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Ron Paul has got it wrong

Posted: May 11, 2014 2:00 a.m.
Updated: May 11, 2014 2:00 a.m.
 

Regarding the Ron Paul column published May 7 entitled “We’re no longer number one”: Sorry, congressman, you swallowed a distortion put out by the World Bank.

The claim that China would soon surpass the U.S. as the world’s largest economy has been soundly debunked by economist Derek Scissors.

The arm of World Bank says China’s GDP adjusted by Purchasing Power Parity (PPP) reached 87 percent of the U.S. in 2011.

They then project this forward, concluding China will pass us this year or the next. Mr. Sessions, the economist, says “this makes no sense.”

PPP relates to internal purchasing power, not economic size. It would be nonsense to claim that because goods and services in a Third World country like Bangladesh are cheaper on average than Australia, that Bangladesh’s economy is much bigger that it appears.

Clearly, that evaluation is flawed. Sessions goes on to suggest that a sound comparison would be to use National Wealth.

Credit Suisse has measured private wealth in many countries. It puts China’s at $22 trillion and ours at $72 trillion; that’s a gap of $50 trillion!

Like many politicians, Ron Paul parroted the World Bank headline but did not really understand it.

Unfortunately, that misleading intro weakened Mr. Paul’s arguments for spending restraint.

 

Comments

Harv: Posted: May 11, 2014 2:01 p.m.

Am I the only American that thinks the Federal Government should spend only what it takes in? I know most Americans spend more than they take in but do they really think this is a good idea?
I'm just really hoping all those that spent too much and went bankrupt are re-thinking their spending habits and the spending habits of their Government.
And I hope that those of us that spend within our means one day expect the same from our leaders.
Thanks for reading.


tech: Posted: May 11, 2014 2:58 p.m.

No, you're not the only American who thinks our various levels for government should live within their existing revenue base.

Regarding China, consider the GDP per capita and note that's another reason why they're not in the same economic league as the USA.


eversoeasy: Posted: May 12, 2014 11:30 p.m.

Unless there is a secret town calledd China in the US where everything is made then I think China is already way ahead.
Recent visit to China confirms that the US looks a decade behind.
In 1980s the US was way ahead but Americans have to take on board that they are in deecline and do something about it.


ricketzz: Posted: May 12, 2014 7:04 a.m.

What happened in the 1980s that has sinced weakened the USA and made its workers the poorest in the industrialized world? Oh yeah, "Globalism" and "free trade" agreements that surrendered our sovereignty to corporations, led by the Devil himself, Ronald Wilson Reagan.

It is totally appropriate you admire the modern Chinese society; after all we built it in order to save "one dollar" at WalMart. We won the race to the bottom by being miserly to the point of self-destruction. There's a reason every truck says "Less" on the back. That is the WalMart/Reagan promise for your future.


fazsha: Posted: May 12, 2014 3:36 p.m.

Actually, Ron Paul is right. Using private wealth as a proxy for national wealth, the author makes an assumption that wealth is the same as economy. Using this measure, Greenwich, CT has the largest "economy" in the U.S. Clearly that's ridiculous. An economy is the production of goods, not amount of 'purchasing power'. I do agree with Scissors that GDP is a bad measure of economy because it includes government spending, which includes a lot of junk. However, if you put the world's billionaires on a desert island, it would not make that island "the largest economy in the world". What makes an economy is where the output is occurring, not where the owner of the output lives.

Once again, Ron Paul is right, and an apology is in order by the whacked out socialists on the left.


tech: Posted: May 12, 2014 4:59 p.m.

I was around when "Japan Inc." was purportedly going to overtake the USA economically in the '80s. I expect we'll see the same result in retrospect regarding China.

Ricketzz: You're a protectionist and I have a reading assignment for you here:

http://www.libertarianism.org/publications/essays/myth-rational-voter-why-democracies-choose-bad-policies?

"What happened in the 1980s that has sinced weakened the USA and made its workers the poorest in the industrialized world?" - ricketzz

Nonfactual. What's your source for this assertion?

Here's mine: http://en.wikipedia.org/wiki/List_of_countries_by_average_wage

Your assertion is incorrect according to the 3 sources cited in the link.


ricketzz: Posted: May 13, 2014 7:18 a.m.

"Average" means when Warren Buffett walks into a Baskin-Robbins everybody in the store is a statistical billionaire.

https://en.wikipedia.org/wiki/Income_inequality_in_the_United_States#International_comparisons


chico: Posted: May 13, 2014 7:21 a.m.

Only read the conclusion in this piece...

"Unfortunately, that misleading intro weakened Mr. Paul’s arguments for spending restraint"

So, because a bad argument was made for spending restraint, it's OK to borrow and spend more.

Out.


Indy: Posted: May 13, 2014 12:17 p.m.

Ricketzz wrote: What happened in the 1980s that has since weakened the USA and made its workers the poorest in the industrialized world? Oh yeah, "Globalism" and "free trade" agreements that surrendered our sovereignty to corporations, led by the Devil himself, Ronald Wilson Reagan.

Indy: Yes, globalization has changed everything . . . in that ‘free trade’ has now permitted the global work force to ‘compete’ for US jobs both on and off shore.

I’m not sure why this ‘competition’ between China and the US is something to be worried about . . . I think most Americans are worried about their own economic prospects and how they are effected by the global economy.

As is the case with most neoclassical economist, they assume a ‘limitless’ planet that can accommodate a ‘limitless’ population all based on the ‘promise’ that technology will solve all problems.

Unfortunately, that’s not the case and in many circumstances, technology is creating the ‘cannibalization’ of remaining resources making a potential economic fall even worse.

In any event, many libertarian market fundamentalist don’t believe in what might be term ‘shared’ wealth but instead promote a method of capitalism that ‘concentrates’ wealth in the hands of the few as we’ve witnessed here in the US since 1980, where at that time, the 1% took ‘only’ 8% of all income but today, take more than 20%.


Indy: Posted: May 13, 2014 12:18 p.m.

This wealth concentration takes place through several known ‘income advantages’ that can be briefly summarized:


a. The low capital gains rate that has them paying a rate that is not consistent with their use of tax funded infrastructure including our military, courts, and transportation infrastructure.

b. They also benefit since their ‘discretionary’ incomes are so much higher they can invest more (think stockholders – owners of capital) while most Americans exist ‘check to check’.

c. They can take advantage of ‘large’ business deals especially in off shoring where huge income gains result from the large ‘wage differentials’ in nations with low wage rates.

d. Having the ability to influence our tax laws (loopholes) provided high income earners access to our leaders where folks like me get to speak to a ‘college intern’ on the phone when I call them.

e. Legal superiority in that those will higher incomes can legally protect their assets versus everyone without such representation (think reading a standard credit card ‘terms and conditions’ that most people don’t read and can’t understand if they did.)

Most libertarian market fundamentalist and neoclassical economist believe that wealth concentration is great since it puts the most resources into those that ‘know’ what to do . . . which under globalization is investing off shore to gain the maximum profits on the oversupply of labor globally. This of course makes the ability of individual Americans to earn more no longer possible . . .

In any event, if you’re interested on Derek Scissors, you can see his work at the conservative Heritage Institute ‘think tank’ site: http://www.heritage.org/about/staff/s/derek-scissors


Indy: Posted: May 13, 2014 12:28 p.m.

Harv wrote: Am I the only American that thinks the Federal Government should spend only what it takes in? I know most Americans spend more than they take in but do they really think this is a good idea?

Indy: You bring up an excellent question . . . and indeed one that should be explored more deeply since any increase in debt today, ‘assumes’ expanded economic growth tomorrow.

For Americans, with the fully onslaught of globalization, their future income growth will now be less which infers that we take on less debt.

And indeed the 2007 crash was created by the explosion of debt by financial firms that ‘hid’ this debt using cleverly designed financial instruments that ‘hid’ the risk . . . made easier to do by our ‘leaders’ rescinding the regulations developed after the ‘depression’ that was created by the same type of financial malfeasance.

In any event, less debt means less economic growth in the short run . . . a tough sell to Americans that are promised by politicians ‘unlimited’ growth on a fixed rock in space.

Harv wrote: I'm just really hoping all those that spent too much and went bankrupt are re-thinking their spending habits and the spending habits of their Government.

Indy: It would be wise to learn from history but the financial motivation to ‘gain’ will continue to drive the movement to create even more debt to create even more unsustainable economic growth.

And it will not be easy to get those making the most income to believe that a system fundamentally designed to concentrate wealth can be ‘adjusted’ to make a more balanced economic (think income equality) when most Americans would be hard pressed to understand what that would mean.

Harv wrote: And I hope that those of us that spend within our means one day expect the same from our leaders. Thanks for reading.

Indy: If indeed we lived within our means, most Americans would never own a home or buy any large assets since debt allows such purchases ‘spread out over time’.

We need to find some balance here . . . and the LTE writer is wise to suggest understanding our debt is a good first step.


tech: Posted: May 13, 2014 2:05 p.m.

""Average" means when Warren Buffett walks into a Baskin-Robbins everybody in the store is a statistical billionaire." - ricketzz

Non sequitur. Do you imagine that the USA is the only OECD nation with billionaires? Statistical fail.


ricketzz: Posted: May 14, 2014 7:14 a.m.

Weird interpretation...

We have an unhealthy divergence between work (productivity) and wages paid to the workers. While output per employee and executive compensation both climbed nicely over the past 35 years, compensation to workers has actually gone down. We kept this economy alive with major sacrificing and we have had enough disrespect.

There are 2 Americas. The stratospheric one is populated by people who have never had an insecure moment in their entire lives. They are clueless and they do not deserve any political power. The other America is all of us and we are one hot mess. We too are lacking election skills.

Obama fights for the banks at home and the fascists abroad. Just like Bush. And Clinton. And Bush. And Reagan.


tech: Posted: May 14, 2014 1:07 p.m.

Your statement lacks perspective and proportion, ricketzz.

Low skill/low education job wages have remained stagnant. With a global supply of labor in that category, it won't improve. For those who aren't in this category, like myself, they've gone up proportional to skill set and education.

The solution isn't artificially raising wages above market prices or protectionism. Rather, it's increasing the skill and education base *in fields where there's demand*.


Indy: Posted: May 14, 2014 3:29 p.m.

Ricketzz wrote: We have an unhealthy divergence between work (productivity) and wages paid to the workers. While output per employee and executive compensation both climbed nicely over the past 35 years, compensation to workers has actually gone down. We kept this economy alive with major sacrificing and we have had enough disrespect.

Indy: This is why it’s so important to understand ‘basic economics’ versus staying buried in ideology . . .

As the global supply of labor continues to grow exponentially while our economies do not, labor will continue to see it’s rate reduced as ‘competition’ for jobs means people will earn less.

This is the great paradox for ‘free traders’ that keep arguing that ‘free trade’ increases economic growth ‘overall’ but the ‘participants’ will earn less as wages are used to distribute limited resources.

In other words, more people and limited resources means ‘laborers’ will get less per person.

The only exception here are for ‘owners’ of capital that indeed take all the productivity increases on that capital . . . and like it or not, those folks now ‘own’ our congress . . . even Obama is out supporting the TPP having been ‘sold’ on the ‘aggregate growth’ but can’t grasp that individuals will still earn less . . .

The so called American Dream is now really becoming a 'dream' . . .


ricketzz: Posted: May 16, 2014 6:55 a.m.

Tech has been deluded into thinking America rewards skilled workers. This is not the case. America makes its skilled workers train their Chinese replacements.

http://www.motherjones.com/files/averagehouseholdincome.pdf


tech: Posted: May 18, 2014 10:07 p.m.

I'm highly skilled and my income has tripled since the mid-90s, ricketzz. It's unfortunate that you're not but those are the choices you made.

I raised myself from a working class background and don't owe you anything.



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