Hospitals & Asylums
Economic Stimulus Package HA-20-1-08
By Tony
Sanders
Introduction / Economic Growth Overview / Balance of Payments / Balanced Budget / Conclusion / Bibliography
II. Balance of Payments
21. The U.S. current international trade
account deficit, that began in the 1970s, expanded sharply in the latter part
of the 1990s and the first half of the present decade. In 1996, the U.S.
deficit was $125 billion, or 1.6 percent of U.S. gross domestic product (GDP);
by 2004, it had grown to $640 billion, or 5.5 percent of GDP. The U.S.
current account deficit has widened further in the past two years. The international trade deficit rose from
$640 billion in 2004 (5.5 percent of GDP) to $812 billion in 2006 (6.2 percent
of GDP), although it fell a bit in the first quarter of this year, to $770
billion at an annual rate. In 2007 the USA beat the trillion dollar account
deficit. Not even the most pessimistic
reports of the President dispute this fact.
An account deficit is defined as the sum of the budget and international
trade deficit in goods. More obscure
methods, such as calculating the international trade in services, result in
different figures. Since 2004 the
account deficit has been over a trillion dollars. In 2004 it was -$1,077 billion, in 2005 -$1,183 billion, in 2006
the account deficit began to decline at the end of the year to -$1,007 billion,
this 2007 it is down to an estimated - $964 billion. Preliminary estimates for the trade deficit in 2007 are around
-$789 billion; a slight increase over 2006 deficit of -$759 billion that
actually improved on the -783 billion of 2005.
Final figures for 2007 could be much lower. The budget deficit is estimated between -$150 and -$205 billion,
down from a high of -$400 billion in 2005.
Wherefore the account deficit for 2007 is estimated between -$900 and
-$999 billion - at -$964 billion.
US International Trade Estimates by Quarter 2007
|
|
2007 |
2007/ Q1 |
2007/ Q2 |
2007/Q3 |
2007/4Q est. |
Goods Balance |
-789 |
-201 |
-202 |
-196 |
-190 |
|
Exports Goods |
1,147 |
270 |
279 |
298 |
300 |
|
Imports Goods |
-1,936 |
-471 |
-481 |
-494 |
-490 |
Source: BEA
22. The Dow, the
S&P and the Nasdaq all tumbled during the fourth quarter and are down several
percentage points so far for 2008. The
Dow Jones industrial average was down 1.51 percent, the Standard & Poor's
500 index was down 0.75 percent, and the Nasdaq composite index was down 2.58
percent (Read 2008). Real exports
picked up in the second quarter, increasing 7.6 percent after increasing 1.1
percent. Exports of goods accelerated and contributed 5.10 percentage points to
growth in real exports of goods and services. The acceleration reflected
upturns in industrial supplies and materials and in nonautomotive capital goods
and accelerations in automotive vehicles, engines, and parts and in foods,
feeds, and beverages. In contrast, “other: exports turned down, and
nonautomotive consumer goods slowed. Exports of services accelerated, mainly reflecting
accelerations in other private services and in travel services. Passenger fares
turned up. Real
imports turned down, decreasing 3.2 percent after increasing 3.9 percent. The U.S. trade deficit declined slightly in
July as record exports of farm goods, autos and other products offset a big
jump in foreign oil prices. The trade
deficit edged down 0.3 percent in July to $59.2 billion (euro42.91 billion),
compared with $59.4 billion (euro43.06 billion) the month before. For much of the year the deficit ran at an
annual rate of $711 billion (euro515.4 billion), down from $758.5 billion
(euro549.84 billion) in 2006. The end of the year was however expensive as the
result of the spike in oil prices. Economists believe the trade balance will
finally shrink this year after setting five consecutive records as American
exporters benefit from strong economic growth in many countries overseas and a
weaker dollar against many currencies. That makes U.S. products cheaper on
foreign markets and imports more expensive for American consumers (Commerce
Department 2007).
Balance of US International Trade in Goods and Service 1970-2006
|
|
1970 |
1975 |
1980 |
1985 |
1990 |
1995 |
2000 |
2003 |
2004 |
2005 |
2006 |
2007 |
|
Total Balance |
4 |
16 |
-13 |
-115 |
-78 |
-92 |
-380 |
-495 |
-611 |
-716 |
-794 |
|
|
Goods Balance |
4 |
11 |
-23 |
-121 |
-111 |
-174 |
-460 |
-547 |
-665 |
-783 |
-838 |
-789 |
|
Services Balance |
30 |
5 |
10 |
6 |
34 |
83 |
-80 |
52 |
54 |
66 |
80 |
|
|
Total Exports |
60 |
139 |
281 |
302 |
552 |
812 |
1,096 |
1,016 |
1,152 |
1,275 |
1,446 |
|
|
Exports Goods |
45 |
110 |
226 |
222 |
397 |
583 |
784 |
713 |
808 |
895 |
1,023 |
1,147 |
|
Exports Services |
15 |
29 |
55 |
80 |
156 |
229 |
312 |
303 |
344 |
381 |
423 |
|
|
Total Imports |
-56 |
-123 |
-294 |
-417 |
-630 |
-904 |
-1,476 |
-1,511 |
-1,763 |
-1,992 |
-2,204 |
|
|
Imports Goods |
-41 |
-99 |
-249 |
-343 |
-508 |
-757 |
-1,244 |
-1,261 |
-1,473 |
-1,677 |
-1,861 |
-1,936 |
|
Imports Services |
-15 |
-24 |
-45 |
-74 |
-122 |
-146 |
-232 |
-250 |
-290 |
-315 |
-343 |
|
Source: BEA Foreign Transactions in the National Income and Product Accounts 1970-2006
Current Account Balances (Billions of U.S. dollars)
|
Country or region |
1996 |
2000 |
2004 |
2005 |
2006 |
|
Industrial |
31.1 |
-304.7 |
-296.5 |
-502.5 |
-607.3 |
|
United
States |
-124.8 |
-417.4 |
-640.2 |
-754.8 |
-811.5 |
|
Japan |
65.7 |
119.6 |
172.1 |
165.7 |
170.4 |
|
|
|||||
|
77.3 |
-37.0 |
115.0 |
22.2 |
-11.1 |
|
|
France |
23.4 |
22.3 |
10.5 |
-19.5 |
-28.3 |
|
Germany |
-14.0 |
-32.6 |
118.0 |
128.4 |
146.4 |
|
Italy |
36.8 |
-6.2 |
-15.5 |
-28.4 |
-41.6 |
|
Spain |
-1.4 |
-23.1 |
-54.9 |
-83.0 |
-108.0 |
|
|
|||||
|
Other |
12.9 |
30.0 |
56.6 |
64.4 |
45.0 |
|
Australia |
-15.4 |
-14.9 |
-38.5 |
-41.2 |
-40.9 |
|
Canada |
3.4 |
19.7 |
21.3 |
26.3 |
21.5 |
|
Switzerland |
22.0 |
30.7 |
50.4 |
61.4 |
69.8 |
|
United
Kingdom |
-10.5 |
-37.6 |
-35.4 |
-53.7 |
-88.3 |
|
|
|||||
|
Memo: |
155.9 |
112.7 |
343.7 |
252.3 |
204.2 |
|
|
|||||
|
Developing |
-82.8 |
124.7 |
296.5 |
507.9 |
643.2 |
|
Asia |
-40.2 |
77.0 |
172.4 |
245.1 |
352.1 |
|
China |
7.2 |
20.5 |
68.7 |
160.8 |
249.9 |
|
Hong
Kong |
-4.0 |
7.0 |
15.7 |
20.3 |
20.6 |
|
Korea |
-23.1 |
12.3 |
28.2 |
15.0 |
6.1 |
|
Taiwan |
10.9 |
8.9 |
18.5 |
16.0 |
24.7 |
|
Thailand |
-14.4 |
9.3 |
2.8 |
-7.9 |
3.2 |
|
|
|||||
|
Latin America |
-39.1 |
-48.1 |
20.4 |
34.6 |
48.7 |
|
Argentina |
-6.8 |
-9.0 |
3.2 |
3.5 |
5.2 |
|
Brazil |
-23.5 |
-24.2 |
11.7 |
14.2 |
13.6 |
|
Mexico |
-2.5 |
-18.7 |
-6.7 |
-4.9 |
-1.5 |
|
|
|||||
|
Middle East |
15.1 |
72.1 |
99.2 |
189.0 |
212.4 |
|
Africa |
-5.2 |
7.2 |
0.6 |
14.6 |
19.9 |
|
Eastern Europe |
-18.5 |
-31.8 |
-58.6 |
-63.2 |
-88.9 |
|
Former Soviet
Union |
5.2 |
48.3 |
62.6 |
87.7 |
99.0 |
|
|
|||||
|
Memo: |
-47.4 |
56.5 |
103.7 |
84.3 |
102.2 |
|
|
|||||
|
Statistical discrepancy |
-51.6 |
-180.0 |
0.0 |
5.4 |
35.9 |
23. The trade gap
with China is expected to hit an all-time high above $250 billion this year.
The imbalance has been blamed as contributing to loss of 3 million
manufacturing jobs in the United States since 2000. American manufacturers contend that the yuan is undervalued by as
much as 40 percent against the dollar, making Chinese products cheaper in this
country and U.S. goods costlier in China.
China modified its currency system in July 2005. Since then, the yuan has
risen in value by 12.1 percent. That, however, is far less than what U.S.
manufacturers say is needed to address the trade gap. The U.S. deficit with China was $233 billion in 2006, America’s
largest ever with a single country. It is on track to surpass that amount this
year, perhaps topping $250 billion even though some Chinese products have been
the subject of high-profile recalls. That included unsafe tires and toys with
lead paint (Crutsinger 2007). In China, rates of both saving and
investment rose, but saving rates rose more, leading to an increase in that
country's current account surplus of about $60 billion. Outside of developing Asia, oil exporters in
the Middle East and the former Soviet Union were also important contributors to
the large increase in emerging-market current account balances. The
combined current accounts of the two regions increased from a surplus of $20
billion in 1996 to a surplus of $162 billion in 2004, an increase of about $140
billion. The total value of import duties was $19.9 billion. (Stewart, Stone & Streitwiser 2007)
24. In the US service economy only 0.7% are still engaged in farming, forestry, and fishing, 22.9% in manufacturing, extraction, transportation, and crafts, and 34.7% in managerial, professional, and technical, 25.4% in sales and office and 16.3% in other services.
The
manufacturing index of the Institute for Supply Management registered 47.7 in
December 2007, down 3.1 percentage points from the 50.8 in November 2007. A
reading above 50 indicates growth; below that level indicates contraction. December 2007 was the first month that
manufacturing failed to grow since January 2007, when the index was 49.3. It
has been four years and eight months since the index was lower, when it hit
46.4 in April 2003. The Dow Jones industrials fell more than 160 points in the
beginning of the year and continues to open several hundred points down from
2007 (Tong 2008).
In 2005 manufacturing employed 14.3 million workers in the
United States and another 6 million in related industries such as wholesaling
and finance. Nearly 3 million jobs were lost between 2000 and 2003. In
2005, the U.S. manufacturing sector, in terms of GDP, was close to $1.5
trillion. U.S.
manufacturers exported $782 billion of goods overseas in 2005, or nearly two-thirds
of total exports. Nearly 40 percent of exports go to neighboring NAFTA
countries (NAM 2005).
The US Census Bureau reported that in the USA there are as estimated 438,301 wholesalers employing 6 million employees with a payroll of $255 billion and shipments totalling $4.376 trillion. The retail trade has 1,115,902 establishments employing 15 million employees with a payroll of $307 billion and sales totalling $3.173 trillion (US Census 2006). A third of the internatioal trade deficit can be attributed to to oil alone. In 2005 the US exported $22.7 billion and imported $251.9 billion in petroleum for a trade deficit of –229.2 billion in petroleum alone (US Census, BEA 2006).
Private goods-producing industries accounted for about 18 percent of the US economy, compared with about 21 percent in 1997. Private services-producing industries accounted for about 69 percent of GDP in 2002, compared with about 66 percent in 1997. Government’s share of GDP was 13 percent in 2002, unchanged from 1997. Health care-related services industries maintained their share of GDP at 6 percent in 2002. Hospitals value added increased about 44 percent; nursing and residential care facilities value added increased about 48 percent. At the same time, pharmaceutical and medicine manufacturing value added grew about 78 percent. The average increase across all industries was 28 percent. Electronic information-based industries accounted for less than 1 percent of total GDP and about 11 percent of the information sector’s value added.
The 2002 accounts are the first to provide detailed information on electronic shopping, electronic auctions, Web search portals, Internet service providers, and Internet publishing and broadcasting as well as data on the interactions between the Internet industries and all other industries. Private goods-producing industries accounted for 28 percent of gross output, compared with 33 percent in 1997. Private services-producing industries accounted for 61 percent of the total, compared with 59 percent in 1997.
Government gross output accounted for the remaining 11 percent in 2002, up from 8 percent in 1997. Intermediate purchases of materials and services were about $9 trillion, with 39 percent purchased by private goods-producing industries, 51 percent purchased by private services-producing industries, and the remaining 10 percent purchased by government. On average, intermediate purchases of materials, energy, and services accounted for 44 cents of each dollar of gross output. Value added accounted for the remaining 56 cents (compensation accounted for 32 cents, taxes on production and imports less subsidies for 4 cents, and gross operating surplus for 20 cents). This distribution was virtually unchanged from 1987 (Stewart, Stone & Streitwieser 2007).
25. The WTO 2007
draft text on Anti-dumping, subsidies and
countervailing measures and fisheries subsidies addresses all aspects of
paragraph 28 of the Doha Declaration., anti-dumping, subsidies and
countervailing measures and fisheries subsidies. A product is to be considered as being dumped if it is
introduced into the commerce of another country at less than its normal
value. A determination of injury for
purposes shall be based on positive evidence of an objective examination of
both (a) the volume of the
dumped imports and (b) the effect of the dumped imports on prices in the
domestic market for like products. A subsidy shall be deemed to exist if there
is a financial contribution by a government or any public body. Except as provided in the Agreement on
Agriculture, subsidies contingent, upon the use of domestic over imported
goods, shall be prohibited. Assistance
for research activities conducted by firms or by higher education or research
establishments on a contract basis with firms if the assistance covers not more
than 75 per cent of the costs of industrial research or 50 per cent
of the costs of pre‑competitive development activity, shall be considered
non‑actionable, to the prohibition of subsidies. Subsidies, the benefits of which are conferred on any
vessel engaged in illegal, unreported or unregulated fishing are prohibited. Subsidies exclusively for improving fishing or service
vessel and crew safety shall not be prohibited under the Fish Stocks Agreement, the Code
of Conduct, the Compliance Agreement.
It is remarkable that international trade is becoming regulated under a
single set of rules whose scope is continuously expanding.
26. The benefits
of the development of standardization for enhancing the liquidity of financial
markets have a long history. One particularly clear example dates back to the
development of exchange-traded commodities futures contracts in the mid-1800s.
The standardization of the futures markets improved the flow of information to
market participants, reducing transaction costs and fostering the emergence of
liquid markets. In the early days of the Chicago Board of Trade, in the
mid-1850s, standardization took the form of creating “grades” or quality
categories for commodities to break the link between ownership rights and
specific lots of a physical commodity. In effect, standardization and related
controls reduced trader information requirements and, thus, their transaction
costs. In 1865, the Chicago Board of Trade standardized the delivery dates for
the contracts, thus fostering the emergence of liquid markets in which traders
could readily hedge the risk of price changes in the commodities and contracts.
A final step toward standardization came years later with the adoption of the
clearinghouse for the exchange as the common counterparty to all of the
contracts traded on the exchange. The benefits of standardization can be
realized not only on organized exchanges but also in over-the-counter markets.
Standardization reduces uncertainty about the instruments, which lowers
transaction costs and facilitates price discovery and market liquidity (Krosner
2007).
Year |
Petroleum Balance |
Exports |
Imports |
|
2003 |
-120,402 |
12,693 |
-133,095 |
|
2004 |
-163,378 |
17,082 |
-180,460 |
|
2005 |
-229,191 |
22,664 |
-251,856 |
|
2006 |
-278,000 |
22,000 |
-300,000 |
27. President Bush urged OPEC nations to
put more oil on the world market and warned that soaring prices could cause an
economic slowdown in the United States.
A barrel of light, sweet crude surpassed $100 a barrel on the New York
Mercantile Exchange. The World Bank
predicts that oil prices are likely to decline gradually as record crude prices
weaken demand so that a barrel of crude oil will cost $84.10 on average in 2008
and fall by 6.8 percent to $78.40 a barrel in 2009. It estimates that the
average price of crude oil in 2007 was $71.20 a barrel. If you look at the
fundamentals, there is scope for lower oil prices. The World Bank forecasts
more or less a sustained, gradual decline in the price of oil (Wong 2008). The Organization of Petroleum Exporting
Countries next meets Feb. 1 in Vienna, Austria, to consider increasing output.
OPEC oil accounts for about 40 percent of the world's needs, and the Saudis
account for 30 percent of the organizations product. Oil is commodity that
requires investment, exploration, a lot of capital. A lot of these oil producing countries are full out in terms of
what they can produce. In his
petition to the Saudi King Adullah, President Bush declared,
“High energy prices can damage consuming
economies. Paying more for gasoline
hurts some of the American families”.
The Saudi oil minister, Ali Naimi, said,
“The U.S. economy is significant to the oil
market and demand. I'm sure no one will look with pleasure on a recession in
the U.S. On the contrary, all our effort is to maintain prosperity and growth
in all countries, particularly the number one consuming nation in the world”.
But the minister said oil is not the only
reason for the slowing U.S. economy.
"The concern for the U.S. economy is
valid, but what affects the U.S. economy is more than the supply of oil. The kingdom will raise oil production when
the mnarket justified it. Higher prices
reflect supply and demand, and that there is little excess capacity in the
marketplace”.
Bush retorted, “a growing demand for oil,
especially from fast-growing India and China, is straining supply and lifting
prices” (Hunt & Gearan 2008).
28. A special commission is urging the
government to raise federal gasoline taxes by as much as 40 cents per gallon
over five years as part of a sweeping overhaul designed to ease traffic
congestion and repair the nation's decaying bridges and roads. The two-year study by the National Surface
Transportation Policy and Revenue Study Commission, that is not yet public,
recommended broad changes after the devastating bridge collapse in Minneapolis,
which killed 13 people and injured about 100, to avoid future disasters. Under the recommendation, the current tax of
18.4 cents per gallon for unleaded gasoline would be increased annually for
five years - by anywhere from 5 cents to 8 cents each year - and then indexed
to inflation afterward to help fix the infrastructure, expand public transit
and highways as well as broaden railway and rural access to meet a growing
demand for alternatives to congested highways.
The gas tax has not been increased since 1993, and recent efforts by
Congress to raise it have faltered over the objections of the Bush
administration. The tax increase being proposed is designed to take effect in
2009, after President Bush leaves office.
The 12-member commission's proposals, which are expected to cost $225
billion each year for the next 50 years, face internal division. The
commission's chairwoman, Transportation Secretary Mary Peters, and two other
members oppose gas tax increases and were issuing a dissenting opinion to the
report calling instead for private-sector investment and tolls. The two commissioners opposing a tax
increase are Maria Cino, Peters' former deputy who is organizing the 2008
Republican National Convention, and Rick Geddes, a Cornell University professor
who has served as a senior staff economist in the Bush administration on the
President's Council of Economic Advisers (Yen 2008).
29. On average, the value of the dollar
fell by 2.1 percent against the currencies of the United States’ major trading
partners in 2007, and CBO expects declines of between 2 percent and 3 percent
in 2008 (Wong 2008). Real
export growth, which has generally been strong since mid-2003, has been
supported by strengthening economic activity in many foreign countries and by
the substantial depreciation of the U.S. dollar against many foreign currencies
since early 2002. In contrast, real import growth has generally weakened from
its pre-2005 pace, responding to the relatively slower growth in U.S. gross
domestic purchases as well as higher import prices arising from the
depreciation of the dollar (Weinberg, Hanson, Howard 2008). A weaker dollar will benefit both US
exporters and developing countries with dollar debt interested in harnessing
better technology. Rapid technological progress in developing nations has
helped to reduce the proportion of people living in absolute poverty from 29
percent in 1990 to 18 percent in 2004. Technological progress increased 40-60
percent faster in developing countries than in rich countries between the early
1990s and early 2000s (Wong 2008). The
weaker dollar has the effect of decreasing US purchasing power, increasing
markets for US goods and services. The
weaker dollar also gives rise to inflationary pressure as the result of national
dependency upon oil.
30. To be
effective, in more cash strapped circumstances, the United States will need to reaffirm support for achieving the health
and poverty related Millennium Development Goals (MDGs) to maximize the use of
their technological knowledge. Despite
a 34% reduction in global infant death rates between 1975 to 1995, huge
improvements in immunization coverage for children less than one year old, from
20% to 80%, between 1980 and 1990, and improvement in population access to safe
water and sanitation, health for all fell short of resolving health inequities
(Kanchanachitra, Wibulpolprasert & Tangcharoensathien 2008). Approximately $10 billion per year is needed
to install low-cost water and sanitation services, and a further US$ 15 to 20
billion a year to maintain current levels
of service and make improvements.
To finance the cost of installation per-capita spending of $8 for water and $28
for sanitation is needed. Developing
countries in the WHO Western Pacific Region needs 48% of the total spending for
water, followed by 28% for the WHO African Region. For sanitation the WHO
Western Pacific Region and WHO South-East Asia require 30% of total spending
each and the WHO African Region needs 24% (Hutton & Bartram 2008). In 2005 the Global Immunization Vision and
Strategy (GIVS) aimed to reduce vaccine-preventable disease mortality and
morbidity by two-thirds by 2015 compared to 2000. About
$ 25 billion is estimated to be available for vaccines, for the 2006–2015
period, of which 16% is projected to come from national governments, 15% from
the GAVI Alliance and 40% from external donors. Between 30% and 40% of need is
unmet, an annual shortfall of more than US$ 1 billion. By 2015, more than 70
million children in the world’s 72 poorest countries can be protected annually
against 14 major childhood diseases if an additional US$ 1 billion per year
that can be invested towards immunization to strengthen health systems and
deliver other life-saving interventions such as those against malnutrition,
malaria and intestinal worms (Wolfson 2008).
International Assistance 1990-2010
