(What’s Left of) Our Economy: New GDP Figures Cut Trade’s Contribution to Growth and Recovery Toll Remains Towering


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The government’s release of revised figures for second quarter 2016 gross domestic product (GDP) revealed a higher constant dollar trade deficit than initially judged ($562 billion versus $556.3 billion) and a smaller absolute and relative trade contribution to annualized growth (0.10 percentage points to 1.09 percent expansion versus 0.23 percentage points to a 1.21 percent increase). The second quarter real trade deficit remained the third largest largest quarterly result ($562 billion) since the first quarter of 2008 ($623.7 billion) – just after the start of the Great Recession.

As a result, trade’s cumulative drag on the economic recovery hit 8.84 percent of total real growth, with the toll taken by the Made in Washington (real non-oil goods deficit) at 19.70 percent – or $437 billion after inflation. Total real exports were still higher than in the first quarter but dipped from the previous second quarter estimate. Total real imports were up on both scores, and hit their second highest total ever: $2.6701 trillion annualized. Real services imports also declined slightly from the first estimate, but still represented a new record of $473.6 billion annualized.

Here are the trade highlights from this morning’s GDP report:

>The U.S. government’s second official look at inflation-adjusted economic growth in the second quarter of 2016 revealed that a higher-than-previously reported real trade deficit ($562 billion versus $556.3 billion) – boosted growth considerably less than initially estimated.

>The previous second quarter GDP report pegged trade’s growth contribution at 0.23 percentage points out of 1.21 percent annualized expansion after inflation – the highest such total since the fourth quarter of 2013.

>According to the new figures, however, this growth contribution was only 0.10 percentage points out of a 1.09 percent annualized expansion in constant dollars.

>The new second quarter trade deficit, although down from the final first quarter figure of $566.3 billion, was still the third highest total since the $627.3 billion recorded for the first quarter of 2008 – right after the start of the Great Recession.

>The new GDP figures took the toll exacted by rising real trade deficits during the current economic recovery to a cumulative 8.84 percent – which translates into $195 billion in lost after-inflation growth.

> Data kept separately by the U.S. Census Bureau show that the growth toll exacted by the Made in Washington trade deficit as of the second quarter has been much higher – $437 billion after inflation. In other words, real growth during the current economic recovery has been 19.70 percent lower in toto simply because this inflation-adjusted trade gap – in the non-oil goods flows heavily affected by trade agreements and similar trade policies – has risen so dramatically.

> Today’s GDP revision pegs combined real goods and services exports at $2.1081 trillion annualized. That’s 0.05 percent lower than the previous estimate of $2.1092 trillion, but 0.34 percent higher than the first quarter total. The new second quarter total is 2.05 percent lower than the all-time high for total real exports – the fourth quarter 2014’s $2.1523 trillion.

>The new combined real imports figure is a new record: $2.6701 trillion annualized. This new record eclipsed the previous high – set in the first quarter – of $2.6682 trillion by 0.07 percent. It was also 0.17 percent higher than the initial second quarter figure of $2.6655 trillion.

>The real goods export total reported today – $1.4303 trillion annualized – was – 0.22 percent lower than the first second quarter figure of $1.4335 trillion, but topped the final first quarter number of $1.4241 trillion by 0.44 percent.

>Real goods exports also peaked in the fourth quarter of 2014, at $1.4745 trillion annualized – three percent higher than the latest figure.

>The real goods imports numbers reported today ($2.1943 trillion annualized) topped those both in the previous second quarter estimate ($2.1894 trillion, for a 0.22 percent rise) and for the first quarter ($2.1941 trillion – a fractional increase).

>Second quarter real services exports of $677.4 billion annualized were 0.25 percent higher than the previous estimate of $675.7 billion, but barely nosed out the $677.3 billion mark of the first quarter. At the same time, they fell 0.97 percent short of the record ($684 billion) set in the first quarter of 2015.

>The new real services import total for the second quarter ($473.6 billion annualized) was fractionally lower than the $473.7 billion estimated in the initial report. But it still represented a new record, beating the previous all-time high ($471.9 billion), set in the first quarter of this year, by 0.36 percent.

Making News: New Lifezette Op-Ed on Obama’s Pacific Trade and Security Fantasies – & More!


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I’m pleased to announce the publication of my newest op-ed piece this morning:  a Lifezette.com article on a gaping, nuclear-related flaw in President Obama’s case for believing that his Trans-Pacific Partnership (TPP) trade deal will strengthen U.S. national security.  Click on this link to access the op-ed, which savvy RealityChek readers will see builds on my previous critiques of America’s military strategy in the East Asia-Pacific region.

Also, ICYMI, earlier this week, The New York Times op-ed page published a piece that shares my skepticism about the president’s arguments but critiques them from a different angle.  Here’s the link to the article, by Economic Strategy Institute founder and President Clyde V. Prestowitz.

And keep checking in with RealityChek for news of new or upcoming media appearances and other events.

Im-Politic: Little Thinking in The NY Times on Think Tanks


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Even though news organizations like The New York Times are big outfits where it’s hard to keep the left hand informed about what the right hand is doing, it’s disturbing to see how completely the paper has ignored its own reporting about the sophisticated form of corruption perfected by major American think tanks – and keeps mindlessly citing their work and staff members in articles.

On August 8 – just over two weeks ago – the paper ran on its front page an invaluable report on how America’s major think tanks, most of which are headquartered in Washington, D.C., now habitually produce and distribute material that promotes the interests of their corporate or other contributors. As I’ve explained, this Standard Operating Procedure is not only contemptibly deceptive, but dangerous to our democracy.

For think tanks like the Brookings Institution and the Center for Strategic and International Studies are used by policy makers and the media as important sources of information and analysis – largely because they’re seen as objective sources of expertise, just like colleges and universities. (Brookings even uses the “.edu” internet domain name.) When the main purpose of these organizations is to help their donors, they’re engaged in what I’ve called “idea laundering” – garbing special interest pleading in the raiment of scholarly integrity and independence. Worst of all, think tanks rarely disclose specific actual or possible conflicts of interest.

So the obvious question is whether The New York Times, for starters, is taking the hint, and at least begun to change its news coverage to portray think tank findings and views accurately? Sadly, the answer is, “Not yet” – at least judging from The Times‘ mentions, since the article appeared, of Brookings, whose academic pretenses it spent so much space exposing.

According to The Times‘ search engine, the paper has presented the views of Brookings staff seven times since August 8. And it’s as if the reporters and editors don’t read their own paper.

The most recent was The Times publication today of the big Associated Press story detailing the large number of Clinton Foundation donors who managed to finagle meetings or telephone conversations with Democratic presidential candidate Hillary Clinton when she served as Secretary of State. The Brookings “fellow” quoted was identified as someone who might have a bias – since Secretary Clinton was once his boss at State. But credit here should go to the Associated Press, not The Times.

Yesterday, a Times piece on the fighting in Iraq quoted a Brookings analyst once with the CIA. No special interest motive is apparent here, although the source, Kenneth Pollack, was a big backer of the 2003 invasion of Iraq. These views weren’t mentioned in the story – but maybe they were a little bit germane?

On August 18 came a Times article purporting to show that Republican presidential candidate Donald Trump is losing support among white men – widely thought to be one of his core constituencies. Many polls and political specialists were cited, which is all to the good. But one of them was “Brookings demographer William H. Frey” – who has “conducted several simulations that tried to determine how much the turnout among white men without college educations would have to increase for Mr. Trump to win.” His results were bad news for Trump.

That’s in principle fine, too. But here it’s surely relevant that almost none of Brookings’ legion of corporate donors is likely to look favorably on Trump, a loud opponent of the trade and immigration policies these businesses support. Also relevant – Brookings President Strobe Talbott is really chummy with both Secretary Clinton and her husband, the former president. Indeed, he was Deputy Secretary of State in the former’s administration, on top of several other appointive positions.

That same day, some research by Brookings economist Gary Burtless was featured in a Times post on the surprisingly large numbers of men who have been dropping out of the American workforce. Nothing objectionable here, especially since Burtless wasn’t asked to explain his findings.

More problematic was the August 17 Associated Press’ summary of the tax policy plans being touted by the Clinton and Trump campaigns this year. Because the piece, which appeared in The Times, relied in part on the work of Brookings’ Tax Policy Center, and because the issue so politically charged, it seems to me that the Talbott-Clinton connection should have at least been mentioned. Here, the fault lies mainly with the AP – although as a customer of the news service, The Times has wide latitude to edit its material.

Much less partisan was the Reuters article published by The Times August 16 on racial tensions in Milwaukee. The piece, written in the wake of a recent police shooting, offered some Brookings data on the city’s segregated housing patterns that don’t seem to be motivated by any particular agenda.

The final report in The Times, however, was another that missed Brookings’ corporate and Clinton links. The article, again from the AP, summarized and analyzed the two leading presidential candidates’ overall economic plans. The AP in particular should have noted that the Brookings staffer it quoted here, “senior fellow” William Galston, is a “former policy advisor to President Clinton.” Is it any wonder he’s so enthusiastic about amnesty for illegal immigrants!

Since think tanks do house a lot of worthy knowledge and wisdom, and since their donors have every right to participate in policy debates, the solution is obvious: adequate transparency. That way, we could all benefit from this expertise, but also have some sense of who’s been sponsoring it, why – and what it might be downplaying, slanting, or ignoring. And since The Times has done such excellent reporting on what shady institutional characters think tanks can be, is it so unreasonable to expect that the paper starts leading the way?

Those Stubborn Facts: The Highest-End Jobs Keep Getting Offshored, Too


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Global Corporate Research and Development Investment, Jan. 2013 – June, 2016

China: $24.2 billion

India: $13.1 billion

United States: $10.2 billion


Jobs Created by Above Investment

China: 25,700

India: 43,900

United States: 10,500

(Source: “Apple has chance to pick better R&D model in China,” by Andrew Hill, Financial Times, August 22, 2016, https://www.ft.com/content/fe00be6a-646d-11e6-8310-ecf0bddad227)

(What’s Left of) Our Economy: A Halt in the Subsidized Private Sector’s Hiring Momentum?


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Since the next U.S. jobs report (covering August) won’t be out until a week from Friday, it seems like a good idea to take stock of where the economy stands in terms of the employment being created during this weak recovery by industries that depend heavily on government subsidies for their levels of activity – and therefore hiring. (Think, in particular, “healthcare services.”) Distinguishing these jobs from those in what I call the “real private sector” matters because America’s best bet for lasting prosperity is an economy where the lead roles are played by sectors whose vibrancy is determined mainly by market forces, not government decisions.

The message being sent by the last jobs report (which covered July) and revisions for June and May mixes good news with bad news. The good: After surging through the spring, the relative growth of subsidized private sector jobs seems to be leveling off. The bad: On a January-July basis, these jobs are still a more important part of the national hiring picture than during the first seven months of last year, and their prominence remains way up over the last four years.

July’s numbers are still preliminary (as are June’s). But they show that the subsidized private sector accounted for 15.73 percent of total non-farm jobs (the Labor Department’s employment universe) and 18.58 percent of the jobs classified as private sector. The former figure was unchanged over the June level (which itself was unrevised) after a long period of steady increases. The latter was also unchanged from June, but that June figure was revised down from 18.59 percent – which also happened to be the May number.

Similarly, the subsidized private sector accounted for only 14.90 percent of July’s total monthly job gains. That’s down from 19.86 percent in June and completely different from the situation during the (apparently anomalous) month of May,. That’s when the entire non-farm economy only created 24,000 net new jobs and the subsidized private sector increased payrolls by 46,000

Of course, these shifts aren’t big (except for those involving seeming outlier May). But even small changes in direction following years of unmistakable movement one way or another can signal bigger changes down the road. So stay tuned.

As indicated, though, over the longer term, the subsidized private sector is still pacing the nation in relative employment gains by a wide margin. During the first seven months of this year, these industries were responsible for 25.96 percent of the net new jobs created by the entire economy, and 28.99 percent of the jobs conventionally defined as private sector. Those numbers are up from 24.72 percent and 25.87 percent, respectively, in 2015, and all the way up from 15.10 percent and 14.26 percent in 2013.

Viewed from another perspective, four years ago, the real private sector – the part of the economy we want to absolutely dominate hiring – generated nearly 91 percent of the total economy’s net job increase during the first seven months of the year. Since then, that share during comparable seven-month stretches has declined to 81.55 percent, 70.82 percent, and only 63.59 percent so far this year.

And even though the stand-still numbers cited above have been improving month-on-month so far this year, the subsidized private sector’s hiring employment is still much higher nowadays than at the start of the (Great) recession. In December, 2007, it stood at just 13.63 percent of all non-farm jobs and 16.26 percent of conventionally defined private sector jobs.

When the recovery began, in June, 2009, these numbers were 14.97 percent and 18.09 percent, respectively – because the private sector without subsidies was had taken such a huge jobs hit during the recession. To remind, the latest (July) figures are 15.73 percent and 18.58 percent.

Netscape founder Marc Andreessen captured a major technology, business, and economic trend a few years ago when he said that “software is eating the world.” It’s an exaggeration to say that the subsidized private sector is eating the American jobs market. But “munching on it” may not be so far off the mark.

Im-Politic: The Real Know-Nothings on Manufacturing Job Trends


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One of the seemingly strongest (and most reasoned) claims raised by his critics against Donald Trump’s promise to bring large numbers of manufacturing jobs back to the United States is that he’s ignorantly trying to buck a global trend. As claimed by many journalists and analysts, the Republican presidential nominee doesn’t seem to realize that, as one columnist recently put it, “manufacturing jobs are disappearing everywhere, not just in the U.S.” Even China, one of Trump’s biggest targets, allegedly hasn’t been immune.

The prominence of this push-back actually adds up to good news for Trump and his supporters. For what the numbers actually show is that, by the most meaningful measures, China has been adding jobs in its manufacturing sector in recent years, not shedding them.

Earlier this summer, Richard McCormack reported in his invaluable Manufacturing & Technology News findings from the Conference Board that between 2002 and 2013, Chinese manufacturing employment increased by nearly 28 million. That’s more than twice the total number of manufacturing workers currently left in the United States.

At the end of last year, moreover, the Peterson Institute for International Economics – which has been a strong defender of the trade policies Trump and others have attacked – posted even more compelling evidence for the health of manufacturing employment in the People’s Republic. China specialist Nicholas Lardy found that manufacturing payrolls in China’s cities, which he considers the most reliable Chinese data, not only nearly doubled in absolute terms between 2003 and 2015 (to just under 80 million). But these jobs also rose as a share of total Chinese urban employment from 15 to 20 percent.

Incidentally, a June Conference Board post contains more statistics pointing to American policy failure on the manufacturing jobs front. According to Joseph J. Minarik of the private Committee for Economic Development, most high income countries have indeed joined the United States as manufacturing employment losers in absolute terms from 1990 to 2014. But during that period, the United States was one of the biggest proportional losers. Further, from 2008 to 2014 – years during which American manufacturing supposedly was experiencing or verging on a renaissance – the U.S. manufacturing jobs performance lagged behind that of South Korea, Taiwan, Germany, and Canada.

Here are the charts Minarik used:

Trump’s positions on trade can be legitimately criticized on any number of grounds. But when it comes to describing global trends in manufacturing employment, he sure doesn’t look like the one who deserves the label “know nothing.”

Our So-Called Foreign Policy: A Pitiful Media Defense of America’s Asia Strategy


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It’s of course OK for the Washington Post op-ed page to run articles with which I disagree. It’s also OK – for a different reason – for the Post op-ed page to run mainly articles with which its editors or the paper’s owner agree. No media outlet is under any legal or moral obligation to serve as a completely open forum. (Although it would be nice if those with an obvious slant at least dropped the pretense.)

What’s much less OK is for the Post or any other paper to run op-ed articles that completely ignore major evidence and arguments that undermine their own conclusions, or that contain big internal contradictions. These articles may technically not amount to intentionally misleading readers. But as made clear by an offering in yesterday’s paper on America’s Asia policy, they come uncomfortably close.

The article, by a veteran Japanese journalist-turned-think tanker and a Korean academic Chung Min Lee, charges that Republican presidential candidate Donald Trump appears dangerously likely to support “a U.S. withdrawal or fundamentally reduced U.S. military presence in Asia [that] would not only undermine regional security; it would also ultimately weaken the United States at home and abroad.”

Among the leading points:

>Contrary to the insinuations of Trump and other Americans, Japan and Korea are not defense free riders;

>Both countries are committed to free trade, just like the United States; and

>Trump’s positions would represent a complete turnaround from the policies of President Obama, who has “demonstrated that credibility need not be purchased through force; it can come from articulating clear strategies that give other nations confidence the United States will follow through.”

Anyone remotely familiar with U.S.-Asia relations in recent decades will find these claims downright laughable. But for layfolks, here’s what authors Yoichi Funabashi and Chung Min Lee didn’t tell you – and what Washington Post op-ed editors allowed them to leave out:

>The best measure of whether an ally is a free rider is not, as Funabashi and Lee contend, whether it picks up some or even most of the expenses of hosting American forces on its soil. After all, these payments aren’t acts of foreign charity. Those U.S. military units are present first and foremost to defend those very countries. It’s true that American leaders have determined that this posture serves American interests, too. But its the allies themselves that unquestionably have the greatest stake in preserving their own security. Why aren’t they paying all the expenses of hosting the U.S. military. Isn’t it enough that American taxpayers have footed the entire bill for fielding and arming these forces in the first place?

Instead, the best measure of free rider status is whether allies’ defense spending is proportionate to the threats they face. According to the World Bank, for South Korea – which is located right next door to wildly belligerent North Korea, and only a little farther away from two huge neighbors with which it’s had a troubled history – the military budget amounted to 2.6 percent of its economy last year. And this figure had been falling for decades, even though the North Korean threat was obviously worsening. For Japan, defense spending as a share of the economy has been rising – largely out of concern of growing belligerence from both North Korea and China. But it still only represented one percent last year. Do these statistics really paint a picture of countries that have stepped up?

>Contrary to this Post op-ed, there’s little evidence that Japan and Korea deserve to be removed from the list of countries ranking as the world’s most protectionist. But don’t take my word for it – look at what President Obama’s Office of the U.S. Trade Representative has reported. Its latest survey on protectionist practices around the world devotes more pages to listing trade barriers in Japan and Korea than to nearly any other single country (as opposed to agglomerations that include big countries, like the European Union).

Worse, it’s clear that tariffs and non-tariff barriers remain high in Korea even though a U.S.-Korea free trade agreement promising to open the latter’s market significantly went into effect more than four years ago. As with Japan, with which Washington has negotiated dozens of purported market-opening agreements over a span of decades, the reason couldn’t be clearer to any informed trade policy student: The pervasive non-tariff trade barriers they maintain have provided the most effective protections and subsidies for their domestic producers. And because they’re developed and administered by powerful and highly secretive bureaucracies, they’re painfully difficult for outsiders even to identify, much less combat.

>Finally, it’s nothing less than astonishing for the Post to have published a piece lauding President Obama’s success in preserving America’s credibility with its security allies. For the paper has published the most detailed reporting on an idea conspicuously being mulled by the president that could pose the greatest threat to these relationships since their creation: his interest in declaring that the United States will never be the first participant in a military conflict to use nuclear weapons.

As is surely known by Funabashi and Lee – and by anyone on the Post op-ed staff that reads the paper – the threat of using nuclear weapons has been central to America’s alliance strategy in both Europe and Asia for decades. The idea has been and still is that these arms would be the free world’s great equalizer versus Soviet, Russian, Chinese, and North Korean adversaries that have fielded conventional military forces that Washington and its allies have decided would be too expensive to match, much less exceed.

Why should they know this so well? At the least because Post columnist Josh Rogin laid it all out in a piece all of four days before the op-ed by Funabashi and Lee. Further, Rogin reported that “Diplomats from allied countries argued that if the United States takes a nuclear first strike off the table, the risk of a conventional conflict with countries such as North Korea, China and Russia could increase. Regimes that might refrain from a conventional attack in fear of nuclear retaliation would calculate the risks of such an attack differently.”

It’s possible that Rogin’s reporting was completely off base, and that the allies are all on board with an impending U.S. “no first use” policy. It’s also possible that even if Rogin’s coverage is on target, the allies are wrong, as insisted by some American arms control advocates quoted by Rogin. (Although if this is true, that logically wouldn’t mean that the allies are thrilled with Obama or still believers in American defense guarantees.) But why on earth didn’t the Post op-ed staff ask Funabashi and Lee to at least address the issue?

The Mainstream Media have been under such fire lately that its members have been spending more and more time contending that its record, resources, and devotion to quality mean that alternative media can’t be remotely adequate substitutes. The more slipshod, tendentious, pro-status quo columns like Funabashi’s and Lee’s that these news organizations serve up, the weaker these increasingly controversial claims become.

Making News: Podcast of Last Week’s Connecticut Radio Interview on Trade and the Election


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I’m pleased to report that the podcast is now on-line of my interview last week on Waterbury, Connecticut radio.  Click on this link to listen.

You might find this August 11 conversation on trade and the election especially interesting because WATR-AM host Larry Rifkin wanted to spend some time on a vitally important but widely neglected subject:  the relationship between American trade policy’s failures and the outbreak of the financial crisis.  This subject urgently deserves much more attention, if only because comparable failures could be helping set the stage for Financial Crisis 2.0.

Keep checking in with RealityChek for news of upcoming media appearances and other events!

(What’s Left of) Our Economy: More Dubious Manufacturing Figures – from the Regional Feds


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I hope that RealityChek regulars remember my posts debunking the idea that a widely followed private sector gauge of manufacturing’s health has much to do with manufacturing’s health. As I explained, the Institute for Supply Management’s (ISM) monthly surveys of American industry suffer badly from “survivorship bias.”

In other words, they may accurately report on the performance of the nation’s manufacturing base at that moment. But because they only question companies still in existence in a given month, they provide no information on how that base has changed over time, and especially on the vital question of whether the base has shrunk or grown. As a result, I was able to show that in recent decades, the ISM’s findings that domestic manufacturing is in “expansion” mode have usually – and increasingly – clashed with the (more comprehensive) government data.

At the same time, the ISM is far from the only survey-based report on manufacturing that’s closely followed by students of the economy and of industry – including investors. Many of the Federal Reserve’s regional banks analyze manufacturing in their geographic districts in the same way, and one such series that often makes headlines comes from the Philadelphia Federal Reserve. I just looked over its latest release – from this morning – and it was so completely weird that I checked to see whether its findings have matched up or not with government statistics on manufacturing’s growth in the area it covers. And guess what? Its results could well be as off base as the ISM’s.

What set me off was the Philly Fed’s finding that manufacturing in its district – which includes the eastern three-fourths of Pennsylvania (pretty much everything up to Pittsburgh), southern New Jersey, and Delaware – had moved back into expansion mode in July. Nothing strange per se about that. What was utterly bizarre was the contention that this improvement took place even though new orders for this same manufacturing complex plunged deep into contraction territory, and the employment indicators performed almost as badly.

These aren’t the only measures tracked by Philly Fed economists (and their counterparts at other regional Fed banks), and much more positive readings for other indicators pushed the overall headline figure – which is a composite of all the data – into the black for July. But let’s leave aside whatever narrow technical issues this methodology raises and grant the Philly Fed’s view that such a mix represents “expansion” or “growth.” Let’s also leave aside the reliance of the ISM and Philly Fed and the like on manufacturers’ judgments on how their companies are performing – rather than on their actual performance.

That still leaves us with the question of how well this definition of expansion or growth tracks with U.S. government data on the actual production achieved by manufacturing in the district over time. These strike me at least as better measures since they focus (however imperfectly) on what’s measurably come out of a factory. And of course, without adequate output, higher profile gauges of manufacturing’s health, like employment, can’t possibly be expected to be satisfactory (Unless you’re OK with productivity stagnating – which seems to be the case recently.)

There are no output numbers for the Philly Fed’s district as such. But you can get a pretty good idea of the situation by looking up the manufacturing production statistics for the major towns and cities it contains, which are kept by the U.S. Commerce Department. At this level of specificity, such data only go up to 2014. But the contrast between them during the current economic recovery (which began in 2009), and the Philly Fed headlines over the 2009-20014 period, is striking.

Here’s a chart from the Philly Fed that shows those headlines:

Chart 1

As you can see, the brown “current activity” line doesn’t indicate terrific performance. But it stayed over zero (i.e., in expansion) for most of the relevant five years.

The Commerce Department keeps statistics on manufacturing production pre- and post-inflation for 18 of the “metropolitan areas” in the Philly Fed district. I looked at the former, since it yields the best sense of volumes, and therefore of the level of activity. And these figures show that manufacturing production rose in nine of them. Score one for the Philly Fed? If you’re generous.

But there are still two big problems. First, two of those increases, in tiny Gettysburg and Bloomsburg-Berwick, were minimal – i.e., much less than one half of one percent. In bigger Lancaster, manufacturing production expanded by a total of 2.10 percent in real terms. Harrisburg-Carlisle, in the middle, size-wise, between those two areas, fared better, with 3.95 percent after-inflation manufacturing growth. But these increases look pretty paltry over a five-year stretch.

By far the best performance in the Philly Fed’s district was turned in by the Trenton, New Jersey area, where constant dollar manufacturing output soared by more than 54 percent between 2009 and 2014. But its manufacturing sector is still peanuts, relatively speaking. Moreover, the real manufacturing declines that show up in the Commerce data were much bigger on average than the increases.

The second big problem is that there’s no adequate data – either pre- or post-inflation – for the Philadelphia-Camden (New Jersey)-Wilmington (Delaware) metropolitan area, which is by far the biggest in the Philly Fed district. Nonetheless, the few numbers that are provided suggest that its manufacturing sector has fallen on hard times. Specifically, between 2008 and 2012 (the only post-2005 numbers available), its manufacturing production shrank by 18.63 percent adjusting for inflation.

So it seems fair to conclude that, if you’re looking for a reasonably accurate portrait of those domestic American manufacturers who are still standing after decades of offshoring-happy trade policies, other officially created challenges, the economy’s inevitable ups and downs, and frequently changing product markets and technologies, by all means rely on the monthly ISM and the regional Fed surveys. If you’re interested in knowing about manufacturing recently aside from these survivors – including about whether their ranks have grown or shrunk – you’ll need to look someplace else.

Im-Politic: Challenges for Everyone Debating America’s Muslims Policy


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Scott Anderson, an historian of the Middle East, has performed an invaluable public service with his piece in last Sunday’s New York Times Magazine. His article “Fractured Lands: How the Arab World Came Apart,” is both a great primer on the deep, complex roots of a regional crisis that keeps jolting the rest of the world, too, and a powerful challenge to most of the voices – including mine – who have been speaking out on American policy toward admitting Middle East refugees and toward its own existing Muslim community.

As RealityChek regulars know, I’ve been much less clear on defining a U.S. approach going forward than in criticizing those who, within the Obama administration and without, have demonized as bigots and xenophobes anyone insisting that tighter restrictions and more monitoring are essential. That’s because, despite my adamance that the nation faces a Muslim problem at home as well as abroad, and that debunking what I’ve called “denialism” is a vital first step toward urgently needed reform, I haven’t been able to formulate feasible, specific ways of preventing Americans resident in the country from turning into home-grown terrorists.  I do favor immigration bans or at least freezes on war-torn Middle East countries where reliable vetting is absolutely impossible, but no one should imagine such measures alone will keep the nation safe.   

Anderson’s portrait of the Middle East should prompt rethinking by everyone. Supporters of basing new measures largely or solely on religion – and specifically, on what they see as the dangerously reactionary, intolerant, anti-Western nature of Islam – will be struck by the relatively small role played by religion in the author’s analysis. But if you think about it seriously, you don’t have to view Islam as a model of peace and progressivism, or ignore evidence of grossly outsized American Muslim participation in terrorist activity, to recognize that the religion is widespread in a huge, populous part of the world – Southeast Asia – where it hasn’t been a major security threat. Moreover, the large Muslim populations of India and Bangladesh don’t qualify, either. (At the same time, due largely to the – often Saudi Arabian-funded – propagation of fundamentalism, an extremist threat has certainly been growing in these areas.)

At the same time, “Fractured Lands” strengthens the case for thoroughgoing immigration and refugee policy changes by presenting abundant evidence that the nation (and world) do face a special problem from the Arab Muslim world. Anderson rightly describes both the domestic and foreign influences that led him to observe that “In my professional travels over the decades, I had found no other region to rival the Arab world in its utter stagnation.”

Those who have finished the compelling picture Anderson has drawn of disastrous foreign meddling and imperialism in the Middle East could reasonably be tempted to claim that outsiders have actually been the main problem. After all, as the author reminds, the early 20th century Europeans practically ensured eventual chaos by creating states with no regard for “national coherence, and even less to tribal or sectarian divisions.” The logical follow-on point: Immigration curbs would amount to the contemptible version of “blaming the victim.”

But again, the experiences of other parts of the world push back strongly against this position. Much of East Asia, for example, was controlled by Europe for long stretches of modern history. (And the United States ruled the Philippines for decades.) True, Japan remained independent, and China was at least nominally so. Foreign imperial ventures in the region, moreover, don’t seem to have resulted in borders that so flagrantly ignored ethnic realities.

But both Japan and China suffered horrific destruction during World War II, Korea was all but flattened in the 1950s, and Indochina experienced a similar nightmare in the 1960s and 1970s. Moreover, several Asian countries that emerged from the imperial era were religious and ethnic polyglots to some extent – like Malaysia, Singapore, and especially Indonesia. And don’t forget the subcontinent! Yet even counting the latter’s brutally violent post-independence breakup into Hindu-dominated India and overwhelmingly Muslim (East and West) Pakistan, they’ve cohered much better than the Arab Muslim countries, not to mention leaving them in the dust economically.

So it’s hard to avoid the conclusion that East and South Asia have, despite towering obstacles, somehow created the ingredients for longer-term success that have totally eluded the Arab Muslim world. As a result, it’s just as hard to avoid asking why anyone would expect even the beginnings of Middle Eastern progress along these lines in the foreseeable future – and why, without immigration policy overhaul, the region won’t continue to send violent extremists abroad, including to the United States.

The challenge, then, to everyone involved in the Middle East immigration debate is clear. Status quo fans will have to reject their denialism. And restrictionists will need to come up with properly focused, workable curbs. Of course, election years aren’t the most promising times for such consensus building. But don’t expect much sympathy on that score from the terrorists.


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