By Peter Morici
2:45 PM EDT, September 7, 2011
America is in crisis.
The new normal is not good enough. The unemployed can't find jobs, the old can't retire and those in between live in constant fear of being tapped on the shoulder and thrust into the abyss.
Property values are lower than a snake's belly, stocks are diving and gold — the "fear asset" — seems the only sound investment.
Thursday, President Barack Obama will address Congress and is expected to propose ideas that only maintain the status quo, or perhaps even make things worse.
Infrastructure spending, payroll tax holidays and extension of unemployment benefits will only replace monies now running out from the $800 billion stimulus package and subsequent initiatives. Job training is the biggest folly; the economy is not creating many decent openings for trainees to fill.
New tax breaks to encourage hiring and investment won't work either because domestic sales are not growing fast enough to create work for new hires at most businesses.
Despite what many people think, by some measures things are actually getting better. Americans are spending and businesses are investing a lot more than they were two years ago. But too much of what they spend is going into higher-priced imported oil and more consumer goods from China.
The $600 billion trade deficit from oil and China create a tax on domestic demand too heavy for the economy to bear. Simply put, dollars that go abroad for gasoline and coffee makers that don't return to buy U.S. exports destroy millions of jobs.
If the trade deficit were cut in half, the economy would grow by some $500 billion and add 5 million new jobs. This is where our efforts should be directed.
Developing U.S. oil and gas, where environmental risks can be managed better than abroad, could slash oil imports in half. Finally labeling Chinese currency manipulation as the protectionism it is — and levying a tax on the conversion of dollars into yuan until China stops manipulating its currency — could slice the trade deficit by some $300 billion.
However, oil and China are not the end of our problems; addressing them is necessary but not sufficient. The marketplace also needs regulations that work — not merely ones that add to the costs of doing business and creating jobs.
The Dodd-Frank financial reforms, signed into law last year ostensibly to protect consumers from the excesses of the financial industry, added costly bureaucracy — but Americans are still abused by credit card companies, while banks continue trading and many have doubled their CEOs' salaries. The only things that have really changed are that banks won't lend to small businesses and savers can't earn much interest on CDs.
"Obamacare" has raised the cost of health to businesses and co-payments on prescriptions. Things have improved for some — more people have health insurance, and drug companies are earning bigger profits and paying CEOs more.
General Motors, Chrysler and the United Auto Workers are rescued, but now GM will outsource the core of future hybrid and electric vehicles — and all electronic accessories in its autos — to Korea's LG. Chrysler is hawking Italy's Fiat 500. (We'll get a lot of growth and jobs out of those.)
The president needs to tell us he will open up American oil and gas reserves to drilling, build out the use of natural gas for vehicles in big cities and heating in rural areas, finally stand up to China, and genuinely clear out all the useless regulations that make no one better off.
He needs to do those things, but Democrats get a lot of support from banks and pharmaceutical executives, unions and America's biggest outsourcers: GM, General Electric and technology companies. It would take Trumanesque courage to stand up to those vested interests and the counterproductive ideas of the professional left at Harvard and Princeton and among Democratic Party activists.
The time is long past due for President Obama to demonstrate he has what it takes to do the job.
Peter Morici is a professor at the University of Maryland's Smith School of Business and is former chief economist at the U.S. International Trade Commission. His email is email@example.com and his Twitter account is http://www.twitter.com/pmorici1.
Copyright © 2014, The Baltimore Sun