goes up and people begin to spend too much, and then we have inflation again.

It's a process that you can't stop. It will always happen and you can't stop it. The only thing you can do is slow it down and make it less severe. Right now we are in the recovery phase. jobs are being created and unemployment is decreasing. we are almost at full employment now. cutting taxes and increasing spending was the best thing the government could have done, and later it will be time to increase taxes and cut spending to slow inflation and prepare for the next period of recession.

[smhatahy]

inflation can easily be solved by using proper fiscal policy (which every president other than clinton fails to do) it is easier to bring the country into a recession (thus decreasing inflation) than to keep it at high levels. Its like a forest fire, burn of shrubs using control fires (rasing taxes sometimes to decrease money supply) and you wont end up with a huge fire.

[JerryLove]

but the problem comes when we force companies to operate at higher cost.

How does not letting them lower their costs thorough offshoring make them raise them?

Higher cost will cause inflation.

So does good paying Jobs.

This brings about recession which leads to higher unemployment.

You mean like the recession we are in and the missing 2,000,000 jobs we have now?

Prices continue to fall until they bottom out and people start buying again.

How cheap must something be for someone with no income to buy it?

It's a process that you can't stop. It will always happen and you can't stop it.

Seems that Clinton did.

The only thing you can do is slow it down and make it less severe. Right now we are in the recovery phase. jobs are being created and unemployment is decreasing.

we shall see. We were promised 1.7 million new jobs in 2003... we actually lost 50,000

we are almost at full employment now.

What? We are at a higher unemployment right now than at any point in the Clinton presidency.

cutting taxes and increasing spending was the best thing the government could have done, and later it will be time to increase taxes and cut spending to slow inflation and prepare for the next period of recession.

How is that deficit doing anyway... when all the money is in India and China, what will the tax rate be? Or will we just continue to spend imaginary money until we collapse like so many south american countries have?

[smhatahy]

another reason california should leave the uninon..

if only

[Bryan]

Originally Posted by JerryLove

How does not letting them lower their costs thorough offshoring make them raise them?

no, forcing them to stay onshore raises cost.

You mean like the recession we are in and the missing 2,000,000 jobs we have now?

we aren't in a recession, furthermore, 308,000 jobs were created in march (http://www.cnn.com/2004/ALLPOLITICS/04/02/bush.jobs/)

How cheap must something be for someone with no income to buy it?

free i guess

Seems that Clinton did.

He did not stop the business cycle. That's absurd, you can't stop the business cycle.

we shall see. We were promised 1.7 million new jobs in 2003... we actually lost 50,000

can you cite a source for this?

What? We are at a higher unemployment right now than at any point in the Clinton presidency.

I didn't say we were at a lower unemployment rate than in the Clinton Presidency. I said we are almost at full employment. The full employment rate of unemployment is about 5%. That means that all unemployment is due to frictional and structural unemployment and there is no cyclical unemployment. right now, the cyclical unemployment is about 0.7%

How is that deficit doing anyway... when all the money is in India and China, what will the tax rate be? Or will we just continue to spend imaginary money until we collapse like so many south american countries have?

yes the deficit is bad now, it has been bad for a long time, and nobody does anything about it. But you can't cut spending when we are in or recovering from a recession. That will make things worse.

[Bryan]

Originally Posted by Art

Bryan, it is usually illegal immigrants who take these jobs, and they are paid under the table.

is there some source for this? most illegal immigrants (here in texas) work in construction and are probably paid $7-9 per hour.

[josiah]

I would encourage those who have posted on this thread to read a little Adam Smith...Wealth of Nations...you know, that economics book...
Book 4, Chapter 2...
It's good stuff related to outsourcing and the "global economy".

Wealth of Nations, Book 4, Chapter 2

[smhatahy]

ooo man its hugeee.. wanna summarize puhleeazee?

[josiah]

Well, I suppose to summarize it up into a ridiculously short summary.
1) People, when going after their self-interest promote free trade until it affects their own personal industry or line of work which is when they want "protection" usually in the form of tariffs, etc...
2) Tariffs create misallocations of resources from an economic standpoint because it promotes more people in the tariffed industry than would have been feasible and efficient before the tariff
3) Tariffs end up hurting us more than they help us. Free trade in between countries on the whole will breed an efficiency that will eventually make all nations prosperous, because all the inviduals will use their competitive advantages to go to the industry where they are needed the most.

I suppose thats a quick summary...probably missing a lot of things. Smith was a tad bit idealisitic, I must say.
(if you get a chance, I would still encourage reading it)

[JerryLove]

1) The playing field is not level. In addition to the inherent differences in relative wages, many countries do not have safety or envyronmental regularions or fair labor laws.
2) If "lowest cost" is the only determining factor, economics will invariably favors such economies.
3) Even if open trade could bring us to a reasonable status-quo, the first thing it will do is average out the economies... and some of the economies we would be averaging with are impoverished (and far larger than us).

It is silly to walk down to one factory, require a minium wage, require health benifits, require workers comp, require they invest in safety, tax them to pay for the US government and expect that they can put out a similarly priced product to one on which you have not placed such impedements.

The last time this happened, the US economy survived by moving into new areas (service and technology)... but those areas are now leaving our shores as well. Unless we find something new, these jobs will not be replaced and that "eventually" may be measured in generations.