re: Special Counsel Mueller Impanels Washington Grand Jury in Russia Probe

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We've declined as an economic force? I mean you could argue that China has gained significantly, but that corresponds to their increased participation in the global market.

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Testimony by Robert E. Scott, EPI economist
Senate Finance Committee
June 11, 1998

Mr. Chairman and members of the Committee, thank you for the opportunity to testify here this morning. Make no mistake about it, the trade deficit is a problem. It is destroying jobs, depressing wages, hurting our competitiveness and contributing to the stagnation of real incomes that has plagued our economy for the past two decades. The trade deficit results from the use of the U.S. as a “market of last resort” for exports from around the world, and from several macroeconomic problems. Both kinds of problems can and should be addressed with new trade and international policies.

Many attempts have been made to create economic excuses for the trade deficit. A frequently heard claim is that trade deficits do not matter, while others argue that “the trade balance is generally determined by macroeconomic factors.”1 Both views suggest that trade deficits will be largely unresponsive to trade policies, and may be safely ignored, as long as the nation is following sound macroeconomic policies.

These laissez-faire views are both wrong and dangerous to the health of our economy. One major source of confusion is the use of simple correlations, or economic identities, in the place of meaningful economic analysis of the causes of our trade problems. The most recent Economic Report of the President makes this mistake in several places, as shown below. The Report emphasizes the accounting relationship between savings and investment without sufficiently examining the cause of changes in these variables. Improvements in our trade balance, through increased exports, can increase income and hence raise national savings, thereby reducing our reliance on imported capital while creating better jobs in the economy at the same time. If, on the other hand, we ignore the trade deficit, our incomes will continue to stagnate and the risks of an economic collapse will grow in the future.

Consequences of trade deficits

Trade deficits have harmed the domestic economy in at least three direct ways. First, the steady growth in our trade deficits over the past two decades has eliminated millions of U.S. manufacturing jobs. Between 1979 and 1994, trade eliminated 2.4 million jobs in the U.S

2 Growing trade deficits were responsible for most of these job losses, which were concentrated in manufacturing, because most trade involves the sale of manufactured goods. NAFTA added to the flow of jobs out of the U.S. by encouraging firms to move production to Mexico and Canada. Our trade deficit with both countries increased from $16 billion in 1993 to $48 billion in 1996 (in constant 1987 dollars). The U.S. lost 395,000 jobs as a result of the NAFTA deficits.3

...There are several other ways in which trade and trade deficits depress wages that are not included in the preceding estimates. One of the most important is through foreign direct investment. When U.S. firms move plants to low-wage countries, as they have done at an increasing rate in recent years, they clearly eliminate good jobs and increase the trade deficit. These moves also have a chilling effect on the labor market. The mere threat of plant closure is often enough to extract wage cuts from workers. This tactic has also been used with increasing frequency in the 1990s and is effective even when plants don’t move."

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Policies begun by Ronald Reagan actually attacked the people of the United States. The U.S. government continues to attack the people of this country.