Nicholsclan.com : a dimension of mind...

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Thanks to Brian who took the time to respond to my 2/26 free trade opinion. Several of his comments illustrated that my article wasn't terribly clear. I did edit it a bit since, and hopefully my points come across better now. However, the most interesting thing to me was his question, "Who said the trade deficit is bad?" He provided the following links which are certainly worthy of a good read.

The Cato Institute offers a not terribly balanced look at trade deficits. Keep in mind that the Cato Institute is regarded as a "libertarian" quasi-academic think-tank which acts as a mouthpiece for the globalism, corporatism, and neoliberalism of its corporate and conservative funders. I've included it in the spirit of offering the other side of the argument, but do wonder if Brian was just yanking my chain a bit.

By far, the more interesting discussion is here. I will warn you up front that this is a fairly heavy read, but I do think it's worth 30 minutes of your time to study it. I learned quite a bit. After studying this, I do concede that trade imbalance is not the holistic indicator I perceived it to be. It is inexorably interdependent on GDP, domestic spending, and debt. However, in aggregate I remain steadfast that we are headed to economic disaster.

The essence of the above lesson is that trade deficits can be good things where the foreign invested or borrowed capital is being used to build infrastructure capability which ultimately is realized as GDP growth. Where GDP growth fails to keep pace with the trade deficits we create a future state where our standard of living must fall to pay for our extravagances now. To put this on a personal scale, running a trade deficit is similar to you taking out a loan from the bank. If you use that loan to start a successful business, the money earned ultimately pays for the loan and makes it a worthwhile investment. If the loan money is used to take a wild vacation, then you ultimately must pay off the loan in the future by redirecting income from your standard of living to pay the debt.

So how does this manifest itself in the U.S. ? In 2003, GDP was up 4.1%. Consumer spending was up 3.1%. Meanwhile the trade deficit rose by 17.1% The net-net of this is that our debt to and/or ownership by foreign investors increased in 2003. So the only question is, are we using that capital to increase our future GDP? If yes, then this could be considered healthy. If not, we are creating an inter-generational debt bomb which will detonate in the face of our children. We would be dooming them to a lower standard of living than we are enjoying, because they will be paying for our fiduciary sins.

So what are we spending our money on? Sending jobs overseas (as we've discussed before) increases our trade deficit. At present we are sending service sector jobs abroad, and they don't really create GDP value. It can be argued that the lower cost effectively increases profit domestically, but I contend the net loss of jobs and drain on social welfare programs outweighs that benefit. Goods manufactured abroad by U.S. companies count as imports on our side of the equation. Granted, the debt side of importing is somewhat offset by the profit flow back to the U.S. corporate parent. So this is a lesser-evil import than one wholly owned by a foreign company. But still an import.

What about investment in this country? The government is mounting record debt. Is that being used to create/nurture future wealth? Most of the incremental debt is going toward military or security applications and social welfare. Neither of those contribute to GDP. Further, the relaxation of environmental regulations create the possibility that future generations will need to clean up the mess. Again, no value creation there.

Relative currency values also play in this. While a weaker dollar contributes to the ability of U.S. companies to export products (they sell for cheaper abroad), it also lessens the value of foreign investment in U.S. assets and decreases the relative value of domestic investments. They way I read this, if you are running a trade surplus, then you want a weak dollar. Trade deficits are best complimented by a strong dollar. And the value of the dollar is at record lows.

I encourage you to read the tutorial and draw your own conclusions. And I'd love you to share them. For me, I remain on the same page.

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The only problem I really have with this is that it was done as a parody. If policies allowing distinctions based on race exist, then being Caucasian is as valid a criteria as being Black, Hispanic, or Native American. I'm certainly not the first person to note the irony that white Christian males are the only group which can be openly discriminated against without fear of repercussion.

Greg Mankiw strikes again.

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Okay, back into the "free trade" fray again. The Republicans and Democrats have entered into what is beginning to sound like a Miller Lite beer commercial. One side shouts "free trade" and the other shouts "more sanctions". And both are missing the point.

Free trade or open markets or pure capitalism works fine in a unified economy. The market seeks it's own level across state boundaries in the U.S. or even across country boundaries within the European Union. This works effectively because in both cases the economics of the countries/states in question are very similar and/or share a common currency. The much maligned NAFTA agreement in North America is workable between the U.S. and Canada. Even though they don't share a currency, the economies are similar, the standard of living is similar, and the currencies tend to both track each other. It is far more destructive to the U.S. economy when considering Mexico as that country is a whole economic world away. Free and open trade with Mexico tends to be one sided. We will export jobs there and import goods from there. Both of which are advantageous to U.S. companies and to the Mexican economy. But while there is value in this equation on both sides of the border, it is not as balanced as it appears. While U.S. companies may profit, the U.S. economy (pronounced "population") does not - at least not in aggregate. The same situation exits with other 3rd world economies like China, India, Russia, etc.

On the flip, punitive sanctions aren't really productive either. In the same way that the argument shouldn't be about whether or not to raise taxes, but rather how to reduce the deficit. The argument should be about how to reduce the trade deficit. Free and open trade will only exacerbate the trade deficit . Sanctions reduce the deficit by reducing the flow across the border. But while that may alter the net deficit, it doesn't change the import/export ratio. It's a bit like noticing your household expenditures are $1000 dollars every month and your income is $500. While reducing income and expenses by half means you are only losing $250/month instead of $500. The ratio is unchanged. You're still on a death spiral.

Politicians are ignoring the root issues because they are hard to solve and don't resonate well with the under-educated and under-concerned people they think are listening. "Lower taxes" and "More jobs" are themes which resonate directly to the lives of constituents. "Trade deficits" don't attract the same attention. This doesn't change the reality that we live in a complex world. If we only address issues simple enough to be understood in 15 second sound bites, we are doomed. Somehow, we either need to raise politics above the level of our least common intellectual denominator, or convince the politicians we are not really as dumb as they think we are.

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Well, it's good to see technological innovation is alive and well. Don't overlook the suggested application for this product of "driving". While you're at it, consider that if it's worth an extra $10/six-pack to have a beer, perhaps you should really consider spending the money on a good 12-step program.

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I'd like to take a moment to thank G.W. for a little breakfast banter he caused. As I'm thumbing through the paper this morning my older son Tyler was reading the front page headlines across the room.

"Dad, what's a gay marriage?"

Mind racing... weeding out the inappropriate and sarcastic comments... "Well, it's when two people of the same sex get married. Like a guy to another guy."

"Oh," he replies. Seems like ithe issue's just gonna lie there. Maybe that's best.

Then little brother Doug pops up, "Cause some guys like boys better than girls?"

Hmmm... "Well, yeah. Some people's brains are just wired differently so they tend to want to date other men or other women rather than the opposite sex."

"Oh," he replies. "So what's wrong with that?"

Tyler, still reading the headline, contributes, "Bush says it threatens civilization."

And Doug moves in for the kill shot... "Yeah, well that's why we'd rather vote for a house plant than Bush in the next election. He's pretty dumb."

Normally I'd point out that we don't call people "dumb", but hey, if the shoe fits...

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Hmmm... if this is legal, then isn't it a rather large loophole in the solicitation/prostitution laws?

If it's legal to auction one's virginity, then why would it be less legal to auction the opportunity to be one's 253 lover this year? Could one auction their underwear and claim any sex that came after it was removed was just consenual fun? The business opportunities could be large here. One could start a pizza shop where $200 pizzas were delivered by drivers with loose morals and liberated values. Hey, one cannot be responsible for their employees all the time.

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It's good to know that someone has more time on their hands than me. Our inside mole Chuck reports, "20.813 is my personal best thus far - and the office best for the moment is 24.315." He also reports that productivity has come to a grinding halt.

My work here is done...

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I've been in places where I was afraid to order draft beer. Can't say I've ever been anywhere I was afraid to order cream in my coffee...

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Okay, do these guys know about this?

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Well, I've lasted 15.512 seconds. And you?

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Apparently, sometimes "a dollar and a dream" are not quite sufficient.

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Every day's a good day when you can avoid a "zip-related mishap"

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So I'm leaving work tonight in the usual post cubicle dwelling funk and aimlessly thinking I should change jobs, careers, or at least my socks when I get home. By-and-by, I stroll by this sort of lime green Ford Escort wagon which was salt encrusted up to the roofline. By itself, just another uninteresting and filthy victim of the endless northeastern winter - excepting one thing. The cross bars of the roof rack of this otherwise nondescript wagon had been removed. And over the rear hatch was mounted this wonderfully aggressive double aluminum wing. On the odd chance that it ever attained enough speed for the wing to actually function, it would promptly apply force behind the rear wheels. With Archimedian irony, the force would lift the weight off the front drive wheels causing them to spin out. The likely result being the tragic death of the little Escort that could. But hey, at least it can be said that this was an Escort with ambition (kinda like Heidi Fleiss).

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You know how sometimes you don't realize you can't live without something until after you see it?

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It's not often I get a request for a topic. Hell, it's not often I even get comments on this thing, so it's refreshing just to know someone's reading! Anyway, Chuck yearns for me to opine about NYS's attempt to collect sales tax on Internet and Indian reservation purchases by putting a place for it on the income tax form. Chuck has odd yearnings, but that's probably a different blog entry altogether.

I have mixed emotions on NY's desperate attempt to collect these taxes. On the one hand, by the law, they are entitled to collect this tax. There is precedent for requiring the buyer to pay the tax directly to the state. This practice has gone on for years at the DMV when you register a car purchased via a private sale. On the flip, the mechanism by which they are collecting the tax is a bit after-the-fact, and that makes it hard to swallow. But income taxes are always trued up annually and that's pretty after the fact. Again, lots of precedent.

I think the problem I have with this tax collection is two-fold. First, sales and income tax have always been separate taxes. I'm not sure I like the idea that my taxes are cross pollinating. It seems only a matter of time before someone reasons that income tax is really just a purchase of government services and therefore subject to sales tax. And hey, sales tax is really just a purchase of municipal services, so it should be subject to sales tax, which of course is also taxable. At this rate, only math majors will be able to pay their taxes accurately.

And speaking of accuracy, that brings me to point two. I do applaud the state giving us an out. Trying to accurately come up with the sales tax actually due would be a monumental pain in the butt. So they provided a handy alternative table. Based on your income, it says how much back due sales tax you 'probably' owe. Then all the talk radio shows and your mother tell you that putting a $0 in this slot is just begging for an audit and the next thing you know you are signing a form that swears you owe exactly as much back tax as the table says you probably do. This is a bad precedent. Sure, it's a low number this year so they dupe you into basing your out of state purchases on your income, despite any evidence that those two things are related. But I'm nervous. How long will it be before the IRS suggests that my income should be based on my height for tax purposes. I'm tall, that doesn't bode well for where I'll fall on that table.

But I'm not worried. My parents will keep me apprised. After all, they are retired and have ample time to listen to all the talk radio shows which will ultimately solve all these problems by blaming them on Bill Clinton.

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Well, as long as there's "a mounting prosperity that will reach every corner of America" then I suppose we have nothing to worry about.

There is a reality to "Tinkerbell Economics". The economy is buoyed or sunk by the collective belief of everyone with a stake in it. In other words, if you (a very plural "you") believe you can fly, you will. Together we head towards the second star to the right and all is right with our checkbooks. Pixie dust notwithstanding, Wendy had reason to believe she could fly based on Tink and Peter's flitting about the room without seeming swayed by gravity. Had Peter merely said, "Trust me, just jump out the window," it would have been a very different story book.

The problem seems to be that while GW is convinced he's Tinkerbell (if only I could share the mental visual of him in a tu-tu), no one has seen him fly. Therefore, there is no well founded reason to believe we will fly. His policies fly - but only in the face of all conventional economic wisdom. That's not much help. There is no precedent for continued job loss in this country. We don't have a reason to believe the slide will stop. There isn't even any more than a serendipitous connection between tax cuts and prosperity. No one understands the mechanism. Nor does anyone understand any way in which the enormous deficit will magically begin to disappear. All we have is Tinkerbell's word.

We're missing a larger point here. The U.S., like any country, has a vast spectrum of people in it. We have some with bright creative minds. We have some with strong backs. We have some with neither. Any sufficiently large population will span the gamut. The result being that we either need a way to gainfully employ the whole spectrum, or a plan to support the portion we can't.

The technological capability of the world is getting to the point where less and less work is geographically constrained. Over time, this gets worse. Transportation made offshore manufacturing viable. The internet allowed offshoring of technical jobs. Virtual reality and remote sensing will replace a lot of the service sector jobs. At it's pinnacle, it won't matter where most work gets done. So, it is reasoned, why not have it done where labor is the cheapest? It's a hard point to argue, but the transition will be torturous.

The USA has enacted social and labor programs to ensure a reasonable standard of living for most everyone. It is these labor laws and social welfare programs which have elevated the USA to one of the greatest standards of living on the planet. It is these same programs which make it comparatively expensive to employ people here. Now, in an effort to boost bottom lines and keep products cheap, companies move jobs offshore. The jobs they move are the commoditized skills. These are not necessarily low skilled jobs, just jobs ordinary people have. Not the jobs of the geniuses, the entrepreneurs, the creatives, but the jobs of the everyman. As an aside, at the other extreme, we import illegal workers to do the jobs we can't afford to pay American wages for. When I was a boy, 7% of agriculture workers were illegal immigrants. That number is now 55%. The net result is that we are driving the jobs of middle America to cheaper labor. And in both the illegal immigrant and offshore case, that cheap labor is not enjoying the benefits of workman's compensation, medical insurance, pension plans, social security, welfare, unemployment insurance, Medicare/Medicaid, and is not protected by union and government watchdogs. By our standards, those workers are exploited.

The death spiral comes as we make larger and larger portions of our population unemployed. To keep up our social welfare programs, we must increase the burden on the remaining employed to support the society as a whole. Alternatively (and apparently the current plan), we can drive ourselves into crushing debt. Further, the unemployed have less and less income to spend on all the goods and services we are importing, regardless of how cheap they are. This decreases corporate profits which further erodes the remaining domestic salaries as well as the tax base. That flushing sound is your future.

Ultimately, we probably have to give up on some of the social and labor programs or crush our own economy. We can do this voluntarily now, or we can wait until the economy collapses. At that point we'll be forced to abandon the programs, and we will likely thrust ourselves back into the late 19th century. We'll have low-skilled workers operating in near slave like conditions as they will be starving and willing to do most anything for even a meager job. Meanwhile corporate barons and the intellectual/creative elite sit and reap the rewards. Perhaps at that point India and China will begin outsourcing jobs to the USA. But probably not. We are heading toward a normalization or leveling of the world economy. The 3rd world will rise. We will fall. We'll meet somewhere in the middle. It may yo-yo a bit depending on how bad we tank things before we come to grips with this inevitable future. But the economy will seek it's own level. Of course once it does, then we can grow as a world economy. The rising tide will again float all boats. Right now, the new water is filling the empty basins and draining the reservoirs.

The destination probably can't, and shouldn't be changed. But we can make the boat trip Twainian or Hitchcockian depending on how much we ride the currents and seek the calm water vs. how much we flail against nature, damn her forces, and deny that we are in motion. This isn't Neverland. It's time to grow up.

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Whatever happens, do not share this with my kids...

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Blood in the water?

Let me see if I have this right. Bush said on Sunday that he relied on flawed assumptions and inaccurate information in launching the war on Iraq, but denies having intentionally misled the American people. Now just last week, CIA director George Tenet said that he never claimed Saddam was a grave and gathering threat. Apparently Bush agrees as afterwards he stated for the record that Tenet's job is secure.

So our primary intelligence agency didn't make the assessment that Saddam was an imminent danger. The Commander-in-Chief didn't make that assessment either. After all, he admits he was duped - an innocent victim of bad information. Which leaves me to wonder just who the hell is making these assessments. While we just launched an investigation into the intelligence failure, I fear they are going to focus on the wrong thing.

There is a key and substantive difference between "data" and "information". One being the conclusions you draw from the other. From everything I read, the question the commission will examine is why we didn't have better data. While better data would have helped, it's increasingly clear that the real failure here was the analysis of the data we did have. That's where the focus should be. Why was that analysis so bad? And who is responsible for that? Who actually concluded that based on the data, Saddam was a grave and gathering threat?

Bush is still claiming that it's all good though as Saddam was a bad man. Sure he was - nobody's gonna argue that. But a preemptive strike against an imminent threat to U.S. security certainly requires a higher standard than that. It's pretty clear that there never would have been support for a preemptive war based on the "bad man" standard.

So is Bush a liar who pushed a war knowing full well he lacked the grounds? Or is he a stooge who lacked the wisdom to make his own analysis and led the country to war based on trusting the advice of some unseen advisors? I'm not sure I care. Neither makes me trust him. It's time he was help accountable. For the first time since his term began, his Teflon coating has a few chips in it. Maybe we aren't as stupid as he thinks we are after all.

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It's song time again. It's good stress therapy for me to write this stuff now and again. Hopefully you'll know the tune. It's an oldie, but a classic.


16 Years (to the tune of "16 Tons" by Tennessee Ernie Ford)
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Some people say a man is made outta fluff,
A Kodak man's made outta expensive stuff,
Expensive stuff we can do without,
Holler "Dead Man Walkin'" when you see him about.

You put in sixteen years, what do you get?
They can do it cheaper in Manila, I bet,
My time it's a comin' I can hear the tick-tock,
Oh why'd I sell my soul to the big yellow box?

I was hired years ago when the cash cow felt fine,
I worked 8-5 and I toed the line,
Sixteen years later I was out on the street,
And the boss man said "Son, you'll land on your feet."

You put in sixteen years, what do you get?
They can do it cheaper in India, I bet,
My time it's a comin' I can hear the tick-tock,
Oh why'd I sell my soul to the big yellow box?

I was crunchin' on a project, they said had to get done,
Gotta turn the corner 'fore we have any fun,
Digital's a comin' and we gotta cut costs,
Didn't think mine was the job that'd be lost.

You put in sixteen years, what do you get?
They can do it cheaper in Canada, I bet,
My time it's a comin' I can hear the tick-tock,
Oh why'd I sell my soul to the big yellow box?

If you see outsourcers comin', look out for the finks,
A lotta men didn't, all got slips that was pink,
They can do it better, is the daily pill,
If today's don't a-get you, then tomorrow's will.

You put in sixteen years, what do you get?
They can do it cheaper in Manila, I bet,
My time it's a comin' I can hear the tick-tock,
Oh why'd I sell my soul to the big yellow box?

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In response to public outrage over the lack of respect for the law banning cell phone use while driving, which in itself was a response to public outrage... the State of New York has set up a toll-free hotline people can use to report motorists who are talking on cell phones.

Presumably, this hotline is intended to be used by pedestrians who observe illegal cell phone use as cars pass by. Certainly, the state is not suggesting that drivers pick up their cell phones to report other drivers who are using theirs...

Yeah... this should work.

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I'm obviously missing something. Gay marriage is lining up to be the "abortion debate" topic of the coming election. It is consuming an ever increasing amount of effort and attention from politicians. There must be a danger here I'm missing. Either that, or we already solved all the tough social problems and no one told me.

You see, at least with abortion I understand the importance of the issue. There is a life or death decision in the balance, and the debate rages over where to draw the line. Life and death is a topic worthy of debate and attention. But what's the issue with homosexuals marrying? Who gets hurt? Who's quality of life is diminished? Who's paying the bill? I've examined this from a number of angles, and I'm lost.

These are the reasons I can think of why the law might want to oppose gay marriages, and why I think that reason doesn't hold water:

Marriage entitles you to certain economic/legal benefits in this country. The implication is that more married couples would be an economic drain or otherwise a drain on societal resources. However, the very people most opposed to gay marriage just created a $1.5B fund to incent more and healthier (heterosexual) marriages. So the clear message is that either marriage is good for the economy and society, or that it's a burden we are dedicated if not driven to bearing.

Gay marriage erodes the social fabric by destroying the classic nuclear family. Seriously? Has anyone looked at the census or even around the neighborhood? Most families today are not Mom, Dad, and Jr. There are step parents, single parents, grandparents, couples committed to not having children, and countless committed relationships which share a residence without the benefit of marriage. How would gay marriage be more damaging than all of this? Which in itself pre-supposes that our current state would be damaging. It doesn't fit with our Norman Rockwell view of the world, but there is ample precedent for societies organizing themselves around social structures different from the nuclear family. There's nothing magic about that.

If we make it legal, then people will think it's okay to be gay. Does anyone really think there will be a sudden rush of people lining up to register as gay as soon as it's "legal"? Besides, it's legal to be gay already. There are lots of laws protecting your right to be gay. Popular culture is even beginning to suggest that it might be trendy or cool to be gay. Hell, I can now be metrosexual which is supposed to be just like gay without having to actually kiss a boy.

It's a sin against God. First, we don't live in a theocracy, so nobody's god gets a say here. Second, this goes back to asserting that gay is a choice. Otherwise, if this were genetic disposition, we'd have to allow for the infallible God to have created flawed human beings. That would be bad. So it has to be a choice. I swear, anyone who actually believes this is a choice has never really known anyone who was gay. Perhaps we should start some sort of a gay mentors club where an actual gay person could share their intimate emotions with a narrow-minded Christian. But that wouldn't be fair to the gays.

If anyone has any better arguments, I'd love to hear them. In the meantime, I'm forced to think this is all just political posturing to pander to voters who are too stupid to realize this is not really a political issue.

And another thing... should anyone ever decide to write an amendment defining marriage as heterosexual, I'm curious how they'll tackle the issue of defining gender. Sure, it seems clear cut, but there's more grey out there than many realize or want to deal with. If I have a sex change and become a woman, I will still be genetically a man (and a disturbing looking woman, but that's not my point). Who am I allowed to marry? If I married a woman it would look like a lesbian relationship to all the neighbors, but it would be genetically heterosexual. If I married a man, it would be the opposite. There are many XY females out there. People who are genetically male, but have been raised and appear to be female. Who can they marry? Possession of ovaries or testicles doesn't buy you much unless ovarian cancer victims will get annulments in the operating room. Ability to procreate means any man can get an annulment with a vasectomy. The bottom line is that any law will have so much grey area as to be impossible to enforce outside the mainstream. In fact, some marriages today would doubtless be overturned. I've seen articles on sex change recipients who've gone on to marry their same genetic sex.

I'm inclined to think that this is one of those things which is enormous in the headlines, but small in reality. Let's say we allow it and let the news coverage of the first few marriages to fade. It's probably no more likely a gay couple will move in next door in the future than it is right now. They exist as couples now. They own houses together now. They probably don't live next to you now. Personally, they're welcome in my neighborhood anytime.

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But they never really address why seeing an 80 year old breast is important to the dramatic content of the show. Personally I'm skeptical. Although I suppose that the people who are concerned about America's fixation on beauty standards based on 20-something supermodels should be glad we are getting an ample supply of comparatively seasoned breasts to choose from on TV.

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Damn! I still think we should let 'em stay. Anyone who can get a vintage Buick to float has talents we can use.

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Who knew we had a state muffin?

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While I'm not generally a fan of unregulated immigration, if these guys make it, we should keep 'em. Hell, they can probably get their own show on TLC.