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South Korea: Best Trade Deal Since NAFTA

What's that I hear? Oh, it's that giant sucking sound again.

A deal between the United States and South Korea should create at least 70,000 American jobs and could be the biggest trade pact since 1994’s North American Free Trade Agreement.

And we are supposed to be happy about this, right?!? One of the problems with government claims of job creation is that hidden costs are never accounted for. For example, let's say government funds an alternative energy project. Sounds great. But, the money comes from somewhere. Either the money comes from taxes – the process whereby the government takes your money via implied or actual force, or projects are financed by deficit spending. But deficits don't matter, right? Well, as you can see over in Europe, deficits do matter. While some of the problem may be short-term vs. long-term deficit financing, government spending -whether deficit financed or not – reduces economic growth.

Government spending can affect long-term economic growth, both up and down. Economic growth is based on the growth of labor productivity and labor supply, which can be affected by how governments directly and indirectly influence the use of an economy's resources. However, increasing the economy's productivity rate–which often requires the application of new technology and resources– can take many years or even decades to materialize. It is not short-term stimulus.

 

In fact, large stimulus bills often reduce long-term productivity by transferring resources from the more productive private sector to the less productive government. The government rarely receives good value for the dollars it spends. However, stimulus bills provide politicians with the political justification to grant tax dollars to favored constituencies. By increasing the budget deficit, large stimulus bills eventually contribute to higher interest rates while dropping even more debt on future generations. 

Eventually the perfect storm of reduced economic growth, interest payments on government debt, loss of confidence in the bond market, and unsustainable government promises of ever-increasing social welfare benefits combine to create an economic catastrophe.

But hey, the trade agreement with South Korea will create 70,000 U.S. jobs. That is laughable. 70,000 jobs. If you haven't watched the Perot video above, please do so. If you already have watched it, take a moment to listen to it again. Perot makes some valid points:

  • Trade deals rarely open foreign markets to the same degree that we open our market to foreign competition.
  • Economic dislocation – the euphemism used to describe global wage arbitrage – will continue until U.S. wages equal foreign wages. Foreign wages will increase, while U.S. wages will fall.
  • Trade deals, in combination with current law, allow businesses to move out of the U.S. and into markets that don't require paying for expensive (or any) health care.
  • Foreign countries often have few, if any, environmental regulations which significantly reduces the cost of doing business.
Meanwhile, in the U.S., Obamacare is forcing even the unions that supported Obama to reduce or eliminate insurance benefits. It's no stretch to forecast that those hurt by Obama's awful public policy will be magically transformed into "victims" of "greedy" insurance companies and placed into government ran health care. And how will we "pay" for these newly minted health care recipients – either more taxes, more deficit spending or some combination of the two. This, in turn, will reduce economic growth, forcing more companies to drop health insurance coverage, placing even more "victims" into government healthcare. Wash, rinse repeat.

Don't you worry though America, our shiny new trade deal with South Korea will "create" 70,000 new U.S. jobs. Never mind the massive job losses it will create by exporting our jobs overseas.

Back in my Army days, my roommate in the barracks bought a crappy little plastic car with a funny name – Hyundai. It was barely, if at all, a step above my crappy little plastic car the Geo Metro.

Now, the formerly crappy Hyundai makes stylish affordable cars, crossovers and SUVs that people want. Hyundai-Kia recently passed Nissan, and now ranks 6th in U.S. Auto Sales.

Kia's creative car advertising, combined with improvements yielded by sharing the same platform with Hyundai, are yielding increasing sales to the hip, youth market.

A new trade deal with South Korea, will likely accelerate that trend. Look for Hyundai-Kia to leapfrog other competitors. I recently spoke with a salesman for Hyundai. All of the vehicles come directly from South Korea. I imagine the only jobs created over here are at dealerships, and perhaps, advertising agencies – plus the usual add-on accessories and maintenance-related business created by any automobile.

Our economy is in the ditch by the side of the road, yet Obama is handing out the keys to a brand new shiny ride to our competition so they can laugh as they pass us by in the express lane. Yep, there's that sucking sound again – not just jobs permanently leaving our economy, but air as it rushes out of our politicians empty heads.
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