Economic Hemorrhaging May Not be Stopped by Obama

Editor’s Note: The following article was contributed by Former Vice Presidential Candidate Pat Choate, author of Dangerous Business: The Risks of Globalization for America. .

President-elect Barack Obama promised Ohio voters last February that if elected he would renegotiate NAFTA and make it fair for American workers.  With that, he cut Hillary Clinton’s lead in the Ohio Democratic primary, put himself on the path to political victory and ultimately the Presidency.

However, soon after the Associated Press released a leaked memo from a Canadian Consulate official in Chicago that said Austan Goolsbee, an academic economist and long-time Obama economic advisor, had privately reassured the Canadians that those NAFTA promises were “more about political posturing than a clear articulation of policy plans.”  In short, the aide told the Canadians not to worry; Obama really did not mean what he was saying.

Obama quickly distanced himself from Goolsbee.  Senator Clinton called it “the old wink-wink.”  In retrospect, she seems to have gotten it right.  The people Obama is appointing to his Administration’s key economic positions suggest that he intends to follow the failed “free trade” policies of his two predecessors.

The arithmetic of such a course is beyond frightening.  Consider this:  the U.S. trade deficit the year that Bill Clinton became President (1993) was $70 billion.  The year George W. Bush became President (2001) the deficit had ballooned to $365 billion – a 500 percent increase over the prior 8 years.  When Barack Obama takes Office that deficit will be more than $700 billion – a tenfold increase over a 16-year period.  As we are outsourcing our production of everything from cars to food, we are becoming correspondingly dependent on foreign imports for what we consume and our national defense.

Continuing these Bush-Clinton trade policies could not come at a worse moment in U.S. economic history.  More than $6 trillion is being spent on bailing out our failed financial institutions.  Even before taking Office, the President-elect is announcing on a seemingly weekly basis expansion of his economic stimulus program whose price grows every time.

Simply put, the U.S. cannot kick start its economy while it has to finance the purchase of more than $700 billion of imports annually than it exports.  We do not have the savings, and our credit is short.  What Obama and his advisors fail to grasp is that by ignoring the trade deficit, they risk turning a deep recession into a long, deep Depression. 

The great hope about the Obama campaign’s pledge of change was that he would surround himself with advisors who had the courage, independence, and wisdom to abandon the current U.S. trade policies, stop our economic hemorrhaging and put us on a more sensible course.

Alas, I fear that it is not to be.  Obama’s key economic advisors are all hard-core “free traders,” as devoted to the theories of Adam Smith, David Ricardo, and Milton Friedman as the Bush appointees they will be replacing.  And, Goolsbee is back.

More important, Lawrence Summers, the former Treasury Secretary in the Clinton Administration, a key advocate for NAFTA and an architect of U.S. policies for global financial deregulation, will head the Obama National Economic Council.  He will coordinate the work of other Obama economic advisors and be the gatekeeper to the Oval Office.  Summers fits the description once made about the Bourbon rulers of France “who neither learned nor forgot anything from their experiences.”  

The Secretary of the Treasury will be Timothy F. Geithner, Summers’ aide in the 1990s and now the head of the New York Federal Reserve Bank – the man who failed to monitor Wall Street during the Bush years.  A former employee of Kissinger and Associates, Geithner, too, is a devoted “free trader.”

The Administration’s point person on trade will be Ron Kirk, who is glaringly inexperienced in trade policy.  In the late 1990s, Kirk was the Mayor of Dallas, Texas, and in 2002, a candidate for the U.S. Senate seat now held by his GOP opponent.  After failing to win that race, Kirk joined the giant Houston law firm of Vinson Elkins, where among other work he lobbied the Texas Legislature for the Wall Street private equity firm Kohlberg Kravis Roberts & Co and TPG, a global investment firm. TPG has more than $50 billion of capital under management around the world.  KKR controls 51 private equity portfolio companies and has a total value of more than $68 billion.  KKR has done the largest buyouts in the history of the U.S., the Netherlands, Denmark, India, Australia, Turkey, Singapore, and France.  Besides its U.S. offices, Vinson Elkins has offices in Abu Dhabi, Beijing, Dubai, Hong Kong, London, Moscow, Shanghai and Tokyo. The principal criticism of the Clinton and Bush trade policies is that it was not about trade, but about making the world safe for U.S. investments.  It was investment policy.  Those policies, reduced to binding international treaties, facilitated and speeded the outsourcing of U.S. factories, jobs, and service work, even as they made the import of those foreign-made goods and services quota and tariff-free in the U.S.  It is about liquidating the U.S. economy and American jobs.

In fairness, U.S. Trade Representative designate Kirk has the perfect background and connections to continue those corporate-pleasing investment policies for the Obama Administration.

Consequently, Members of Congress who are concerned about U.S. trade losses need to intensely quiz Kirk about his intentions during the USTR confirmation hearings and then monitor closely what he does once he is on the job.  Too much is at stake to allow the old “wink-wink” to prevail. 

Front Page Photo -Barack Obama - Flickr © Some rights reserved and

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