Episode 33. October 26, 2019

CLP Topic Category. Economic Policy

Title. The Republican’s 3 Big Chinese Lies: “No, Really, the Chinese Are Just Like You and Me.”

Our podcast today uses China’s two most recent reneges on trade agreements as a way of exploring the Republican’s responsibility for promoting trade with China, in 1999, and explaining that they were responsible for ameliorating the labor market and financial effects on displaced American workers.

The two reneges by China, in 2019, are placed into the historical context of the main Republican lie that “the Chinese are just like you and me.”

Just beneath the public lies of the elected Republicans, in 1999, the Business Roundtable and U. S. Chamber of Commerce provided the financial support to the Republicans to change the American economic structure from an industrial production nation to a rentier, financial services, managed global corporate nation.

Because of the way that insider corruption works in Washington, the Roundtable members wrote the law, and rigged the terms of trade to benefit their members.

Our podcast argues that when the Chinese ships come to the U.S. full of cheap goods, those ships leave with U. S. debt securities, that pay for the trade deficit.

Beginning in 2003, but especially after 2008, the payments for the huge trade deficit fundamentally changed the structure of the U. S. economy into a managed global financial services economy that benefitted 5 big New York banks.

The income and employment multiplier effects of the banking rentier economy are concentrated in the elite social classes, making income inequality much greater than under the industrial production economy, which existed prior to 1999.

Our podcast concludes that the ideology of globalism explains the entire Trump impeachment effort by Democrat global socialists and the global crony capitalist Republicans.

The lynchpin of the Republican lie, to paraphrase Trump, is the globalist ideology that financial elites and political elites make better decisions about society than consumers in a free competitive markets.

Codevilla states this issue of global class elitism this way,

“No prominent Republican challenged the ruling class’s continued claim of superior insight, nor its denigration of the American people as irritable children who must learn their place. The Republican Party did not disparage the ruling class, because most of its officials are, or would like to be part of it.”

The threat to American liberty, and sovereignty, is globalism, and the Chinese communists are the lead propagators of both globalism and brutal repression of any political opposition to their global vision of world domination.

The Chinese are aided and abetted by the globalist socialist Democrats and  crony capitalist Republicans, who have combined forces to remove Trump because he is a nationalist, not a globalist.

I am Laurie Thomas Vass, and this is the copyrighted Citizen Liberty Party News Network podcast for October 26, 2019.

Our podcast today is under the CLP topic category Economic Policy, and is titled, The Republican’s 3 Big Chinese Lies: “No, Really, the Chinese Are Just Like You and Me.”

The most recent podcast of the CLP News Network is available for free. The entire text and audio archive of our podcasts are available for subscription of $30 per year, at the CLP News Network.com.

Big Republican Lie #1. We can trust the Chinese Communists to honor their legal obligations.

During the Congressional Hearings on Normal Trade Relations (NTR), in 2000, Michael Bonsignore, CEO of Honeywell, and the lead lobbyist for the Business Roundtable, bragged that Honeywell was doing over half a billion dollars, annually, in trade with China.

Bonsignore stated,

“On virtually every Boeing aircraft shipped to China, Honeywell’s avionics,  auxillary power units, wheels, and brakes are on board. We ship industrial instruments and systems to help modernize a wide range of Chinese industries, from pulp and paper to petrochemicals.”

As a result of Honeywell’s efforts, China stole the technology for its nuclear warheads, including Honeywell’s guidance systems for the W-88 warhead capable of delivering 150 Kilotons within 80 yards of it intended target.

China stole from Honeywell the technology for testing these warheads through simulations and firing in camouflage mode.

China obtained from Honeywell the software for radar detection of operating attack submarines.

Under the trade agreements promoted by the Business Roundtable, China is using Honeywell’s avionics and aircraft technology to build the new Chinese commercial jet, the C919.

Bonsignore left out from his testimony the part that under the law, written by the Business Roundtable, that U. S. companies are forced to give Chinese authorities access to U. S. technology.

He knew at the time of his testimony the danger of the trade agreement to American citizens, but like Nike , the NBA and LeBron, the money was just too good to pass up.

Under Bonsignore’s leadership, the Business Roundtable, spent close to $10 million on lobbying members of Congress for NTR passage, at that time, the largest-ever campaign for a single legislative issue.

Three out of four Republicans voted in favor of NTR, two out of three Democrats voted against. In total, 164 Republicans and 73 Democrats voted in favor; 57 Republicans, 138 Democrats and 2 independents voted against.

George W. Bush stated a part of the Republican lie, after the vote,

”Passage of this legislation will mean a stronger American economy, as well as more opportunity for liberty and freedom in China,”

Speaking on behalf of China, the Chinese negotiator stated,

“The conclusion of this agreement serves the interests of both China and the U.S., and is conducive to the development of Sino-U.S. relations, to China’s becoming a WTO member as soon as possible and to the development of the world economy and trade,”

The Chinese negotiator is right. The agreements served the Chinese interests because the Chinese stole Honeywell’s technology to build their military arsenal.

Steve Bannon accurately described the first Big Republican lie by stating,

“Renegade communists cannot be trusted to keep agreements. For decades, Americans were made to believe a lie, namely that once China entered the World Trade Organization, and received Most Favored Nation status, became wealthier, and started to develop a middle class, then China would gradually democratize and become more of a free market with rule of law.”

Newt Gingrich added,

“For many decades, Americans thought communist-ruled China would evolve into a free and China. Under Xi China is developing an ultra-high-tech police state, wherein powerful cameras and facial recognition artificial intelligence are being utilized to control the Chinese people in ways we had previously only imagined in science fiction. We thought that the trade agreements would lead to open systems similar to our own. We were completely wrong.”

Beginning in 1999, the Republican Party, and the Business Roundtable, knowingly lied to American citizens that China could be trusted to honor its legal agreements.

The Chinese are not just like you and me, but Honeywell’s stolen technology has placed the American public in immediate danger from a Chinese nuclear attack.

Big Republican Lie #2. Displaced manufacturing workers will easily, and costlessly, transition to new and better jobs.

The reason that millennials live in their parent’s basements is because the trade with China fundamentally changed the occupation-by-industry job structure in the American economy.

As a result of trade with China, there are no longer entry level jobs in upwardly-mobile industries that the young people can enter. Those portals of entry were shipped over to China.

Autor, Dorn, Hanson, et al. found that, when factory jobs disappeared, nothing showed up to replace them. Displaced factory workers, and young people, have no entry points to the labor market.

In the 1950s and 1960s, one part of the American economy that made America great were the stable jobs and internal career ladders that began with a private sector portal of entry into many high-wage occupations.

In that former era, the term “upward occupational mobility,” characterized much of the American dream of working hard and getting ahead in society.

Manufacturing jobs were the single most important source of jobs that led to upward mobility because manufacturing jobs had such extensive employment multipliers in other industries.

Moretti (2010) estimates that each additional manufacturing job in a city generates 1.6 nonmanufacturing jobs.

Multiplier effects of manufacturing are higher for skilled jobs: an additional skilled manufacturing job in a city generates an estimated 2.5 jobs in local goods and services

When the manufacturing jobs went to China, the entire occupation by industry matrix was destroyed, permanently. The supply chains that used to transmit the multiplier effects disappeared, not because of automation and increased productivity, but because trade with China destroyed the economic structure of the American economy.

The growth of the U.S. trade deficit with China between 2001 and 2017 was responsible for the loss of 3.4 million U.S. jobs, including 1.3 million jobs lost since 2008.

The reason that displaced manufacturing workers never found decent jobs was that those entry level jobs did not exist in the 370 metro regions that supported manufacturing.

Neoclassical academic economists, who ask wistfully why this period of economic dislocation is different have failed to come to grips with the economic evidence that the American inter-industry economic structure was destroyed by the trade policies.

Typical of this lament, one prominent academic asked,

“why in the years 1990-2007 do we suddenly get an economy that apparently cannot create employment opportunities, in response to changes in trading patterns, as well as it did in the 200-plus years earlier?”

Research by Susan Houseman, at Upjohn, demonstrates that it was not automation that killed the jobs, it was trade policies with China.

Almost 80% of all job losses in manufacturing, caused by China trade, were concentrated in just 50 of the nation’s 370 metro regions.

The 50 metro regions were critical to future economic growth because manufacturing plants, in a supply chain, like to be located close to each other in a specific metro region.

The other answer to the wistful academics about labor market transitions were that the manufacturing plant closings were concentrated in the nine most important technology clusters that were responsible for generating career entry into high wage jobs.

The nine high technology cluster of firms which trade with each other are:

1. The advanced manufacturing cluster
2. The glass and ceramics cluster
3. The apparel and textiles cluster
4. The forest and wood products cluster
5. The biomed/biotech cluster
6. The agribusiness/food processing cluster
7. The IT cluster
8. The chemicals cluster
9. The defense and security cluster

After those nine high technology clusters were destroyed under the trade policies, America lost the internal labor market dynamics that created upward occupational mobility, both for the millennials and displaced factory workers.

Economists at Harvard Business School issued a report on the economic effects of the Republican trade policies on the national prosperity.

1. After the implementation of the trade policies, American median real household income declined 7%, with incomes stagnating across virtually all income levels. Median household income remains below the peak attained in 1999.
2. The job growth rate began to decline around 2001, and under Obama, the loss of jobs overwhelmed the rate of job growth.
3. Private sector investment for equipment, intellectual property and structures began to decline in 1999. For 2010-2016, the average quarterly investment by business as a percentage of GDP was lower than it had been since the 1980s.
4. The number of small business firms created in the U.S. was actually lower in 2010 than 1999.
5. Under Obama, half of the country’s new business establishments created between 2010 and 2014 were clustered in just 20 counties, in the nation. Coincidentally, those 20 counties vote overwhelmingly Democrat.

Harvard economist George Borjas estimated that open borders and global trade reduced the wages of American citizens by an estimated $118 billion a year.

At the same time that American workers are losing $118 billion a year, the open borders global economy generates a net increase in profit for global corporation of $128 billion a year.

The manufacturing workers displaced by the China shock never found jobs again, and their suicide and death rates skyrocketed, because in America, the worker’s individual self-worth is tied to her job.

Republicans knew, in 1999, that the displaced workers would never find new jobs because the Business Roundtable research reports had described what would happen to the American labor market, when they shipped the jobs to China.

America’s labor market flexibility changed because the economic structure was damaged permanently by the trade deals.

The Republicans were responsible for writing and passing the trade legislation, and were responsible for ameliorating the disastrous effects on displaced factory workers.

Their second big lie was used to promote their own financial interests against the interests of American workers. 

Big Republican Lie #3. Managed global corporatism will lead to greater U. S.  and global GDP growth rates.

After listening to Susan Houseman’s interview with Russ Roberts about what caused the permanent job losses, one person left a comment,

“Are there any respected economists out there who question the entire premise that, even under traditional measures, we are in fact better off (GDP wise) exporting manufacturing and importing cheap labor? Our GDP growth has been marginal at best recently, college grads are living at home longer, and millennials are staying at jobs for only about two years before moving on (and thus not buying homes, putting down roots etc).”

Houseman’s research on the gaps in statistical data gathering on job losses are equally valid for the way GDP is reported.

To answer the comment on Houseman’s interview with Roberts, the entire world economy is slowing because the central economic tenets of globalization are false.

First, all of Ricardo’s theory and the Hecksher-Olin factor price equalization depend on a closed sovereign geographical border. Trade theory does not work when global corporations cross-ship intermediate goods across borders because there is no longer a sovereign national welfare function that can be maximized.

Second, all of Ricardo’s trade theory assumes a competitive market of many buyers and many sellers. The entire globalization of trade is conducted by a tiny set of corporations and government elites who control all economic decision making.

The answer to the commenter’s question about so-called Republican “free trade” is that Ricardo’s free market competition produces better welfare results than elite decision making in the global managed corporatism model.

Houseman’s research describes the flaws in labor market statistics that are linked to data on prices, or value-added to intermediate imports, from the Chinese supply chains, to final, finished goods in America, that are then exported  by the  U. S. global corporations.

The profits from trade to U. S. domiciled corporations are reflected in the GDP statistics, but the aggregate gains go to a different set of citizens, mostly 5 banks in New York, who do not produce anything of value.

In other words, the GDP statistics describe increased economic activity that is achieved without value-added because the statistics cannot capture the price effect of the import substitutions from China.

If the correct price deflators were applied to the aggregate GDP statistics, the real rates of economic growth would be much lower.

The GDP, since 2008, was around 2%, because the U. S. economy had settled into a Nash equilibrium of low economic activity.

Trump’s economic policies jolted the economy back to a previous equilibrium, that existed around 1998.

Trump’s economic policies are dissipating, in 2019, because the central bankers are incapable of generating the conditions of economic growth.

Managed global corporatism cannot generate the levels of private business investment for the same reasons that Schumpeter explained.

The central bankers are committed to maintaining the status quo so that the bankers can rely on steady interest repayments. The gales of technology innovation do not blow in America, because those gales threaten the stability of the bankers.

There are winners and losers to global trade, and the 5 banks in New York won great benefits from financing the deficits of international trade with China.

The bank profits, and the increased profits to the corporations from trade with China, were never re-invested in the domestic U. S. economy.

Since 2000, the trade deficit with China have surged by 173 percent, from $83 billion in 2000 to $227 billion in 2009. The United States has lost more than one-third of all its manufacturing jobs, U.S. wages have declined by 120 billion dollars.

The Fed spent $14 trillion on economic stimulus, only to experience the highest unemployment rates in generations and annual federal budget deficits of more than $1 trillion.

The same economic policy is pursued, around the world, by all central bankers, which explains why world economic growth is stagnating.

These trends are not “likely to end,” says U. S. trade advisor Lighthizer.

Houseman provides an example of why the GDP statistics mask the weak economic growth. She explained that the $100 million price drop from intermediate inputs from China displaces $150 million in U. S. domestic economic activity, but the GDP data cannot capture that economic loss.

Houseman states,

“The greater the share of imported intermediates going into an exported good or service, the fewer domestic jobs will be generated. So clearly it’s important to be able to quantify the use of imported intermediates in, say, an exported piece of construction equipment. But the existing data yields no clue about whether export-oriented industries use more or fewer imported intermediates, relative to industries that principally produce for domestic markets.”

To rephrase the answer from the commenter from Houseman’s interview, allowing China into the WTO was a mistake.

Lighthizer stated,

“The United States made the mistake of treating China as if it was another democracy. The world trading system created by the General Agreement on Tariffs and Trade in 1947 excluded countries like China for good reason,  the earlier trade agreements excluded communist countries because they thought such countries would sabotage GATT.”

In 2000, the Republicans used the third big lie that trade with China would lead to high rates of domestic economic growth in order to pass the China trade deals.

After China was admitted to the WTO, the Chinese immediately set out to sabotage the trade deals, and President Trump is now stuck trying to fix the damage to the U. S. economy by the third big Republican lie.

Confronting President Trump’s efforts to re-negotiate the trade deals, are the globalist Democrats and crony capitalist Republicans, who are using impeachment as a tool to get rid of a President who is not a globalist.

This is my Conclusion.

In the 2018 annual report to Congress, the U.S. Trade Representative’s Office stated

“It seems clear that the United States erred in supporting China’s entry into the WTO on terms that have proven to be ineffective in securing China’s embrace of an open, market-oriented trade regime,”

Rather than move in the direction of open competitive markets,  Xi entrenched communist control over the economy in his bid for world domination.

In 2012, the year before Xi’s elevation, more than half of Chinese bank loans went to private firms; by 2015, that fell to 19 percent. Loans to state-ruling owned enterprises, by comparison, doubled to 69 percent.

The Republicans collaborated with the Democrats to implement the trade deals by providing the big lie that the communists were just like you and me.

Codevilla explains the collaboration by using the term ruling class, stating,

“decisions about money were being made in bipartisan backroom  deals with interested parties. The political class reasserted their right to decide ad hoc on these and so many other matters, supposing them to be beyond the general public’s understanding. Republican and Democratic office holders think, look, and act as a ruling class. The majority of citizens lack a political party to represent their interests.”

Codevilla’s rough estimate is that 70% of the American voting population is unrepresented by the ruling class political coalition between Democrats and Republicans.

As a result of that lack of representation, the Republicans are able to perpetuate trade laws that are detrimental to the interests of the majority, who have nowhere else to go to vote.

Our podcast today used the three big lies of the Republicans to demonstrate the irreconcilable differences between the police state repressive society of socialists and the individual liberties of a natural rights republic.

The majority of nationalist conservatives need a new political movement to protect their interests in individual liberty. The name of that new political party is the Citizens Liberty Party, and the right leader for that political party is Lou Dobbs.

Continuing to vote for Republicans, as Rush Limbaugh suggests, is a loser’s proposition, that ends up in trade deals like China, neo-con endless wars, and Vichy collaboration with socialist Democrats.

A better solution to America’s intractable differences is a civil dissolution of the nation, into two new nations, where the globalists can continue to pursue their lies that globalism leads society to the greatest social welfare.

More free market competition, and more citizen liberty, and a reassertion of the principle that individual citizens are their own best judge of what is in their economic interests will solve America’s economic problems.

Natural rights conservatives need a national leader who will lead them to that new national mission, and that leader is President Trump.

I am Laurie Thomas Vass, and this podcast is a copyrighted production of the CLP News Network.

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