Only 39,000 New Jobs Isn't a Surprise - Democratic Underground

OlympicBrian

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Fri Dec-03-10 01:46 PM
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Only 39,000 New Jobs Isn't a Surprise

Edited on Fri Dec-03-10 02:32 PM by OlympicBrian

Only 39,000 New Jobs Isn't a Surprise
- Monetizing Debt in US Won't Help US Economy if GDP is Stimulated Abroad
By Dan, Seattle
12/03/10

Total non-farm payrolls increased a slim 39,000 in November, much lower than the 155,000 gain expected by Wall Street economists.

I'll put it simply: QE2 is incompatible with offshoring. The Federal Reserve is relying on outdated assumptions about the way the US economy works.

The Federal Reserve, like Congress, is completely ignoring the disconnect between the US quantitative easing program and the supposed effects on domestic employment and GDP. This is due to the simple fact that quantitative easing in a nation assumes there is some degree of a "closed system" when it comes to the home economy, and that the flow of direct investment is primarily enhanced domestically.

Specifically, in a globalized economy this is not the case, as business seeks out absolute advantage in the deployment of capital--particularly when incentivized by policy to do so--as is the case in the United States. Indeed, flows of investment subsequent to the last two recessions show an enhanced outward trend. In both cases, employment recovery was protracted, apparently US companies offshored as a productivity measure--given US tax incentives. This is because capitalism becomes increasingly "broken," as it severs ties to its home economy--also resulting in large deficits. Such an economic model is unsustainable--which the US fully admits to, but won't take the steps to fix. The debt commission is partially on track, with Jan Schakowsky on board--but most members miss the major point.

Moreover, quantitative easing has led to pronounced asset and commodity bubbles, and ultimately--a recent Fed Beige Book rife with references to inflation in almost every district--including not only pipeline inflation, but price markups for finished goods. This points to US stagflation--lots of jobs and inflation abroad...but few jobs and (perhaps sharply) increasing inflation at home.

Policymakers should make bills such as the Stop Outsourcing and Create American Jobs Act of 2010 (H.R. 5622)--and even more stringent offshoring bills such as the Creating American Jobs and Ending Offshoring Act (S.B. 3816)--of utmost priority, in order to immediately reverse a fiscally disastrous model. No amount of additional quantitative easing can fix a broken capitalist economy, which "leaks" jobs and capital offshore, preferentially over the US.

All things considered, long-winded discussions of minor adjustments to US taxation are a distraction, and a waste of taxpayer dollars.

"Economic theory assumes that capitalists pursuing their individual interests are led to benefit the general welfare of their society by an indivisible hand. But offshoring, or the pursuit of absolute advantage, breaks the connection between the profit motive and the general welfare. The beneficiaries of offshoring are the corporations' shareholders and top executives and the foreign country, the GDP of which rises when its labor is substituted for the corporations' home labor. Every time a corporation offshores its production, it converts domestic GDP into imports. The home economy loses GDP to the foreign country that gains it."
- Paul Craig Roberts, Economist, former Assistant Secretary of the Treasury, former editor and columnist Wall Street Journal, Businessweek
http://www.creators.com/opinion/paul-craig-roberts/cato-s-trade-report-blinded-by-ideology.html