How the Economy Was Lost: The War of the Worlds (Counterpunch) by Paul Craig Roberts Page A
Authors: Paul Craig Roberts
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CounterPunch , I wrote that jobs offshoring was the new form of class warfare and that it was bringing political instability and social strife to the United States. There is nothing in the Council on Competitiveness’ latest report to cause me to alter my view.
February 19, 2007
Chapter 16: How the Economic News is Spun
R eaders ask me to reconcile the jobs and debt data that I report to them with the positive economic outlook and good news that comes to them from regular news sources. Some readers are being snide, but most are sincere.
I am pleased to provide the explanation. First, let me give my reassurances that the numbers I report to you come straight from official U.S. government statistics. I do not massage the numbers or rework them in any way. I cannot assure you that the numbers are perfectly reported to, and collected by, the government, but they are the only numbers we have.
Here is how to reconcile my reports with the good news you get from the mainstream media:
(1) When the U.S. Department of Labor, for example, releases the monthly payroll jobs data, the press release will put the best spin on the data. The focus is on the aggregate number of new jobs created the previous month, for example, 150,000 new jobs. That sounds good. News reporters report the press release. They do not look into the data to see what kinds of jobs have been created and what kinds are being lost. They do not look back in time and provide a net job creation number over a longer period of time.
This is why the American public is unaware that higher paid jobs in export and import-competitive industries are being phased out along with engineering and other professional “knowledge jobs” and replaced with lower-paid jobs in domestic services. The replacement of higher- paid jobs with lower-paid jobs is one reason for the decline in median household income over the past five years. It is not a large decline, but it is a decline. How can it be possible for the economy to be doing well when median household income is not growing and when economic growth is based on increased consumer indebtedness?
Economists, comfortable with their free trade ideology, are simply careless with data. Remember Matthew Slaughter’s error. He concluded that “for every one job that U.S. multinationals created abroad in their foreign affiliates they created nearly two U.S. jobs in the parent operations.” Slaughter arrived at this erroneous conclusion by counting the growth in multinational jobs in the U.S. without adjusting the data to reflect the acquisition of existing firms by multinationals and for existing firms turning themselves into multinationals by establishing foreign operations for the first time. There was no new employment in the U.S. Existing employment simply moved into the multinational category from a change in the status of firms to multinational.
(2) Wall Street economists are salesmen. The companies that employ them want to sell stocks and bonds. They don’t want bad news. A bear market is not good for business. Similarly, business associations have the agenda of their members. Offshore outsourcing reduces their labor costs and boosts their profits and performance-based bonuses. Therefore, it is natural that their association reports put a positive spin on outsourcing. The same organizations benefit from work visas that allow them to bring foreign workers in as indentured servants to replace their more fractious and higher paid American employees. Thus, the myth of a U.S. shortage of engineers and scientists. This myth is used to wheedle more subsidies in the form of more H-1B visas out of Congress.
(3) Official U.S. government reports are written to obfuscate serious problems for which the government has no solution. For example, “The Economic Report of the President,” written by the Council of Economic Advisers, blames the huge U.S. trade deficit on the low rate of domestic savings. The report claims that if only
February 19, 2007
Chapter 16: How the Economic News is Spun
R eaders ask me to reconcile the jobs and debt data that I report to them with the positive economic outlook and good news that comes to them from regular news sources. Some readers are being snide, but most are sincere.
I am pleased to provide the explanation. First, let me give my reassurances that the numbers I report to you come straight from official U.S. government statistics. I do not massage the numbers or rework them in any way. I cannot assure you that the numbers are perfectly reported to, and collected by, the government, but they are the only numbers we have.
Here is how to reconcile my reports with the good news you get from the mainstream media:
(1) When the U.S. Department of Labor, for example, releases the monthly payroll jobs data, the press release will put the best spin on the data. The focus is on the aggregate number of new jobs created the previous month, for example, 150,000 new jobs. That sounds good. News reporters report the press release. They do not look into the data to see what kinds of jobs have been created and what kinds are being lost. They do not look back in time and provide a net job creation number over a longer period of time.
This is why the American public is unaware that higher paid jobs in export and import-competitive industries are being phased out along with engineering and other professional “knowledge jobs” and replaced with lower-paid jobs in domestic services. The replacement of higher- paid jobs with lower-paid jobs is one reason for the decline in median household income over the past five years. It is not a large decline, but it is a decline. How can it be possible for the economy to be doing well when median household income is not growing and when economic growth is based on increased consumer indebtedness?
Economists, comfortable with their free trade ideology, are simply careless with data. Remember Matthew Slaughter’s error. He concluded that “for every one job that U.S. multinationals created abroad in their foreign affiliates they created nearly two U.S. jobs in the parent operations.” Slaughter arrived at this erroneous conclusion by counting the growth in multinational jobs in the U.S. without adjusting the data to reflect the acquisition of existing firms by multinationals and for existing firms turning themselves into multinationals by establishing foreign operations for the first time. There was no new employment in the U.S. Existing employment simply moved into the multinational category from a change in the status of firms to multinational.
(2) Wall Street economists are salesmen. The companies that employ them want to sell stocks and bonds. They don’t want bad news. A bear market is not good for business. Similarly, business associations have the agenda of their members. Offshore outsourcing reduces their labor costs and boosts their profits and performance-based bonuses. Therefore, it is natural that their association reports put a positive spin on outsourcing. The same organizations benefit from work visas that allow them to bring foreign workers in as indentured servants to replace their more fractious and higher paid American employees. Thus, the myth of a U.S. shortage of engineers and scientists. This myth is used to wheedle more subsidies in the form of more H-1B visas out of Congress.
(3) Official U.S. government reports are written to obfuscate serious problems for which the government has no solution. For example, “The Economic Report of the President,” written by the Council of Economic Advisers, blames the huge U.S. trade deficit on the low rate of domestic savings. The report claims that if only
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