Report: U.S. Lost 1.5 Mln Jobs to China in 1989-2003
Mood:  don't ask
Topic: Financial Woes
Original

WASHINGTON (Reuters) - The United States lost nearly 1.5 million jobs between 1989 and 2003 because of increased trade with China, according to a report released on Tuesday by a government watchdog committee.

The report was prepared by the pro-labor Economic Policy Institute for the U.S.-China Economic and Security Review Commission, a congressionally-appointed panel that has pushed for a tough U.S. approach to China on trade.

The study estimates that imports from China displaced 1.659 million jobs between 1989 and 2003, while exports to that country generated only 199,000 additional U.S. jobs.

The job losses have accelerated and moved into unexpected new sectors as the trade deficit -- which reflects the gap between imports and exports -- with China skyrocketed to a record $124 billion in 2003, report author and EPI senior international trade economist Robert Scott said.

"The assumptions we built our trade relationship with China on have proved to be a house of cards. Everyone knew we would lose jobs in labor-intensive industries like textiles and apparel, but we thought we could hold our own in the capital-intensive, high-tech arena," Scott said in a statement.

The report puts a large portion of the blame for the growing U.S. trade deficit with China on that country's "refusal to revalue its exchange rate."

U.S. manufacturers and labor groups complain that Beijing's decade-old long practice of pegging its currency at 8.28 to the dollar gives Chinese companies an unfair advantage by artificially depressing the price of their goods.

Expected U.S. gains from Beijing's entry into the World Trade Organization in December 2001 "have yet to materialize" and instead China is increasingly competitive in more advanced sectors such as autos and aerospace where the United States has long had a big advantage, the report said.

Old-line industries such as textiles, apparel, furniture, rubber and leather have borne the brunt of the U.S. job losses, although computer, electronic, and semi-conductor sectors have seen China-related losses as well, the report said.

"It is hard to overstate the challenges posed by this export behemoth," the report said.

World On Brink Of Ruin
Mood:  quizzical
Topic: Financial Woes
World On Brink Of Ruin

Forbes | January 7, 2005
By Dan Ackman
NEW YORK - Alan Greenspan , that Matador of the Money Supply, the esteemed Impresario of Interest Rates, has suffered precious few slings or arrows over his many years as chairman of the Federal Reserve. Even the White House has had to offer its critiques off the record for fear of roiling the markets or upsetting the chairman's Elvis-in-Vegas-like following. So when the chief economist of one of the world's most prestigious banks calls Greenspan a bum, that's a big deal.

And yesterday it happened. Stephen Roach , the chief economist for Morgan Stanley & Co. (nyse: MWD -news -people ), one of the most powerful investment banks and one of the 50 largest companies in the world, says Greenspan has "driven the world to the economic brink."

Writing in an upcoming issue of Foreign Policy , Roach says that when Greenspan steps down as chairman of the Federal Reserve next year, he will leave behind a record foreign deficit and a generation of Americans with little savings and mountains of debt. Americans, Roach says, are far too dependent on the value of their assets, especially their homes, rather than on income-based savings; they are running a huge current-account deficit; and much of the resulting debt is now held by foreign countries, especially in Asia, which permits low interest rates and entices Americans into more debt.

The "economic brink" line is from the headline of a press release sent by Foreign Policy . In an interview this morning, Roach said, "That's a little extreme." He does admit the nation has prospered on Greenspan's watch. Still, he does not disavow the haymakers he directs at the chairman's chin.

"This is no way to run the global economy," Roach says. So far, the Fed has bucked the odds, Roach adds. But the longer the situation exists, the more chance there is that it will spell danger for the United States and the world.

Roach lays the blame for the peril at Greenspan's door. But first he takes out after his outsized reputation. Greenspan is not responsible for defeating inflation in the 1980s; Paul Volcker , his "tough and courageous predecessor," deserves more of the credit, Roach says. Greenspan's monetary policy deserves some accolades for the 1990s boom, but former President Bill Clinton 's fiscal policy and other factors were equally responsible, Roach says. Greenspan may deserve some praise for softening the recession that followed the stock market meltdown, Roach concedes, but the chairman's cure may result in "bigger problems down the road" and "the biggest bubble of all: residential property."

Many have credited Greenspan with saving the world following the 1997-98 Asian financial crisis. Time magazine went so far as to put the gnome of Constitution Avenue on its cover, under the headline "Committee to Save the World." Though it is the case that the world did not end, "In truth, the world weathered the Asian financial storm only to chart increasingly dangerous waters in the years that followed," Roach writes. "Global economic imbalances have intensified dramatically since 1999."

A good chunk of the U.S. prosperity is owed to these imbalances, Roach says: "Asian countries holding enormous stocks of U.S. dollars recycle this cash back into the United States by buying U.S. [Treasury bills]. This process effectively subsidizes U.S. interest rates, thus propping up U.S. asset markets and enticing American consumers into even more debt. Awash in newfound purchasing power, Americans then turn around and buy everything from Chinese-made DVD players to Japanese cars."

While the economist has nothing against DVD players, he does say, "Asia and Europe are increasingly dependent on overly indebted U.S. consumers, while those consumers are increasingly dependent on Asia's interest-rate subsidy. The longer these imbalances persist, the greater the likelihood of a sharp adjustment. A safer world? Not on your life."

Roach even questions Greenspan's political independence. He does not claim the chairman is a partisan Republican, but he does fault him for being a "cheerleader for policies such as tax cuts...that could make the endgame all the more treacherous."

Greenspan is to central banking what J. Edgar Hoover was to fighting crime. He will soon surpass the fondly forgotten William McChesney Martin as the longest-serving Fed chairman. But his term as a member of the Federal Reserve Board of Governors expires in just over a year from now, and America will have to do without. Roach says, "Greenspan will be a tough act to follow." But the difficulty may not be living up to the chairman's reputation so much as cleaning up his mess.

Thousands of Students Cut from Pell Grant Program in Final Federal Budget
Mood:  not sure
Topic: Financial Woes

WASHINGTON -- November 23 -- Last-minute changes to the federal spending bill approved by Congress this weekend will cause 90,000 low-income students to lose their Pell Grant eligibility this upcoming year. More than 1 million other students face reductions in their Pell Grant awards under this change.

House Republicans, with the support of the Bush administration, struck a provision from the FY05 Senate appropriations bill that postpones changes in the Department of Education's federal financial aid formula that helps determine Pell Grant eligibility. The Pell Grant program is the country's largest source of federal aid for college students.

"Behind closed doors, Congress decided to pay for budget shortfalls out of the pockets of students," said Luke Swarthout, higher education associate for the State Public Interest Research Groups.

The federal spending bill that Congress passed this weekend left out language written by Senator Corzine to maintain current Pell Grant eligibility rules. The Department of Education claims that without such language they will be forced to change the formula used to calculate the expected family contribution (EFC) in financial aid forms. According to the American Council on Education, the new calculation will cut 90,000 college students out of the Pell Grant program, and reduce Pell awards for more than a million students.

Congress included language in last year's final federal spending bill to postpone changes to Pell Grant eligibility rules until the issue and its effect on students' aid packages was further examined. "By making this change, Congress is reneging on its promise to students and families," said Swarthout. The language was included in last year's spending bill with bipartisan support, and was included in this year's Senate appropriations bill until final negotiations between the House and Senate this week resulted in the provision being stripped from the bill.

The change comes as students are already struggling with skyrocketing college costs and declining grant funding. Students are facing tuitions that are 10.5 percent higher at four-year public institutions this year,
according to a recent report by the College Board. The FY05 budget also freezes funding for the maximum Pell Grant at $4,050, and level funds numerous other higher education programs.

Pell Grant article

Watch Your Wallets
Mood:  incredulous
Now Playing: Jonathan Theory
Topic: Financial Woes
Mountains of interest add pain to credit debt

November 21, 2004

By PATRICK McGEEHAN The New York Times

When Ed Schwebel was whittling down his mound of credit card debt at an interest rate of 9.2 percent, the MBNA Corp. had a happy and profitable customer. But this summer, when MBNA suddenly doubled the rate on his account, Schwebel joined the growing ranks of irate cardholders stunned by lenders' harsh tactics.

Schwebel, 58, a semiretired software engineer in Gilbert, Ariz., was not pleased that his minimum monthly payment jumped from $502 in June to $895 in July. But what really made him angry, he said, was the sense that he was being punished despite having held up his end of the bargain with MBNA.

"I paid the bills the minute the envelope hit the desk," said Schwebel, who had accumulated $69,000 in debt over five years before the rate increase. "All of a sudden in July, they swapped it to 18 percent. No warning. No reason. It was like I was blindsided."

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