“Weak dollar costs U.S. economy its No. 1 spot”
April 18th, 2008 by Chris KinnanI missed this item last month, but it is a significant story:
The U.S. economy lost the title of “world’s biggest” to the euro zone this week as the value of the dollar slumped in currency markets.
Taking the gross domestic product of both economies in 2007, the combined GDP of the 15 countries which use the euro overtook that of the United States when the European currency surged to a record high of more than $1.56 per euro.
“The curious outcome of breaching this latest milestone is that the size of the euro zone’s annual output has now exceeded that of the U.S.,” the economics department of Goldman Sachs, the Wall Street investment bank, said in a note to clients.
Of course, the “weak dollar” is not to blame…the weak dollar is just a signal, a symptom of the serious problems facing the U.S. economy: an overactive Federal Reserve, high corporate tax rates, too much litigation, counterproductive capital markets regulations, an overly complicated tax code, runaway borrowing and spending, and failing schools. The good news is that all of these problems are readily fixable, if our political class can transcend the special interests, and our economy is still among the most free and prosperous in the world.
April 18th, 2008 at 4:13 pm
Okay, so you must realize that the EU has higher corporate tax rates, more corporate regulation (capital and other markets), a variety of complicated tax codes, very well-funded public education (far more than U.S. on per capita basis), well-funded public health services, etc.
So many of the same “serious problems” are already in Europe, in even greater degrees, yet their economy is doing better than ours. They don’t have the runaway lawsuit problem, but most scholars believe that’s tied to better corporate regulation in Europe and a different standard of risk evaluation.
So why argue, then, that we need to distance ourselves even further from the European model? That doesn’t make any sense to me. Could you clarify your argument, please?
April 19th, 2008 at 9:35 pm
LOL…the weak dollar faaaar proceeded the very recent Fed intervention BTW…it’s been going on since 2002! “runaway borrowing and spending”…yup, by the GOP.
Their “argument” is based on ideology, not facts, Sickle.
April 21st, 2008 at 1:57 pm
Hi guys, America’s corporate tax rate is the second highest in the industrialized world.
April 21st, 2008 at 2:03 pm
Also, America spends more per capita than Europe on education (except for Switzerland)….we’re second highest in the OECD.
Do you think we are getting the same bang for the buck?
April 21st, 2008 at 3:17 pm
Are you kidding me, Chris? Did you even read that report you linked to? Or did you just decide, once again, to cherry pick the one part from it that you think supports your view, while ignoring all the rest which debunk it.
for one, it’s not about tax spending by government. It’s about total spending by Americans. It states clearly that we pay more for higher education than just about everybody, but we also pay far less for primary and secondary school than the others, and were below the average. Which makes total sense, Chris, since we keep hearing in the news about how higher education costs are off the charts while our primary and secondary schools are struggling. And lo and behold, the report even says that only half of people getting into college are completing degrees. Seems there were plenty of news reports in recent years about students having to drop out because of rising tuition costs.
*sigh*
You’ll find a few nuggets which ostensibly support your views, but in fact show larger problems. For instance, despite high costs for education in the U.S., only half of that is paid to teachers in contrast to most other successful countries. The report also notes that although education spending has increased in the U.S. as more students enroll, those spending increases lag those of other countries seeing the same thing by more than 10%.
Then there are problems with the report itself. In only one place did it actually differentiate between primary and secondary education spending and higher education spending. Otherwise it kept all those figures together. It also did not differentiate between public and private institutions when figuring out spending for schools. Those are unbelievable oversights which render most of the data meaningless on anything but a macro level. When the report goes on to note that private funding of education is higher in the U.S. than anywhere else, it makes clear that this report is on a hell of a lot more than just our “tax dollars.”
I could go on and on and on. Absolutely unbelievable that you miss all this stuff, unless you were deliberately trying to mislead your readership (again).
Jesus Christ, and you guys think you’re a “small think tank.” Tell me, how many “small think tanks” pay their chairman over half a million dollars a year, eh? That sounds more like what you’d pay the head of a corporate-funded propaganda outfit.
April 21st, 2008 at 4:09 pm
A lot of the spending increases in education here in the U.S. have to do with skyrocketing health care and energy costs as well.
April 21st, 2008 at 4:20 pm
Sickle, logically everything you’re saying makes sense but i don’t believe is actually consistent with the economic structure of the two areas. There are about 130 million more members in the EU over the U.S. which by sheer level of production input gives a higher potential return (thus the quick rise of China). This makes “size” very misleading as a term of economic success, especially when only accounting for aggregate GDP. Also in recent years, England, France, and Germany have all sought to liberalize their economies through cutting corporate gains taxes and repealing labor standard laws. The U.S. has started to do the opposite in the last year or so and seems to be continuing down that path. I wouldn’t claim that as the sole reason for the dollar weakening futher in the last year but it is a notable input. In real economic terms the U.S. still has a larger GDP per capita than the EU on the aggregate. The dollar being weak is a speculative standard by international investors and is caused by the greater investment returns being sought by the Euro. Before you jump on me for that sentence be aware I’m alluding to the the fickle nature of floating exchange and how speculative standards can weaken or strengthen a currency based on more than simply a investment/return structure. The Euro’s recent strength is also in large part to the value-added tax that European countries rebate, making some of their exportable goods much more attractive than American ones which is an extremely liberal trade philosophy. On the surface it would seem your claims are correct sickle, but it seems there is much more going on here than we at first realize. In fact i just brushed over a few of the many factors that could be at play here. I’m staying out of the education debate too so don’t drag me into that.
April 21st, 2008 at 7:57 pm
Repealing labor standards…sounds like a great idea…for rich corporatists maybe. The Bush economic agenda has been a complete & total failure IMO…supply-side is dead.
April 22nd, 2008 at 12:27 pm
It’s like they have a complete inability to be honest. What kind of Princeton-educated Hong Kong MBA waving “analyst” doesn’t even read the report he quotes?
@ cGuy: think you could do that kind of analysis on the original post, too? I’m not the blogger here…
April 22nd, 2008 at 12:37 pm
Sickle, I shall quote for you:
April 22nd, 2008 at 12:45 pm
We are in agreement that U.S. educational dollars are sometimes poorly spent, and don’t get into the classroom….but thats a problem with the delivery system, not an overall lack of effort or funding. Here’s another quote from the US Dept of Ed, page 44:
April 22nd, 2008 at 6:52 pm
* sigh *
You didn’t even read my post, did you? Otherwise you’d see how I already addressed both the things you quoted above.
And that’s why I’m outta here.