Posts Tagged 'politicians'

Global Trade War?

The “Buy American” provisions are in the bills passed by the Senate and House today. Will this lead to a global trade war? From the article:

The heated war of words over “Buy American” laws may be nearing a truce in Congress, but there are still fears among critics that it could spark a new global trade war.

The reworked stimulus bill that the House and Senate are due to vote on Friday has language on “Buy American” provisions that provides even tougher requirements to limit materials used in public works projects paid for by stimulus to those made in U.S. factories.

Many major steel producing countries, such as China, Brazil and Russia, will essentially be blocked from selling their products for use in construction and energy projects being paid for under the program.

But because the “Buy American” provision will not trump existing trade agreements, it allows companies in many major trading partners, such as Canada and the European Union, the chance to sell steel, pipes and other products that can be used in the projects.

Most economists fear a trade war and any kind of protectionism. It could set the U.S. and global economy back several decades. This stance is more of a political one which shows voters that politicians are protecting their jobs at home. At what cost though? WE, the consumer, end up paying more for products when there are trade barriers.

Since the “Buy American” provision won’t trump any existing trade agreements, Canada and the EU probably won’t mind. China, Brazil, and Russia will and could retaliate. It is also possible our politicians would use this to sign trade pacts with China, Brazil, and/or Russia. That would be fine if the trade pacts are mutual and neither country feels forced into signing.

The real concern I have is that other countries will copy our “Buy American” stance. They will say “the U.S. is closing their boarders to us so we should retaliate”. After all, Paul Krugman (Nobel Prize Economist) has shown there are cases where protectionism can benefit an economy. We are the biggest consuming nation and may countries depend on exporting their products to us. If we don’t buy, they will be in a world of hurt.


California Spends FIVE Times more on Prisoners than Students

From Dan Walters of the Sacramento Bee: 

The fastest growing segment of the state’s deficit-ridden budget, by far, has been its prison system, reflecting severe overcrowding, generous labor contracts and federal court pressure to reform inmate health care.

“Corrections,” an ironic misnomer, has jumped from less than $5 billion a year to more than $10 billion in the last decade, over twice as fast as school spending, the biggest budget item. It now costs about $45,000 a year to feed, clothe and medicate each of the state’s 170,000-plus inmates, or roughly five times what taxpayers spend on a typical public school student. And that doesn’t count what it costs to supervise tens of thousands of parolees.

The fact that California spends five times more on inmates than public school students is appalling! I do not have a clue why this is the case, or how it is in other states, but it seems¬†that our “corrections” system is VERY broken. This enormous expense in one reason for California’s budget woes.

California Spiraling towards Bankruptcy: Downgraded yet again!

California’s bonds downgraded by S&P:

The latest blow came with the second downgrading in four weeks by Standard & Poor’s of the Golden State’s remaining $8.7 billion of economic recovery bonds, or ERBs. These bonds are backed by sales-tax revenue, which is taking a hit as consumers in California, like the rest of the country, rein in their spending.

California will not have the ability to borrow any more! Even if California is able to borrow, the interest rates will be so high we will have to cut more out of the budget or raise taxes.

The California government needs to pass a budget yesterday!