Digging a Hole to China

On Tuesday at the AFL-CIO debates in Chicago Congressman Dennis Kucinich showed us why it is important to have a liberal voice in the debates.

While Obama, Hillary and Edwards are always worrying about parsing words and backtracking on positions to try to please the center-right "moderates", Dennis just lets it all hang out and tells it like it is. In doing so he has become the most entertaining part of the debates and has been able to knock a lot of the questions out of the park with his straight forward, non-nonsense attitude about why America has as many issues as it does. He was the only candidate that rightly wants to withdraw from NAFTA (North American Free Trade Agreement) and the WTO (World Trade Organization). Both have given corporations free reign to take our jobs elsewhere and have given America very little in return. The agreements for lack of a better word, suck. They do nothing for America but have strengthened the economies of our trade partners considerably.

Take our situation with China. The Bush Administration has run up ridiculous debt and our deficit that was in a surplus when Bill Clinton left office is now at record highs. Common sense says that when you start two wars and need to pay for them you don't cut taxes on the rich, expand or protect loopholes that allow corporations to evade paying their taxes and you certainly don't give financial rewards to corporations that outsource American jobs to countries like China and India. Less jobs here means less taxpayers and less taxes means we can't pay our debt.

But Bush has no common sense and we're in an incredible hole now and China happens to be the country reaping the rewards. We have little to no negotiating leverage when we owe them as much as we do and this, coupled with them tinkering with the value of their currency, has put us in a very deep hole.

From the New York Times:

A declining dollar is a source of inflationary pressure because it can boost the cost of imports. So if the Fed tried to rev up the economy with a rate cut at the same time the dollar is falling, it could end up provoking even more inflation. That would be a drag on economic growth rather than a boost. In an extreme case, it could result in a toxic combination of weak growth and high prices that is a central banker’s nightmare.

How did the Fed lose room to maneuver? The answer is rooted in the Bush administration’s misguided economic policies.

Over the last several years, America’s imbalances in trade and other global transactions have worsened dramatically, requiring the United States to borrow billions of dollars a day from abroad just to balance its books.

The only lasting way to fix the imbalances — and reduce that borrowing — is to increase America’s savings. But the administration has steadfastly rejected that responsible approach since it would require rolling back excessive tax cuts and engaging in government-led health care reform to rein in looming crushing costs — both, anathema to President Bush. It would also require revamping the nation’s tax incentives so that they create new savings by typical families, instead of new shelters for the existing wealth of affluent families — another nonstarter for this White House.

Check out Dennis Kucinich's response to our trade problems with China. He tears the house down with his hilarious take on where we are with them. While it's a great comedic zinger it's sadly 100% true.



-Rp