Life in the Bush Economy: Fat, Drunk and Broke
A Nation of Waitresses and Bartenders
By Paul Craig Roberts
The Bureau of Labor Statistics payroll jobs report released May
5 says the economy created 131,000 private sector jobs in April.
Construction added 10,000 jobs, natural resources, mining and
logging added 8,000 jobs, and manufacturing added 19,000.
Despite this unusual gain, the economy has 10,000 fewer
manufacturing jobs than a year ago.
Most of the April job gain --72%--is in domestic services, with
education and health services (primarily health care and social
assistance) and waitresses and bartenders accounting for 55,000
jobs or 42% of the total job gain. Financial activities added
26,000 jobs and professional and business services added 28,000.
Retail trade lost 36,000 jobs.
During 2001 and 2002 the US economy lost 2,298,000 jobs. These
lost jobs were not regained until early in February 2005. From
February 2005 through April 2006, the economy has gained 2,584
jobs (mainly in domestic services).
The total job gain for the 64 month period from January 2001
through April 2006 is 7,000,000 jobs less than the 9,600,000
jobs necessary to stay even with population growth during that
period. The unemployment rate is low because millions of
discouraged workers have dropped out of the work force and are
not counted as unemployed.
In 2005 the US had a current account deficit in excess of $800
billion. That means Americans consumed $800 billion more goods
and services than they produced. A significant percentage of
this figure is offshore production by US companies for American
The US current account deficit as a percent of Gross Domestic
Product is unprecedented. As more jobs and manufacturing are
moved offshore, Americans become more dependent on foreign made
goods. This year the deficit could reach $1 trillion.
The US pays its current account deficit by giving up ownership
of its existing assets or wealth. Foreigners don't simply hold
the $800 billion in cash. They use it to acquire US equities,
real estate, bonds, and entire companies.
The federal budget is also in the red to the tune of about $400
billion. As Americans have ceased to save, the federal
government is dependent on foreigners to lend it the money to
operate and to wage war in the Middle East.
American consumers are heavily indebted. The growth of consumer
debt is what has been fueling the economy. Social Security and
Medicare are in financial trouble, as are many company pension
plans. Decide for yourself--is this the economic picture of a
superpower that can dictate to the world, or is it the picture
of a second-rate country dependent on foreigners to finance its
consumption and the operation of its government?
No-think economists make rhetorical arguments that the decline
of US manufacturing employment reflects higher productivity from
technological improvements and not a decline in US manufacturing
per se. George Mason University economist Walter Williams
recently ridiculed the claim that US manufacturing jobs are
moving to China. Williams asks how the US could be losing
manufacturing jobs to China when the Chinese are losing jobs
faster than the US: "Since, 2000, China has lost 4.5 million
manufacturing jobs, compared with the loss of 3.1 million in the
The 4.5 million figure comes from a Conference Board report that
is misleading. The report that counts was written by Judith
Banister under contract to the U.S. Department of Labor, Bureau
of Labor Statistics, and published in November 2005 (www.bls.gov/fls/chinareport.pdf).
Banister's report was peer reviewed both within the BLS and
externally by persons with expert knowledge of China.
Chinese manufacturing employment has been growing strongly since
the 1980s except for a short period in the late 1990s when
layoffs resulted from the restructuring and privatization of
inefficient state owned and collective owned factories. To
equate temporary layoffs from a massive restructuring within
manufacturing with US long-term manufacturing job loss indicates
extreme carelessness or incompetence.
Banister concludes: "In recent decades, China has become a
manufacturing powerhouse. The country's official data showed 83
million manufacturing employees in 2002, but that figure is
likely to be understated; the actual number was probably closer
to 109 million. By contrast, in 2002, the Group of Seven (G7)
major industrialized countries had a total of 53 million
The G7 is the US and Europe. In contrast to China's 109,000,000
manufacturing workers, the US has 14,000,000.
When I was Assistant Secretary of the Treasury in the Reagan
administration, the US did not have a trade deficit in
manufactured goods. Today the US has a $500 billion annual
deficit in manufactured goods. If the US is doing as well in
manufacturing as no-think economists claim, where did an annual
trade deficit in manufactured goods of one-half trillion dollars
If the US is the high-tech leader of the world, why does the US
have a trade deficit in advanced technology products with China?
There was a time when American economists were empirical and
paid attention to facts. Today American economists are merely
the handmaidens of offshore producers. Apparently, they follow
President Bush's lead and do not read newspapers--thus, their
ignorance of countless stories of US manufacturers moving entire
plants and many thousands of US engineering jobs to China.
Chinese firms, including state owned firms, have numerous
reasons, tax and otherwise, to understate their employment.
Banister's report gives the details.
Banister points out that the excess supply of labor in China is
about five to six times the size of the total US work force. As
a result, there is no shortage of workers in China, nor will
there be in the foreseeable future.
The huge excess supply of labor means extremely low Chinese
wages. The average Chinese wage is $0.57 per hour, a mere 3% of
the average US manufacturing worker's wage. With first world
technology, capital, and business knowhow crowding into China,
virtually free Chinese labor is as productive as US labor. This
should make it obvious to anyone who claims to be an economist
that offshore production of goods and services is an example of
capital seeking absolute advantage in lowest factor cost, not a
case of free trade based on comparative advantage.
American economists have failed their country as badly as have
the Republican and Democratic parties. The sad fact is that
there is no leader in sight capable of reversing the rapid
decline of the United States of America.
Paul Craig Roberts was Assistant Secretary of the Treasury in
the Reagan administration. He was Associate Editor of the Wall
Street Journal editorial page and Contributing Editor of
National Review. He is coauthor of The Tyranny of Good
Intentions. He can be reached at:
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