archived: 12 - 18 Feb, 2006 Back Next
UPDATED: February 16, 2006
SHADOW BOXING OUR CHINESE BANKER?
TPJ has focused a great deal of attention to Bush’s policies toward China. Over the course of the Bush administration, China has become the principal banker of the United States; with a huge and ever growing positive trade balance with the United States and financing the ever growing federal budget deficits that Bush is incurring.
As we noted in THE BANKER’S FIX, article below, there is no “free trade” with China. First, China largely “fixes” the value of its currency against the US Dollar. This ensures that Chinese goods are cheaper than American goods. American business simply cannot compete against Chinese manufactures. Second, the Chinese government subsidizes its businesses, keeping their goods cheap, in violation of international trade rules. Chinese products are simply flooding America.
The economic and political consequences are hurting the Bush administration. Bush’s response? More talk about getting tough with the Chinese. The Chicago Tribute publishes an article articulating that Bush’s trade representatives have prepared a 29 page report detailing illegal Chinese policies (emphasis):
Portman said the administration intended to focus on getting China to stop thefts of intellectual property, which American industry contends is costing billions of dollars in lost sales annually. It also will focus on persuading China to honor the market-opening commitments it made in joining the WTO and halting various government subsidies to Chinese companies.
He said this effort would take on new urgency now that China has been a WTO member for four years, a transition period when it was supposed to phase in various commitments to open its economy.
The report contains not one word on China “fixing” its currency exchange rate:
Sen. Charles Schumer, D-N.Y., said the report contained a major omission by not discussing China's practice of depressing its currency's value against the dollar to gain trade advantages.
"It is amazing that in a comprehensive 29 page report, the trade representative fails to mention the 800 pound gorilla in the room -- how China manipulates its currency," said Schumer, who is sponsoring legislation to impose 27.5 percent penalty tariffs on Chinese products unless the country changes its currency policies.
AFL-CIO President John Sweeney criticized the report for having "gaping holes when it comes to protecting workers' rights and working families' interests."
Sweeney said the report devoted too much emphasis to the concerns of corporations and did not say enough about Chinese . . . currency manipulation, which he said were the biggest contributors to the loss of an estimated 410,000 U.S. jobs to China in recent years.
The report also fails to pledge that the US will even bring trade cases before the World Trade Organization.
"After reading the report, I have to ask -- where's the beef?" said Rep. Benjamin Cardin of Maryland, the top Democrat on the Ways and Means trade subcommittee. "The administration promises no new enforcement of trade laws, no new action in the WTO and no further steps to combat China's unfair trade practices."
The Chinese response is classic for a “banker”:
But [Bush’s tough talk] reflected domestic U.S. politics, said Chen, vice president of the Chinese Academy of International Trade and Economic Cooperation, the Commerce Ministry's think-tank.
"It's known to all that the United States curbs exports and selectively sells only Boeing aircraft, soybeans and cotton to China, and that is also discriminatory as it doesn't apply the same policy to other countries," he told Reuters.
"The United States needs to abandon its discriminatory policy and give up its Cold War mentality by removing the restrictions on high-tech exports to China," he said, referring to a ban intended to deny technology to the Chinese military.
Our banker simply wants more while giving nothing. Bush policies are letting China fix the terms of trade and demanding more. Not hard to phantom who is the “banker” and who is the “borrower.”
Bush, in his efforts to protect American businesses and American jobs, is left shadow boxing with the Chinese.
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UPDATED: February 14, 2006
A CONSERVATIVE’S CASE
Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law, Faculty Director for Curriculum, and Director, Law and Economics Program at the University of Chicago. No one would describe Professor Epstein as a liberal, much less a Democrat.
Yet, he has authored a concise, cogent and compelling condemnation of Bush’s assault on traditional constitutional values. Democrats should commit this article to memory:
President Bush's domestic surveillance program against al Qaeda has spawned multiple controversies. Intelligence skeptics ask, for example, whether the potential gains from snooping are worth the hassle. Civil libertarians doubt whether the warrantless surveillance and wiretaps can be squared with the Fourth Amendment. On both these disputes, my sympathies run with the president. I support his efforts to renew the Patriot Act; and I believe our first order of business should be to retool the Foreign Intelligence Surveillance Act (FISA) to meet the challenges of modern communications technology.
Yet the key legal struggles over domestic spying go not to its wisdom, but to the thorny issue of whether the president has exceeded his constitutional powers in disregarding FISA. He has.
The Constitution gives Congress the power to set policy; it gives to the president the right, and the duty, to execute it. The president claims first that he has secured the needed congressional blessing for the NSA's domestic surveillance through the Authorization of Use of Military Force Act, passed in the aftermath of Sept. 11, 2001. Not so. AUMF does not contain one word that dislodges FISA, and the law disfavors any "implied repeal" of major legislation. Right now, the president can both hound al Qaeda and follow FISA requirements for domestic warrants. If he wants to go further, he should seek explicit congressional authorization.
The administration's more aggressive claim is that an "inherent commander in chief power" lets the president act on his own. To see why this claim fails, it is critical to set out -- they're short -- the precise provisions that implement the constitutional separation of powers in matters of war and peace. First off, the Constitution gives the Congress the power "to declare" war. Next, only Congress can appropriate the funds to operate the land and naval forces. Most critically for the spying dispute, Congress has the explicit power "to make rules for the government and regulation of the land and naval forces." It has similar powers for setting the standards (or "discipline") for the state militia. Congress's power applies in both peace and wartime, and is subject to no express limitations on the nature and content of its general rules.
On the other side of the ledger, "[t]he President shall be Commander in Chief of the Army and Navy of the United States, and of the militia when called into actual service of the United States." Note the word "power" appears no where in this sentence. The operative verb is "shall be."
The choice of words is not inadvertent. Later in the same section the Constitution provides that the president "shall have the Power to grant Reprieves and Pardons for offenses against the United States, except in cases of impeachment," and the "Power, by and with the Advice and consent of the Senate to make Treaties." Elsewhere the president shall "receive" ambassadors and "require" reports from his subordinates.
Words matter. Only powers allow for a change in legal status of the persons over whom some power is directed. Thus the president's power to grant reprieves and pardons is rightly described as "plenary," precisely because Congress has no stated power to hedge it in by legislation, for example by declaring certain offenses unpardonable.
The president's power to make treaties is likewise plenary, but now subject to the explicit check of Senatorial advice and consent. At no time, however, can Congress send its own delegation off to negotiate with Iraq.
So understood, subtly adding in some "inherent commander in chief power" upsets a carefully wrought constitutional balance. Let the president have plenary power over military affairs, then it becomes an inevitable political tussle over whether his inherent power is stronger than Congress's stated one. But why twist accurate constitutional language to make a shambles of our basic governance structure? Congress gets to set the general rules governing military efforts. The Constitution does not confer the identical power on the president.
This view does not reduce the commander-in chief-clause to some ceremonial nullity; rather, it has four critical functions. First, it guarantees the civilian control over the military. Second, Congress cannot circumvent the president's position as commander in chief by assigning any of his responsibilities to anyone else. Only the president can execute any laws that Congress puts in place, and all inferior military officers from the Joint Chiefs of Staff on down answer only to him. Third, the Congress is barred from making any specific order on military matters once it lays down the rules. It cannot micromanage the military, nor put inferior military personnel in the impossible position of deciding whose commands to follow, or why. Fourth, the president, like any inferior military commander, can respond on his own initiative to an immediate attack, without congressional authorization.
The president's defenders insist that any gap in his power is filled because the Constitution provides that the president "shall take Care that the laws be faithfully executed." But this clause cuts in exactly the opposite direction. FISA is one law that the president must "take care" to enforce: He cannot choose to flout or ignore it, even if he has wide discretion in how to implement it. Nor can the president obviate the need for legislation by making selective disclosures of his activities to certain members of Congress whom he then subjects to a vow of secrecy. Our constitutional structure of checks and balances is not subject to unilateral presidential circumvention by ad hoc procedures. The precise detailed enumeration of powers and responsibilities in Article II just do not confer on the president a roving commission over foreign and military affairs.
He is a coordinate player, not a dominant one.
So who cares about these close textual and formal arguments? We all do, or should. The major danger with presidential surveillance does not lie in this particular overreaching of executive power. It's what comes next. If President Bush can ignore FISA, then he can disregard a congressional prohibition against the use of nuclear force. His defenders often claim that national defense is too important to be left to a wobbly Congress -- which on my view might prohibit the use of live ammunition in combat. And so it could. But political forces are always in play, and no legal institutions are simultaneously robust against all forms of incompetence.
As Madison reminds us, "Enlightened statesmen will not always be at the helm." If we accept executive power on steroids, then what's to be done if a reckless president drags our nation into foolish conflicts? Over the long haul, we'll do best by sticking to the original game plan on military matters rather than rewriting the Constitution to let the president alter the rules of the game. Under our Constitution, that power belongs to Congress. May it use the power wisely.
This is the message that Democrats have to take to America.
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BUSH’S ECONOMIC DARWINISM
The rich are getting richer as these two stories document:
OIL companies on both sides of the Atlantic will gush record profits this week, with America’s Exxon Mobil posting the world’s biggest-ever profit, and Shell setting a new record for British companies.
Exxon is tomorrow expected to unveil a profit of about $32 billion (£18 billion) for 2005, according to Thomson Financial. It will be the largest single profit in the history of corporate America.
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In 2003 the top 1 percent of households owned 57.5 percent of corporate wealth, up from 53.4 percent the year before, according to a Congressional Budget Office analysis of the latest income tax data. The top group's share of corporate wealth has grown by half since 1991, when it was 38.7 percent.
In 2003, incomes in the top 1 percent of households ranged from $237,000 to several billion dollars.
For every group below the top 1 percent, shares of corporate wealth have declined since 1991. These declines ranged from 12.7 percent for those on the 96th to 99th rungs on the income ladder to 57 percent for the poorest fifth of Americans, who made less than $16,300 and together owned 0.6 percent of corporate wealth in 2003, down from 1.4 percent in 1991.
Meanwhile, Bush is simultaneously proposing more tax cuts aimed at the wealthy and cutting programs that benefit middle class and lower socio economic Americans. The Center on Budget and Policy Priorities has one of the best reviews of Bush’s Darwinian budget that TPJ has found. Their assessment:
This budget’s priorities are clear: it features cuts in numerous domestic programs that serve low- and middle-income families alongside continued — and substantially expanded — tax cuts of very large size that concentrate their benefits on people high on the income scale. The new budget also contains continual significant increases in defense and homeland security spending. . . .
The Administration’s budget
would increase the deficit over both the short run and the long run. The budget
proposes significant reductions in a broad array of domestic programs, but those
reductions would not be used to reduce the deficit. Instead, they would be used
to offset a fraction of the costs of the tax cuts the President proposes. . .
.
Although the fiscal consequences of the tax cuts enacted in recent years are
becoming increasingly apparent, the Administration has responded not by
reassessing any of those tax cuts, but by proposing sharp cuts in many domestic
programs, alongside an array of costly new tax breaks. The tax cuts would favor
the most well-off, while the program cuts would primarily affect low- and
middle-income Americans. . . .
The budget conceals or omits information essential to assessing its impacts
on deficits and on programs and services that affect millions of Americans.
1. The budget omits the costs of funding U.S. operations in Iraq and
Afghanistan after 2007.
2. The budget also omits the cost of extending relief from the
Alternative Minimum Tax after 2006. CBO estimates show that extending AMT
relief will reduce revenues by $914 billion over the next ten years if the
Administration’s tax cuts are made permanent. (Making the tax cuts permanent
greatly increases the cost of AMT relief).
3. The omission of such information makes various Administration claims,
such as the claim that the deficit will be cut in half over five years, rather
hollow. (Even if deficits do decline in 2009 to half what the Administration
projected the 2004 deficit would be in February 2004, using inflated deficit
projections at that time, this would not represent a significant
accomplishment. Deficits will rise sharply again soon after 2009, in part as a
result of the Administration’s own policies).
4. Even more serious, the budget fails to contain figures for revenues,
expenditures, and deficits for years after 2011. This omission prevents
policymakers and the public from seeing how high the deficits would be in those
years under Administration budget policies — and how substantially the deficits
in those years would be increased by those policies. Adding to this problem,
the Administration also took the step of eliminating the standard budget summary
table that shows the effects of the budget’s proposed policies on the deficit
over the next five years.
Bush and the Republicans are clearly leading America in the wrong direction.
THE BANKER’S FIX
America’s balance of trade deficit continues to balloon under Bush’s economic policies. The “overall trade gap climbed to an all-time high of $725.8 billion last year. The deficit was up 17.5 percent from 2004, marking the fourth straight record.” As with Bush’s budget deficit, there is no end in sight to the red ink (emphasis added):
Analysts predicted that the 2006 trade gap will be even worse, with Global Insight forecasting it could hit $810 billion, reflecting lagging economic growth overseas that could hold back U.S. exports. "Trade is far and away the largest weight on the U.S. economy at present," said Mark Zandi, chief economist at Moody's Economy.com. "This is a risky time."
The 2005 trade deficit numbers reaffirm that China is America’s principal banker (emphasis added):
And the year's $201.6 billion deficit with China, the largest ever recorded with a single country, brought demands for a crackdown on what the U.S. sees as unfair trade practices.
Despite the ever growing imbalance with China, Bush continues to let America’s principal banker fix the deal to prevent America from “free trade” with China. While America permits the US Dollar to float in value against other currencies, China actually fixes the value of the yuan within a narrow range. As a result, it is cheaper for Americans to import Chinese goods while it remains, in relative terms, more expensive for China to import American products. As a result, the Republican mantra of “free trade” is a cruel myth.
By fixing the terms of trade, China wins and Americans largely lose. First, China is taking its profits and essentially reinvesting those profits by financing Bush’s burgeoning federal deficit. Second, Americans have lost and will continue to lose jobs that are moving off shore (emphasis added):
the trade deficits have contributed to the loss of nearly 3 million manufacturing jobs since mid-2000 as U.S. companies moved production overseas to lower-waged nations. Many economists believe those manufacturing jobs will never come back.
"America's gargantuan trade deficit is a weight around American workers' necks that is pulling them into a cycle of debt, bankruptcy and low-wage service jobs," said Richard Trumka, secretary-treasurer of the AFL-CIO.
Warren Buffet states the warning succinctly:
The U.S. trade deficit is a bigger threat to the domestic economy than either consumer debt or the federal budget deficit, billionaire investor Warren Buffett warned this week. “Right now, the rest of the world owns $3 trillion more of us than we own of them,” Buffett told business students and faculty Tuesday at the University of Nevada, Reno. “In my view, it will create political turmoil at some point. ... Pretty soon, I think there will be a big adjustment,” he said without elaborating.
The cruelty of Bush’s policies is clearly demonstrated in this example. As Trumka notes, Bush’s policies favoring off shoring of American jobs is driving many citizens into bankruptcy. However, instead of fashioning bankruptcy law that recognizes the hardships, Bush and the Republicans enacted bankruptcy “reforms” that deprive Americans just relief. As one Bankrutpcy Court Judge recently wrote (emphasis added):
The Congress of the United States of America passed and the President of the United States of America signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the "Act"). It became fully effective on October 17, 2005. Those responsible for the passing of the Act did all in their power to avoid the proffered input from sitting United States Bankruptcy Judges, various professors of bankruptcy law at distinguished universities, and many professional associations filled with the best of the bankruptcy lawyers in the country as to the perceived flaws in the Act. This is because the parties pushing the passage of the Act had their own agenda. It was apparently an agenda to make more money off the backs of the consumers in this country. It is not surprising, therefore, that the Act has been highly criticized across the country. In this writer's opinion, to call the Act a "consumer protection" Act is the grossest of misnomers.
Is America listening?
Last Update: 03/27/2006