On August 3, American
Thinker published "Why
is Trump fighting the trade war?," which contained a chart showing the
devastating flattening of capital spending in the U.S. following the 2001
accession of China to the World Trade Organization (WTO).
We thought readers would be interested in seeing the two
additional charts shown here. The first chart below the capital
spending chart is for Industrial Production. This is an important
series in the economy. You can see that as with capital spending, Industrial
Production flattened dramatically after 2001. Although technically
it has increased very, very modestly over the last 18 years, we can say that
substantively, it has been flat during this period in a pattern similar to
capital spending. This
is a dangerous condition for the U.S. economy.
In some ways, perhaps the
most interesting chart of the three is the last one, showing the Labor
Participation Rate. Drop-in
labor participation, particularly during the Obama administration, was to some
extent a mystery. There were various vague suggestions about unnamed
policies that were causing this effect, but essentially, there was no real
explanation for it. For consistency, the Labor Participation Rate is
shown since 1968, but it has been increasing since 1949 due to various factors,
not the least of which being the demographics of women entering the workforce
over the last 50 years.
Although cause and effect can never be definitively stated in
nonscientific phenomena, we can conclude that the drop in the Labor
Participation Rate is due to the flatness in capital spending. That
is, capital was not being invested in the economy sufficient to create jobs at
the wage level that American workers are used to. This is also
reflected in the flatness of Industrial Production.
The drop in the Labor Participation Rate has improved the reported
unemployment rate over these years because it takes people so discouraged that
they are no longer looking for work out of that calculation. If a
worker has stopped looking for work, he is counted as no longer in the
workforce. That does not alter the devastation to communities caused
by widespread non-working.
The number of jobs lost shown on the chart is roughly 11 million,
or approximately 7% of the workforce. If those jobs were added back
as in the workforce, the unemployment rate would be increased by an addition to
the reported number of 7%.
This is not
ruinous...yet. Tremendous damage has been done to those people and
communities affected. This
was part of the constituency that Trump was addressing during the
campaign. However, during this period, the GDP has chugged along to
record levels, as we are used to it doing, albeit at slow growth during the
Obama administration.
What Trump is doing is attacking (a) the trend and
(b) the causes of the trend before it's any more damaging
– i.e., while America can still charge forward at full power.
Without President Trump's
dramatic and forceful intervention, these three charts together are a death
warrant for a high-wage vigorous America. President Trump is the
only person in public life who understands this problem. He is so
far ahead of his colleagues that they consider him a figure of fun, someone who
does not understand the benefits of "free trade," which is an
ignorant formulation in light of Chinese mercantilism and of other trade
restrictions that we have accepted since World War II but are no longer
appropriate.
https://www.americanthinker.com/blog/2018/08/why_is_trump_fighting_the_trade_war_part_ii.html