Hu's On First? Well... Obviously Not The American People; Maybe Jeffrey Immelt, A Self-Described "Nut" On China

Replacing the dumb bell with the smart guy hasn't changed much when it comes to trade

Vermont's Independent progressive Senator, Bernie Sanders, tends to vote with the Democrats. But he certainly feels no obligation to follow them down one of the roads to ruin the party hierarchy is currently traversing. That's why-- even with a Democrat in the White House-- Senator Sanders felt the need last week to issue a press release entitled "Hands Off Social Security! " Warning that Social Security faces new threats from the Republican-controlled House and newly-elected ultra-conservatives in the Senate, Bernie urged President Obama to keep his campaign promises to preserve the "strong and vibrant" system that serves more than 52 million Americans. Meanwhile, Bernie was joined by Sens. Whitehouse and Boxer in forming a congressional caucus to protect Social Security." On January 11 he sent an official letter to President Obama in the hope of snapping him back to reality: "there have been worrisome reports that you are considering supporting cuts in Social Security. I hope that information is wrong, and that you will stand by your campaign promises to strengthen Social Security, making sure that it remains strong and vibrant and able to pay out full benefits for our children and grandchildren."

The financial sector has lavishly financed Barack Obama's political career. Although he's only been in federal office for just over 4 years, he's taken in an astounding $42,285,749 in political "contributions" from the worst players in American politics, the kind of banksters and insurance sells who normally pump for Republicans. These same interests-- which would also include tellers, security guards and janitors working in banks, has given Bernie Sanders just $181,095, one of the smallest amounts any senator has ever gotten from the sector-- despite the fact that he's been a federal officeholder since 1990. Doubtful that it's just a coincidence that one of these men sticks up for Wall Street and one sticks up for American workers and consumers.

President Obama hosted a visit by President Hu Jintao of China last week. Washington insiders had a nice state banquet to gossip about. Presumably they talked about China's role on the Korean peninsula and in Iran's nuclear development and Obama had a few comments about human rights and currency manipulation. Do you think they discussed Boeing's lay off of 1,000 American workers in southern California the day after the much ballyhooed $19 billion deal with China? Dylan Ratigan made the point that Wall Street-dictated U.S. economic policies have been great for workers... in China.

A recent article in the Wall Street Journal showed that most of the people who lost jobs in this most recent recession found new ones at lower pay. Over a third of these people had to take pay cuts of at least 20%. Pay cuts. We haven’t real sustained pay cuts across a large swath of Americans since the 1930s.

But this isn’t just a tragedy; it is in fact a conspiracy. The people in charge aren’t just failing to prevent this from happening. They want it to happen. You see, pay cuts for workers mean that prices as a whole in the economy don’t rise. There’s less inflation, which means that banks and creditors make more money.

What do I mean by a conspiracy?  Well, you can read all about it.  It’s right in the transcripts of the Dec. 2005 Federal Open Market Committee, which is the committee of central bankers that run America (more on that below).  In that meeting, Dallas Fed President Richard Fisher is complaining about the enormous quantity of Chinese goods flowing into America.  He points out that this is creating ‘disinflation,’ ie. lowering prices and wages for Americans.

Only, he isn’t complaining that there are too many Chinese imports, he is frustrated there aren’t enough imports.  Even though China has built special export-only ports to ship goods out of China, he says, the ports at “Long Beach and Northwest” can’t absorb what China wants to sell us, because of work rules (ie. unions). This is a huge problem, Fisher continues, because it is blocking his CEO contacts from outsourcing as much work abroad as quickly as possible. They cannot “exploit China” fast enough.

...There were all sorts of excuses for why this was a good idea-- we would do the ‘high value add’ work in America, like research and development, while the ‘low quality work’ like manufacturing went abroad. And everyone would benefit-- sure you wouldn’t get a raise, but you’d get low prices at Walmart (Walmart shows up all the time in FOMC meeting transcripts). But basically this was a way of ensuring that banks and creditors could make a lot of money that would instead go to workers. It was known as ‘the great moderation,’ a term coined by Bernanke, and was considered a great success.

As late as 2005, Richard Fisher was celebrating this trend. In that same meeting where he complained about too few Chinese goods coming into the US, he bragged about the weakness of one of the most significant employers in the United States:  “My most delicious irony is the fact that similarly dated Vietnamese debt now trades on a price basis richer, and on a yield basis lower, than that of Ford Motor Company.  [Laughter]”

Just who is Richard Fisher working for, anyway?

This is a systemic problem, and it requires a systemic answer. Right now, China makes our goods, the Chinese workers get our jobs, and American workers get pay cuts. But, the Chinese also lend us our own money back to us, which we then give to JP Morgan, Citigroup, Goldman, and Bank of America so they can speculate with.  Pretty soon, China will have our entire industrial base, and we will be left with the socially destructive financial oligarchs that Charles Ferguson described in Inside Job.

This is not inevitable. We can fight back. The first thing to do is educate yourself on what is really going on, and on who makes the decisions in America. And who is that? It’s not just the people at the White House and in Congress.

Ratigan postulates it's the Fed. Yesterday Matt Stoller got even more specific and pointed to banksters JP Morgan and Goldman Sachs. And this week the Alliance for American Manufacturing wanted to know why there were no serious discussions of the Chinese currency manipulation that is making a wreckage of the American middle class. The meeting that took place in Boehner's office with Hu may have been "bipartisan" but there was little disagreement on so-called "free" trade, part of the right-wing, corporate orthodoxy that binds Ohio Republicans to Chinese Communists these days. The discussion was of human-rights violations, intellectual-property protections, and China's "one child" policy.

Unfortunately, there was no discussion of "longstanding complaints that the Chinese government keeps its currency low to dominate its trading relationship with the U.S."

The real question is why currency manipulation was never raised in the meeting.

As a diverse group of economists have pointed out, Beijing's ongoing policy of currency undervaluation is one of the key drivers of the growing U.S. trade deficit with China.  A recent EPI study finds that this massive bilateral trade deficit has cost more than 2.4 million jobs since 2001.

Why didn't the Congressional leadership raise the currency issue directly?  What's needed is a strong, consistent message in order to show Beijing that their currency peg, which is in violation of WTO law, must end. 

In the end the Alliance for American Manufacturing said Hu's visit was "very disappointing" and that it did "little to change the underlying dynamic of the dysfunctional U.S.-China economic relationship.  Business deals, while important, are no substitute for firm commitments from China to stop its currency manipulation and to end its illegal subsidies of industry. And they are no substitute for clearly defined consequences if China fails to make progress,: said AAM Executive Director Scott Paul. "I'm afraid that there is very little good news in this for American workers. China has received a bounty of good public relations while avoiding any repercussions for its mercantilism. Once again, China has called our bluff. It is a very disappointing result for workers and businesses that face unfair competition from China." 

But Hu wasn't the only bad news coming out of DC for American workers last week. Reagan devotee Jeffrey Immelt, CEO of General Electric-- which, incidentally has closed 26 factories in the United States since President Obama took office in January 2009-- was asked by Obama to chair his Council on Economic Competitiveness. Basically he's replacing someone who actually is concerned about ordinary American families, Paul Volcker, with another of his favorite corporate vultures.

His appointment adds another corporate insider to the White House orbit, underscoring the White House's efforts to build stronger ties to the business community. Earlier this month, Obama named former commerce secretary and JPMorgan Chase executive William Daley as chief of staff.

Funny enough, the Alliance for American Manufacturing didn't think this was a great idea either. Scott Paul went as far as to call it a "poor choice... There is no swifter way to alienate working class voters than to name an outsourcing CEO to lead your jobs strategy. Yet that's exactly what President Obama is doing." I wondered how Paul Krugman was looking at these developments and in his column yesterday, my suspicions were confirmed.

[I]t appears that President Obama is going to make “competitiveness” his main economic theme. To be fair, he could (and may well) do worse. But this is hackneyed stuff, and involves a fundamental misconception about the nature of our economic problems.

It’s OK to talk about competitiveness when you’re specifically asking whether a country’s exports and import-competing industries have low enough costs to sell stuff in competition with rivals in other countries; measures of relative costs and prices are, in fact, commonly-- and unobjectionably-- referred to as competitiveness indicators.

But the idea that broader economic performance is about being better than other countries at something or other-- that a company country is like a corporation-- is just wrong. I wrote about this at length a long time ago, and everything I said then still holds true.

The hopeful interpretation of Obama’s embrace of the idea that he’s the CEO of America Inc. is that it might help fend off right-wing attacks on government action as a whole, helping him sell the need for public investment of various kinds. On the other hand, as Robert Reich says, this could all too easily turn into a validation of the claim that what’s good for corporations is good for America, which is even less true now than it used to be.

All in all, it’s kind of sad. And the less said about Jeffrey Immelt’s vacuous op-ed, the better.

But, as much as I admire Krugman and Reich, let's give Bernie Sanders the last word and let him tie it all together for is:

“I hope [Immelt] changes his mind and focuses on rebuilding the manufacturing sector here in the United States, not in China, and in the process creates millions of good-paying jobs... For the sake of our manufacturing sector and the collapsing middle class, let’s hope that Mr. Immelt’s appointment by President Obama indicates a transformation in his thinking. It is time for GE and other large and profitable corporations to start investing in America again.”