Former GE Chairman and CEO Jack Welch was mightily upset last Friday when the latest job numbers from the Bureau of Labor Statistics (BLS) showed unemployment falling from 8.1 percent to 7.8 percent.
This was the first time it had fallen below 8 percent since 2009. Coming just in the wake of Wednesday's election campaign debate with Republican candidate Mitt Romney, this report would be helpful to President Obama's reelection bid by mitigating some of the political damage done by his poor debate performance. Apparently a Romney supporter, Welch dismayed by Obama's good luck. In fact, he wanted the public to believe that luck had had nothing to do with the numbers. So he turned to Twitter to arouse public suspicion.
I know it's hard to imagine a macho guy like Welch tweeting, but that was the fastest way for him to jump into the fray with the following message: "Unbelievable job numbers. These Chicago guys will do anything. Can't debate so change numbers."
I defy you to interpret that in any way except as a charge that the White House had intervened with the BLS and directed it to cook the numbers in such a way as to be favorable to the President's reelection bid. In other words, Jack was suggesting that Obama, the White House staff, and the BLS are all corrupt and conniving. If such a suggestion could be substantiated, it would be grounds for impeachment of the president and abolition of the BLS and perhaps of the whole Department of Labor.
But, of course, it couldn't be substantiated. I watched Jack dance around that problem in an interview with Chris Matthews on Friday night. Chris asked him if he had any evidence beyond his own suspicions and speculation of White House interference with the normal practice and procedures of the BLS or of any change in the normal methods and practices for calculating the unemployment statistics. "No" and "no" was the response. Chris further asked him if he was accusing anyone of improper interference and if so who. Jack squirmed and shifted his position. "No", he wasn't pointing the finger at any particular individual he said. Rather, he was just raising questions. Didn't it seem awfully coincidental that these favorable numbers would come out at just the right moment to help the president, he asked.
He added that the BLS methodology is based on myriad assumptions and that it actually uses two different methods for calculation that sometimes appear to produce contradictory results. So, how, he asked, can anyone really know what the true numbers are.
That the calculations are based on a variety of assumptions and that they are complex and that different survey techniques often produce different numbers is all true. But that's not really the issue. Everyone knows about these vicissitudes. The real question is whether or not the usual assumptions and techniques were changed in some way so as to influence the latest report in a pro Obama direction. When Chris again asked Jack if he had any evidence of such a change in technique, Jack danced and squirmed again. "No," , but I'm just raising questions" he said.
Maybe Jack's suspicions arise from his own experience with reporting good and bad numbers. His main claim to fame, after all, is that he produced a string of 80 quarters of uninterrupted increases in earnings for GE. This no doubt reflected his genius as a corporate manager, but it also reflected use of off balance sheet vehicles such as those used by Enron before its bankruptcy and other creative accounting techniques linked to GE Capital, the company's finance arm. So, maybe from this experience Jack thinks that happy coincidences just don't occur.
But this is where the difference between running a company and running the United States is so great. The employees at GE and GE Capital were all subject to Jack's whim. Not so the bureaucrats at BLS who as members of the Civil Service have job protection and cannot be fired by the President. They are in a position to defy any illegal directive from the White House and they don't take their thinking on methodology and practices from Presidential whims.
When Jack uses cynical innuendo to suggest conspiracy and corruption at the heart of our political system, he not only undermines a president whom he obviously doesn't like. He undermines public trust in the system itself.
If he has real evidence of such corruption, he should demonstrate it immediately. If he doesn't have such evidence, the not only owes the president an apology. He owes the American people one as well.
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Romney won the debate, but in addition to Obama, it was the country that lost.
Romney had more energy, spoke more fluently, had better zingers, was more focused, seemed to have a better understanding of the issues and a better grasp of facts, showed more empathy with the voters, and demonstrated a better sense of humor. Obama looked and acted as if he really wanted to be someplace else -- maybe celebrating his wedding anniversary. His delivery was hesitant and halting. He got bogged down in minutiae, never hit any of Romney's weak points, presented no compelling vision for a second term, and made claims that could easily be shown to be factually fuzzy.
But how could we have both presidential candidates spend an hour talking about the economy and job creation without mentioning the loss of U.S. international competitiveness, the continuing chronic U.S. trade deficit, the off-shoring of U.S. jobs and technology, the low rate of U.S. investment compared to countries like China and Germany, and the abysmal state of U.S. infrastructure compared to other leading countries?. How could there be a discussion of the economy without any questions about national priorities and without any comment on the impact of America's role as the international hegemon and provider of global security on its ability to keep delivering the American dream?
The statistics show very clearly that the United States has been suffering loss of competitiveness and stagnation and even decline of living standards for a very long time. Insanity has sometimes been defined as continuing to act in a particular way while expecting a different result. Neither of these candidates showed any awareness of the deep underlying currents that continue to erode the country's productive capabilities. Despite the sound and fury, the differences between the were very small. Romney said he wouldn't raise tax rates on the wealthy while Obama said he'd move the rate on the rich from 35 to 40 percent. Big deal. I can remember when it was 90 percent and the rich cheered when Ronald Reagan got their rate reduced to 50 percent. Neither candidate showed any signs of wanting to adopt a completely new game plan for America, of wanting, for example, to make economic competitiveness the nation's top priority in place of military dominance or of wanting to develop strategic economic policies in parallel with geo-political strategies.
In short, both are playing essentially the same old game while expecting and predicting that they will produce new and different results. They won't. Regardless of which one is eventually elected, there is unlikely to be any substantial change in policies or results. So the country will just continue on with its present insane and unsustainable priorities and policies.
Where is Ross Perot when we need him?
J. DAVID AKE/AFP/Getty Images
As the U.S. Presidential election campaign enters its final stages, both candidates are being criticized in the media for "bashing" China.
This is in response to Obama administration filings of anti-subsidy complaints against China with the World Trade Organization (WTO) and to Governor Romney's strong criticism of Beijing's currency manipulation that undervalues its yuan (or RMB) as a way of subsidizing exports and acting as a tariff on imports.
The best example is the Chicago Tribune. Recently, it flatly said that both candidates are "bashing" China and noted that "attacking China's export-subsidy machine is guaranteed to win applause at campaign stops in Ohio and other Midwest industrial swing states, where resentment of Chinese competition in manufacturing runs deep."
Now, from the tone of this, you'd expect that China is completely innocent of any trade rule violations and that the candidates are unreasonably and cynically beating on it as a scapegoat for the off-shoring, layoffs, and unemployment that have all skyrocketed in the mid-west over the past five years. Indeed, you might even think the candidates are in some measure motivated in their critique by racism. After all, the terms "bash" and "bashing" imply anger, rage, violent emotion, and unreasonable hatred. If someone is a critic, he is legitimate, but a "basher" is emotional and unreasonable. The terms are usually applied to characterize criticism of Japan or China but are rarely if ever used with regard to non-Asian nations. When was the last time you read about "Germany bashing"? So the implied charge in the case of one labeled a "China basher" is that he/she is a racist.
Thus, the continuation of the Tribune's commentary was surprising. It acknowledged that "China's efforts to promote its export sector with cash grants, below-market loans, preferential tax treatment and free use of government-controlled property make a worthy target. " In other words, some of China's policies are indeed problematic. In fact, the Tribune went on to note that the sense of a need to create a "level playing field" with China "has a basis in reality." It added that subsidies and regulations in a number of areas along with the power of state owned enterprises has prevented U.S. and other foreign companies from taking the lead in a wide range of Chinese markets. It further noted that theft of intellectual property in China, and China's policy of keeping the yuan weak are enormously problematic.
So the Tribune appears largely to agree that China is doing all the things of which the two candidates have complained and against which the administration has filed complaints with the WTO. But if it agrees with them, why is the Tribune effectively pasting the racist label on the candidates?
In justification of its position, the Tribune makes four points that constitute the orthodox free trade case. First, it argues that even though it might help workers, any restriction or sanction on the free flow of Chinese goods into the U.S. market would be harmful to U.S. consumers. Second, it holds that the activities of getting imports from China unloaded, shipped, displayed, advertised, and sold create new U.S. jobs in place of the jobs that might be lost as a result of the displacement of U.S. produced goods by imports from China. Third, it asserts that any kind of trade sanction could lead to a ruinous trade war that could damage everyone, and fourth, it emphasizes that rather than trying to crack down on China's questionable policies and practices, the U.S. government should focus on persuading the Chinese fully to open their markets.
The difficulty with these points, often repeated by orthodox neo-classical economic commentators, is that they are superficial, internally inconsistent, and at odds with the realities of the trading world. Take the matter of possible harm to consumers arising from any increase in the prices of goods resulting from some restriction on imports. This ignores a couple of important facts. One is that most consumers are also workers. Cheap imports are of little consolation if they have lost their jobs and income. Lost jobs put downward pressure on all wages, not just those in the particular industries that suffer from import penetration. Of course, the exception to this is a situation of full employment which is assumed by the usual econometric models and writers like those of the Tribune. But full employment is not the normal circumstance for most economies. Certainly it is not now the circumstance of the U.S. economy and it is most certainly not true of the economy of the city where the Tribune resides -- Chicago. In situations of high unemployment, the loss of jobs and general downward pressure on wages may far exceed the savings to consumers of slightly lower import prices.
The notion that imports create unloading, shipping, and marketing jobs is also misleading. Think about it this way. Toyota makes a car in Japan and ships it in a Japanese vessel to San Francisco where it is unloaded by American longshoremen and driven by American truckers to a showroom in an American city where it is advertised, marketed, sold, and serviced by Americans. So there certainly are a number of American jobs associated with this import from Japan.
But now suppose that Toyota makes a car in Tennessee with parts made in America and with the assembly done by Americans. Then the car is driven by an American trucker to an American showroom where it is marketed, serviced, sold, and advertised by Americans. In this second case, more U.S. jobs are created than in the first case. Why? Because the vast bulk of the selling, overland shipping, marketing, and servicing has to be done in the United States whether the product is made there or imported. So the truth is that imports do not create net new U.S. jobs or jobs in any country unless they are products that cannot be made or made competitively in that country.
As for the dangers of trade wars, they are much exaggerated. The whole point of the WTO is to have a set of rules and adjudication of the rules. It is inevitable that there will be trade disputes. A main mission of the WTO is to deal with them so that they don't become trade wars. So far the record of the WTO is pretty good on this score.
With regard to prying open the Chinese market, the Tribune calls for that as an alternative to the trade actions called for by the two candidates. This is an old story and it seems to keep selling. I only wish that those who sell it would once in their lives have to serve as trade negotiators. One of the main reasons for complaining about and sanctioning violation of trade rules is to gain leverage precisely for the purposes of opening the market. These negotiations are not pit a pat. Important and powerful interests are involved and they don't give up easily unless faced with consequences as well as opportunities. Countries don't open their markets just because someone from Washington says that would be a good idea. A successful market opening negotiation requires sticks as well as carrots.
Neither Obama nor Romney is a "China basher". The Tribune owes them both an apology.
Clyde Prestowitz is the president of the Economic Strategy Institute and writes on the global economy for FP.