First off: a heartfelt Happy Anniversary and best wishes for continued success to RedState's good friend Rush Limbaugh.
The headline from yesterday’s advance estimate of second-quarter GDP was that the US economy grew at an annual rate of 1.9 percent in Q2. This was disappointing news because private forecasters had been expecting a number well above 2%. Additionally, growth in each of the past three years was revised downward. The economy is now known to have contracted in Q4 of 2007, rather than growing slightly as originally reported.
The various data series that go into the GDP estimates were significantly noisier than usual this quarter because of the fiscal stimulus program. But looking past that, the economy showed growth as a result of decreased imports, nonresidential structures and all levels of government spending. With one exception, everything else got worse.
The other bright spot in the economy was exports.
According to the GDP report: ”Real exports of goods and services increased 9.2 percent in the second quarter, compared with anincrease of 5.1 percent in the first.”
By my reading of this report, trade in goods and services contributed 2.4% to the growth in Q2 GDP. If you subtract this from the headline growth of 1.9%, you get a net contraction for the non-trade sectors of the economy.
And this makes all kinds of sense. Even as the US, Europe and Japan show more signs of slowing growth every week, the rest of the world is still growing like mad.
Among large economies, the US has one of the smallest trade sectors as a proportion of the total. Something like 10% of our economy is engaged in foreign trade. (The comparable figure for Germany, the largest trading nation in the world, is about 16%.)
The US must begin to systematically and aggressively expand exports. We must sharply increase the amount of goods and services we produce for export. This is a simple matter of going where the growth is. More than half of all humans live in countries that are building modern economies at a breakneck pace, and they should be using more American-produced goods and services to do that.
And that brings us to politics.
John McCain has long understood how important trade is, and has announced a range of policies designed to increase it. Among them are reductions of taxes on business income, capital gains, taxes on goods for export, and reductions in foreign trade barriers.
Barack Obama, on the other hand, persists in retailing the fiction that foreign trade results in job losses in the US. And given that a huge part of his support comes from labor unions, he’s not likely to change his ideas about this.
Obama has pledged to increase, rather than decrease, taxes on business income and capital gains. He has pledged to increase, rather than reduce, restrictions on foreign trade. Don't forget this, people.
Especially as we stand at the edge of what may be a prolonged period of weak consumer demand in the US (because of continuing decreases in asset values, notably home prices), the Obama policies are precisely what you’d want, if your goal was to make the US economy worse, and to put more Americans out of work.
McCain’s policies are what we need, if we want the economy to get better, and start producing more private-sector jobs again.