U.S. Economic/Financial News
Ballooning U.S. Trade Deficit Threatens World Financial System
The U.S. trade deficit on goods and services hit $43.46 billion in March, up from $40.37 billion the month before, the Department of Commerce reported May 13. This is the second highest monthly U.S. trade deficit on goods and services in history.
Restricting attention only to merchandise (physical goods) trade: In March 2003, the U.S. physical-goods trade deficit reached $47.11 billion, up from $44.30 billion in February. For the first quarter of 2003, the deficit leapt to $136.38 billion. Were the trajectory to continue, the physical-goods trade deficit for the whole of 2003 would reach an unprecedented $545.52 billion, which would eclipse last year's figure of $484.49 billion, itself a record. However, processes indicate that the trajectory has not remained the same, but is accelerating: The deficit will be even larger.
During March, the level of U.S. physical goods imports was the highest ever, at $105.19 billion. Relative to February, the U.S. imported more oil, autos, and consumer goods in March. In particular, in March, the U.S. imported 300 million barrels of oil, valued at a record $9.1 billion, up from 237 million barrels, valued at $7.5 billion, in February. However, whatever secular changes occur from month to month, it would be wrong to attribute the U.S. trade deficit to them. Rather, the fundamental, long-standing cause for the deficit is that the U.S. can no longer produce its own physical existence; thus, functioning as an imperial society, the United States extracts loot from the world's nations.
America's ability to import huge volumes of goods, depends upon the producers of the physical goods accepting U.S. dollars, as IOUs, and then bringing the dollars back into the U.S., to invest them in the speculative bubble. Many nations and investors are disinvesting from the dollar. Since Jan. 1, the dollar has plunged 10% against the euro, and 12% against the Canadian dollar, with a sharp plunge during the past two weeks. As the U.S. trade deficit accelerates the process, the dollar will fall 40%, shattering the dollar-denominated world financial system.
Bush Economic Nominee: 'What, Me Worry?'
"I'm not tremendously worried about the trade deficit," stated N. Gregory Mankiw, the Bush Administration's nominee to be the new head of the Council of Economic Advisers, speaking at his Senate Banking Committee confirmation hearing May 13. Indicating that the Bush economics team is located somewhere out beyond the planet Pluto, Mankiw said, "We are importing more goods than we are exporting, because people who live abroad are eager to buy U.S. assets."
U.S. Machine-Tool Consumption Collapse Shows Need for 'Super-TVA'
U.S. machine-tool consumption, so far this year, is down 25.5% from last year's depression level, totalling $394.9 million for January-March 2003proof of the urgent need for LaRouche's "Super-TVA" policy. Machine-tool use by U.S. industry in March totalled $154.2 million, up 40.9% from the near-record low in February, but down 13.6% from the level in March 2002, reported the Association for Manufacturing Technology (AMT) and the American Machine Tool Distributors' Association (AMTDA) May 12.
AMT President Albert Moore, buying the Administration's tax-cut gimmick, called the proposed tax cuts a "jump-start" for manufacturing, while acknowledging the outlook appears "bleak."
Machine-tool consumptionthe means by which man develops the biospherehad already fallen by the end of 2002, to about 37% of the level in 1997.
U.S. Bankruptcies Rise to New Record Levels
U.S. bankruptcies rose to a record-high 1.61 million in the 12-month period ended March 31, up 7.3% from the previous year, the Administrative Office for the U.S. Courts reported May 15. The number of bankruptcies in the first quarter (January-March) climbed to 412,968, up 4.5% from the previous quarter, and the highest quarterly figure in the last nine years. Personal bankruptcy filings rose 7.4% to 1.57 million, while business filings fell 5.8% during the 12-month period.
'What Jobs, What Growth?' Tax Cuts a 'Ruse'
"What Jobs? What Growth?," asked a headline in a Washington Post editorial May 14, adding that the Bush Adminstration's tax-cuts are a "ruse." The Post cites an analysis by the Congress's Joint Committee on Taxation. which states that, although the Bush Administration has repeatedly claimed that the proposed tax cuts would trigger economic growth, create jobs, and pay for itself, "the numbers still won't add up quite the way they hope," even as they change the method for calculating the economic effects. The Congressional Budget Office found that the tax cuts, together with the Administration's spending proposals, would have, at best, a negligible effect on the economy.
More importantly, the Joint Committee on Taxation found that the House's $550 billion tax cuts through 2013, without changes in spending, would barely budge the economy. In the first five years, an estimated 230,000-900,000 jobs would be createdwhen the economy has lost half-a-million jobs in the past three months alone. Worse, from 2008-2013, the study predicts no new job creation, or even job losses. As for whether the tax cut would pay for itself by generating more tax revenue, even the JCT's most optimistic prediction finds it recovering only 23.4% of the cost. The Administration's economic rationales for the tax cut, the WaPo concludes, were best described as "soggy."
Senate Moots Raising Debt Limit by $1 Trillion
The U.S. Senate is considering a bill to raise the $6.4 trillion Federal debt limit by nearly $1 trilliona whopping $984 billionon top of the $350 billion scaled-back tax-cut gimmick. What's a trillion dollars here and there? Recall that the Wall Street Journal recently called on Congress to abolish the debt ceiling.
State Budget Cuts Threaten Most Vulnerable: The Children
State budget cuts are slicing into the health and welfare of America's children. At least 23 states, since 2001, have reduced access to affordable child care for poor and near-poor working families, a recent General Accounting Office survey found. A couple of examples will suffice to show the pattern.
* Missouri: With the stroke of a pen, the lower house of the Missouri legislature voted to halt its State Children's Health Insurance Program (SCHIP). If the state senate adopts this too, Missouri will be the first state to abolish the five-year-old program, which insures children who come from households which are just over the poverty level. Eliminating the SCHIP program will "save" the state a measly $25 million, while leaving 83,000 children uninsured. (Nationally, SCHIP covers 5 million children. Only a few other states are considering abolishing the program, but dozens are trimming eligibility, benefits, and enrollment, affecting hundreds of thousands of kids.)
* Wisconsin: The state's welfare-to-work program, Wisconsin Works, pioneered by former Gov. Tommy Thompson (now the ill-suited Secretary of Health and Human Services) is expected to cost $276.9 million more this year than the program it replaced (Aid to Dependent Children), even though fewer families are on cash assistance, having dropped by more than half, from 45,000 in 1996-97 to 21,000, as of September 2000. One Wisconsin legislator told EIR that 50,000 people "disappeared" from the old ADC program. The report says that demand for child care has grown by 160%, due in part to Wisconsin Works' requirement that adults work or get job training in exchange for a check and subsidized child care. That the unemployed rolls have grown must also be a contributing factor.
Home Mortgage Rates Fall to New Record Lows
Mortgage rates fell to new record lows, after the yield on the 10-year Treasury note dropped May 14 to a 45-year low, both a sign of deteriorating investor confidence in the economy, and a reflection of the collapse of the dollar system. The national average on the benchmark 30-year, fixed-rate mortgage fell to a record low 5.45% on May 15, while the 15-year mortgage rate fell to a record low 4.84%. One day earlier, the yield on the Treasury Department's 10-year note slid to 3.52%the lowest level since July 1958capping a drop of 40 basis points in less than two weeks, while the yield on the 30-year Treasury bond fell to below 4.5%, the lowest level since it was first issued in the early 1970s.
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