Saturday, October 5, 2013

Co-Founder of Reaganomics Predicts Economic Collapse

Paul Craig Roberts, the former Assistant Secretary of the Treasury during the Reagan Administration notes in a recent article that the real crisis has always been the offshoring of jobs, not the current debt ceiling debate.

"The real crisis is not the debt ceiling crisis, the real crisis is that job offshoring by US corporations has permanently lowered US tax revenues by shifting what would have been consumer income, US GDP, and tax base to China, India, and other countries where wages and the cost of living are relatively low. On the spending side, twelve years of wars have inflated annual expenditures. The consequence is a wide deficit gap between revenues and expenditures.

Raising the debt limit simply allows the real crisis to continue. More money will be printed with which to purchase more new debt issues needed to close the gap between revenues and expenditures.

On Social Security Roberts says: The Social Security system’s large surplus accumulated over a quarter century was borrowed by the Treasury and spent. In its place are non-marketable Treasury IOUs. Consequently, Social Security is one of the largest creditors to the US government. But cutting Social Security payments also cuts consumer spending or aggregate demand, and sends the economy down further, thus magnifying the deficit/debt problem. Because of the serious decline in the US economy caused by jobs offshoring and financial deregulation, Social Security no longer adds to its surplus. Social Security payments need the supplement to the annual payroll revenues of repayments by the Treasury of the borrowed funds. The only reasons that Social Security is in trouble is that jobs offshoring and wars have constrained the US Treasury’s ability to make good on its debts except by having the Federal Reserve print money. Every job that is sent abroad does not contribute payroll taxes to Social Security and Medicare.

The real crisis is the absence of intelligence among economists and policymakers who told us for 20 years not to worry about the offshoring of US jobs, because we were going to have a “New Economy” with better jobs. Economists and policymakers simply gave away a good chunk of the US economy in order to enhance corporate profits.

One result has been to create in the US the worst distribution of income of all developed countries and of many undeveloped ones. The lack of consumer income growth is why 5 years of massive monetary and fiscal stimulus have not brought economic recovery. In the scheme of things, the enhanced profits are a short-run thing, because by halting the growth in consumer income, jobs offshoring has destroyed the US consumer market.

The real crisis cannot be addressed unless the jobs are brought back home and the wars are stopped. As powerful organized interests oppose any such measures, Congress will pass a new debt ceiling and the real crisis will continue.

Insouciant American economists say that manufacturing is an outmoded source of employment, but Chinese manufacturing employment is almost equal to the total US labor force in all occupations, including waitresses and bartenders and hospital orderlies. China’s economy is growing at a rate of 7.5% in real terms, while Western economies cannot move forward and some are regressing.

In order to appease Wall Street, the most corrupt institution in human history, and to prevent Wall Street-financed takeovers of their corporations, executives destroyed the American consumer market by offshoring American incomes in order to enhance profits by substituting cheap foreign labor for US labor.

Paul Craig Roberts: "In my opinion, the US economy is not salvageable in its present form. At this time, collapse seems the most likely forecast."

From his post, The Social Cost Of Capitalism:

Today there are new social costs brought by globalism. For developed countries, these are unemployment, lost consumer income, tax base, and GDP growth, and rising trade and current account deficits from the offshoring of manufacturing and tradable professional service jobs."

Roberts testified before the US-China Commission and has written many articles saying that the offshoring of high productivity, high value-added jobs in manufacturing and professional services is dismantling the ladders of upward mobility that made the U.S. an opportunity society. In his latest book, The Failure of Laissez Faire Capitalism, he critiques and reformulates large areas of economic theory, and opposes global labor arbitrage.

The video below was posted on May 31, 2013: "From economic turmoil to social dissolution and cultural chaos, it can no longer be denied that the once-opulent West is on the brink of collapse."

A study shows that 1/3 of US Jobs are still prone to offshoring 

Offshoring from Sea to Shining Sea: The year 1979 may very well have been the year when the middle-class in America had first began it's long decent into oblivion. 

Research released today by PwC suggests that within two decades, wages in emerging economies will make up a huge amount of ground, while those in developed countries will only grow slowly.

1 comment:

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