As the United States files a major case at the World Trade Organization charging China with wholesale piracy of U.S. intellectual property, especially copyrights covering books, music and videos, let’s pause and think about our trade deficit with China. The administration is entirely right to file the case – though a little late, given that it’s only our third complaint with the WTO over intellectual property violations since George W. Bush took office, compared to fifteen cases filed at the WTO by the Clinton administration in its second term alone. We’ll get to why those violations matter economically, but first let’s look at an even bigger picture.
It may not be politically satisfying, but the truth is, we cannot blame any other country’s trade practices for the size of our trade deficit. We run trade deficits for one reason: We consume more than we produce and then purchase the difference from abroad. When China sells paper or t-shirts for less than they cost to produce and ship them here, it increases our imports of Chinese paper and t-shirts, hurting American workers and companies that still produce them here. But if China charged three times as much, and we bought more paper and t-shirts from American or other foreign suppliers, it could affect the composition of our trade deficit, but not its overall size: That’s because the size is locked in by how much we consume of everything, relative to how much we produce of everything. The only way to reduce the trade deficit is to either consume less – which is what economists mean when they say that the answer is to save more – or to produce more. It’s used to be the case that the two were closely linked: In order to produce more, you had to invest more, and to invest more, you had to save more (and so consume less). Global capital markets have changed that for the United States, where everyone wants to invest: Now, we can invest more even without consuming less – we just have to borrow the investment funds from foreign savers. There’s a big cost down the road, since foreigners end up owning more of our companies and real estate, and then taking home their profits and rent – but at least we get to invest.
Force China to play fair with her trade policies (if we can, which is often doubtful), and we’ll end up importing a little less from China and exporting a little more to China. But unless we also begin to consume less overall or to produce more overall, it won’t affect the total trade deficit at all. There is one, possible way it could do so -- if demand for our exports to China goes up, it may lead to greater production at home to fill the need (after it had led to greater investment to expand production) -- and the increase in our production can bring down the trade deficit.
The one exception to all this is what the administration is finally focusing on -- foreign violations of the intellectual property rights of American producers. If we could get China, India, Russia and Brazil (the four biggest offenders) to stop appropriating or pirating our pharmaceuticals, software or music and films, it would directly reduce our trade deficit. Our own consumption wouldn’t change, but foreign payments back to U.S. companies would increase, just as if our production had increased and all been exported. Stealing our intellectual property, in short, has the effect of reducing our production (more precisely, taking part of our production and pricing it at nothing), which in turn drives up the trade deficit.
So, now there are two reasons to crack down on intellectual property violations by our trading partners. It’s the only cost-free way to reduce our trade deficit, and it should increase the returns and incentives for producing more of it, at a time when globalization and technology make intellectual property a central factor in U.S. economic growth and progress.
One more word on our trade deficit with China: Half of it comes from U.S. companies bringing back products they’ve produced in China by their Chinese subsidiaries. China’s currency is undervalued by all the standard economic measures. But if China does revalues its’ currency, so its exports become more expensive, it will raise the price of products produced by American companies there for sale here – and by itself can’t affect the overall trade deficit.
The Politico asked me to write an essay on what advice I would give to the Democratic Presidential candidates. It is running today and is below. Would love your thoughts.
The Democratic Opportunity
Simon Rosenberg April 11, 2007 05:28 PM EST
As we look to 2008, it is clear the two parties face a vastly different political landscape than anything we’ve seen in recent years. For the first time in a generation, the Republicans are in retreat, their brand damaged and ideology discredited. The Democrats won a resounding national victory in 2006 and according to a recent Pew Center poll, have opened up an extraordinary 15 percentage point advantage in party identification.
It is now reasonable to speculate that if Democrats win the presidency in 2008 it could be the beginning of a sustained period of Democratic control of government, akin to their run in the middle of the past century. President George W. Bush, meanwhile, is looking more like a 21st century version of Herbert Hoover each day.
Thus the stakes in 2008 are very high. It is not just about the control of the White House, but whether Democrats can take advantage of a profound mishandling of government by the Republicans, and build the foundation for a 21st century majority as strong as it had in the 20th. To do so, Democrats will have to apply their values to a new set of realities that are making the new politics of this new century different from the one just past; requiring us to offer a new agenda that meets the challenges of our time, master the new technology and media that is changing the way we all communicate, and speak to and engage the new American population of this new century, one very different from Americas of previous generations.
A New Governing Agenda That Tackles The Emerging Challenges Of Our Time When in power during the 20th Century, Democrats succeeded by tackling the great challenges of that time. Abroad, we defeated fascism, were instrumental in the triumph over communist totalitarianism, and constructed an international system based on FDR’s vision of a United Nations, bringing unprecedented liberty and prosperity to the people of the world. At home, we rescued America from its greatest economic crisis, the Depression. We further created Social Security and Medicare, and spearheaded the civil rights, consumer, labor, women’s and environmental movements that have helped make America not just great, but good. And, when we last held presidential power in the 1990s, progressives oversaw the greatest economic expansion in our history. It is a record to be proud of.
In the years ahead, our leaders will face a new set of tough 21st century governing challenges. We must keep the world peaceful and our country safe, restore broad-based prosperity in a much more competitive age of globalization, invest in infrastructure and people to ensure future prosperity, address global climate change and move toward greater energy independence, modernize our health care system while guaranteeing that all Americans have access to health insurance, manage the retirement of the baby boom, get our federal budget under control, and reform our broken immigration system. These are no small set of challenges.
For Democrats, success in 2008 will require offering real solutions to these great challenges, something the current governing party has utterly failed to do.
A New Post-Broadcast Media And Communications Era As FDR mastered early broadcast radio and JFK excelled on the new technology of his time, television, future success will depend on the mastery of an emergent post-broadcast communications environment. We are in the very early stages of a whole new era of political communications, which is more personal, iterative, participatory, mobile, fragmented, digital, networked – and whose rate of change is accelerating.
In 2003, we saw how an unknown candidate, former Vermont Gov. Howard Dean, used these new 21st century tools to leapfrog his competition among rival Democratic presidential candidates. In 2004, we saw the DNC use them to raise more money than the RNC for the first time in recent memory. And in 2006, we saw the early power of viral video help take down GOP Sen. George Allen in Virginia, giving Democrats control of the Senate.
The rise of the broadband internet, cable and satellite television, mobile telephony and media and their increasing use is radically changing the way the American people connect and communicate with one another. In response, we must radically alter our approach to media and political communications. For Democrats, success in 2008 will require replacing the 20th century model of political communications, with a new spirit of experimentation, and a new set of political tools.
The American People Themselves Have Changed Since FDR built the Democratic Party’s last great majority electoral coalition, the American people have changed a great deal. In recent decades America has become increasingly suburban and exurban, Southern and Western, Hispanic and Asian, immigrant and Spanish-speaking, aging Boomer and Millennial, and more digital age in our orientation towards life and work than industrial age. We live in literally what is a new America.
These new demographic realities have created a new 21st electoral majority strategy for Democrats, one that was used to win the Senate and House in 2006, and that has now produced 42 states with either a Democratic senator or governor. This new map starts with Democratic strengths in the Northeast, Midwest and Coastal West, and seeks to consolidate opportunities in the Inter-mountain West, the Southwest, the Plains and the South.
Democrats start the hunt for the presidency with much more strength at the Electoral College level than is widely understood; having what could be considered perhaps a high floor but low ceiling. The party has received 250 Electoral College votes or more in the last four national elections, a feat last accomplished in the FDR era.
While Ohio alone may give the Democrats the presidency in 2008, a great new Hispanic opening has emerged with what may be a permanent degradation of the Republican brand resulting from the terrible immigration debate in 2006. Exploiting this opening could flip Arizona, Colorado, Florida, New Mexico and Nevada, and give the Democrats another 56 electoral votes. What is remarkable is that this new Electoral College strategy is essentially the same way Democrats won the Senate and House, creating for this old party a very new, achievable and durable way of holding power in this new century.
What’s Next So how are Democrats doing so far in mastering this new politics of the 21st century? Well, after years of failed conservative government, Democrats have put big issues – restoring broad-based prosperity, fixing Iraq, health care for all, reforming immigration, global climate change and energy independence – on the agenda. Our presidential candidates have already embraced powerful new tools like viral video and social networking, and are using these and other new tools to involve already close to a million people – an extraordinary number – in their campaigns. Our party’s emerging leaders – House Speaker Nancy Pelosi, presidential candidates Hillary Rodham Clinton, Barack Obama, John Edwards, Bill Richardson, Senate Majority Leader Harry Reid, DNC Chairman Dean – look like 21st century America, and hail from the region’s critical to locking in this 21st century electoral majority.
Our new primary calendar includes states from the fastest growing regions of the country, the South and West, which will allow African-Americans and Hispanics to participate in our primary process as never before. Our 2008 convention is in Denver, at the epicenter of the most important new strategic opening in this election, the Southwest, and will be chaired in part by the compelling Sen. Ken Salazar of Colorado, a member of a new generation of Hispanic leaders.
There is much at stake in 2008. Only one political party, the Democrats, built a sustained majority coalition in the 20th century. The historic failures of the Bush era have made it possible for Democrats to imagine replicating this success in our new century. And while a great deal of attention will go into winning the 2008 elections, it is critical for us to also be looking ahead at a much more strategic level, and recognize that by mastering this new politics of the new century we may be taking the critical early steps in building a majority coalition as robust and durable as the one FDR built more than 70 years ago.
Simon Rosenberg is the President of NDN, a progressive think tank and advocacy organization.
Google someone in politics and you’re likely to see something similar to this: an official website, a link to a Wikipedia entry about them, and few (if any) sponsored links to the right or at the top. That seems to be the standard, except in the case of the average 2008 presidential candidate, who, with search ads, brings you to see what they want you to see.
Below are examples of what search ads are doing for two candidates with a good internet presence:
Google Hillary Clinton and the first site that comes up is "HillaryClinton.com" with sub-links of the site that would take you to the "About" section. On the right side, where the paid links are, the first link is to "Clinton on YouTube." Below that? "Barack Obama in 2008."
Google John McCain and the first site that comes up is John McCain’s Senate website. Above the news, highlighted in yellow, is another paid link, "John McCain 2008." To the right? "Mitt Romney in 2008" and a site that comes up on all of the Google searches for GOP candidates who have declared (as well as Hillary Clinton) "JoinRudy2008"
"If the Internet is a new media like broadcast television in the 1960s, then search is the TV Guide of this era, the way to find all the content, and paid search is the most powerful and effective way to advertise."
As noted in the examples above, search ads are becoming increasingly helpful. For candidates and organizations who want their voices and issues made readily available to the general public, or a more targeted audience, search ads are an easy way to go. As our report mentions, it only makes sense for those in politics to utilize what search has to offer, especially since millions of Americans continue to be exposed to new tools allowing them to be involved.
At this point, it seems like most search ads will be dedicated to inform people about the various candidates and sometimes their opponents; but it is encouraging to see that the advice of NPI is paying off, as campaigns are incorporating this tool into their overall internet strategy.
(I'll be updating this post as the campaign progresses.)
For more information on NDN's coverage of the 2008 Presidential election, click here.
Senators John McCain and Barack Obama are facing off again. During his speech on Iraq today at Virginia Military Institute, Senator McCain used Obama in an attempt to shame Democrats to support funding for the war:
“When the President vetoes, as he should, the bill that refuses to support General Petraeus’ new plan, I hope Democrats in Congress will heed the advice of one of their leading candidates for President, Senator Obama, and immediately pass a new bill to provide support to our troops in Iraq without substituting their partisan interests for those of our troops and our country.”
Senator Obama responded sternly:
“Progress in Iraq cannot be measured by the same ideological fantasies that got us into this war, it must be measured by the reality of the facts on the ground, and today those sobering facts tell us to change our strategy and bring a responsible end to this war."
"No matter how much this Administration wishes it to be true, the idea that the situation in Iraq is improving because it only takes a security detail of 100 soldiers, three Blackhawk helicopters, and two Apache gunships to walk through a market in the middle of Baghdad is simply not credible or reflective of the facts on the ground."
"What we need today is a surge in honesty. The truth is, the Iraqis have made little progress toward the political solution between Shiia and Sunni which is the last, best hope to end this war. I believe that letting the Iraqi government know America will not be there forever is the best way to pressure the warring factions toward this political settlement, which is why my plan begins a phased withdrawal from Iraq on May 1st, 2007, with the goal of removing all combat troops by March 31st, 2008."
(via Greg from TPMCafe)
For more information on NDN's coverage of the 2008 Presidential election, click here.
Following up on this morning's encouraging post on Rudy Giuliani's pillars for prosperity, two articles (here and here) highlight the former Mayor and GOP frontrunner's recommendation of Bernard Kerik and the White House's sound judgment - including that of Attorney General Alberto Gonzalez - in pursuing his nomination. The Washington Post notes:
A reconstruction of the failed nomination, assembled through interviews with key players, provides new details and a fuller account of the episode -- how Giuliani put forward a flawed candidate for high office, how Bush rushed the usual process in his eagerness to install a political ally and how Gonzales, as White House counsel, failed to stop the nomination despite the many warning signs. "The vetting process clearly broke down," said a senior White House official. "This should not happen."
Newsweek adds fuel to the already cumbersome fire, shedding light on the reasoning behind Kerik's withdrawal. Citing his past connections with a businessmen allegedly tied to the mafia, as well as a prison guard with whom he had an affair, the article explains:
Federal prosecutors in New York have informed Kerik that he is a "target" of a criminal investigation into possible tax problems, illegal wiretapping and making false statements in an FBI questionnaire connected to Kerik's nomination. Earlier this year, said two legal sources (who asked for anonymity due to the ongoing investigation), Kerik's lawyers agreed with prosecutors to extend the statute of limitations for the Kerik probe until next October.
...such an honest and compassionate vetting process!
NDN needs your help to update our agenda. Last week we began the important process of updating the NDN Agenda for Hope and Progress, the document that defines our governing philosophy and is at the center of all our advocacy work. This week we are asking for your feedback on the first section of the NDN agenda "Meeting the Challenges of the 21st Century Economy." After you read the section below, sign-up for an NDN Blog account, if you haven't already, and share your ideas with us in the comments section.
From NDN's Agenda for Hope and Progress...
Meeting the Challenges of the 21st Century Global Economy: Enact a 21st century economic strategy that will help all Americans succeed in the global economy and create broad-based prosperity and opportunity; restore fiscal responsibility and genuine progressivity in the tax code; champion free and fair trade; ensure the integrity and vitality of America's capital markets and the U.S. dollar; promote entrepreneurship, innovation and broad access to capital; update national telecommunications policy to foster universal broadband; enact a new national energy strategy; raise the minimum wage; prepare for the retirement of the baby boom; and protect and promote the retirement security of all Americans.
New Mexico Governor, statesman and Presidential candidate Bill Richardson reported significant progress at the end of his four day trip to North Korea. From the BBC:
[Richardson] was leading a delegation to retrieve the bodies of US soldiers killed during the Korean War.
He said officials in Pyongyang had assured him that once the funds were made accessible, the North would act swiftly to enact its pledge to shut down Yongbyon.
"The North Korean government told us that with that issue resolved, [it] would move promptly, within a day after receiving the funds," he said.
"And therefore, within that day, [it would] invite the [UN nuclear inspectors] to Pyongyang to draft the terms for shutting down the Yongbyon reactor," he added.
Mr Richardson said he was "optimistic" about the North's willingness to shut the reactor, which was part of a deal agreed in February.
Under that landmark agreement, North Korea said it would "shut down and seal" Yongbyon in return for energy aid and other incentives from its dialogue partners - the US, China, Russia, South Korea and Japan.
But the deal has been delayed because of the financial dispute involving $25m (£12.7m) of North Korean funds, which was frozen in Macau-based Banco Delta Asia (BDA).
The deadlock looked to have been resolved on Tuesday when the US Treasury Department said the Macau authorities would lift the freeze, allowing North Korea to obtain the money.
Senator McCain just gave a major speech on Iraq at the Virginia Military Institute. He bashed Democrats and praised the stay the course route. Is he going to be the Mondale of the Republican primary season? Read more here.
The WAPO coverage of President Bush's immigration speech was pretty fair. It gave him credit for pushing for comprehensive immigration reform, while emphasizing his frustrating reluctance to move past soundbites "family values don't stop at the Rio Grande" and focus on specifics. Read NDN's response to the President's speech here.
President Bush outlined the latest version of his plan to overhaul the nation's immigration laws Monday, renewing his support for a guest-worker program for those with low skills and issuing a vague call for a resolution of the legal status of the estimated 12 million undocumented workers in the country.
Speaking at the dedication of a state-of-the-art Border Patrol station here, a few miles from the U.S.-Mexican border, Bush called on Congress to pass the type of comprehensive immigration legislation that he has been pushing with little success since his earliest days as president. Bush said the overhaul should combine increased border security and added pressure on employers who hire illegal immigrants with a legal avenue for large numbers of guest workers to come into the country, while resolving the status of undocumented workers already here.
"Congress can pass a comprehensive bill, and I can sign it into law this year," Bush said, without offering a detailed proposal.
Since becoming president, Bush has viewed immigration as an issue on which he could make his mark as a "compassionate conservative" while extending the reach of the Republican Party to the fast-growing ranks of Latino voters, who tend to lean Democratic. But the swirling politics surrounding the emotional issue have left Bush groping for a viable path toward a solution, even as his political capital continues to be drained by the war in Iraq.