Chuckle and Analysis: Out-of-State Backers Claim Rounds Restores America’s Economic Powerhouse Status

The out-of-state chemical corporations spending money to keep Mike Rounds in the Senate and in their pocket say in their TV ad that thanks to our junior Senator, “America’s an economic powerhouse once again“:

The claim is tricky to refute, because the term “economic powerhouse” is a catchy marketing slogan with no firm definition. But the substance of the claim is reasonably clear: Rounds’s out-of-state backers want voters to believe that, thanks to Mike Rounds, America has reclaimed some sort of economic vigor and dominance that it had once upon a time, lost and did not have immediately prior to his election, and regained following his election thanks to actions he took, for which we should pat him on the back.

If we accept that reasonable interpretation, we can proceed to debunk it.

Even with Donald Trump fumbling about with the levers of power, the United States is the most powerful nation on the planet, in part due to our enormous economic output, but also thanks to our abundance of natural resources, friendly neighbors, and diversity (none of which Mike Rounds has made better). Our nation has enjoyed this economic primacy for as long as everyone reading this blog has been alive. In the past century, we have twice enjoyed unusual global dominance, due to unique historical factors:

When we think about power, there’s an inevitable tendency to look at trends over time. The question we tend to ask is whether Country X is getting stronger or weaker. Here in America, this approach is usually accompanied by a nostalgic yearning for some by-gone era where the United States was supposedly near-supreme and could do whatever it wanted. Leaving aside the obvious point that things were never really like this, the history of the past century does tend to make Americans more worried than they ought to be.

Why? Because there have in fact been a couple of historical moments when a combination of good fortune and skillful policy put the United States in a highly unusual position of primacy. The United States produced about 50 percent of gross world product in 1945 and had unmatched military power, mostly because the other major economies were mostly in ruins. This was a decidedly unnatural condition, however, and there was nowhere to go but down once the rest of the world recovered from the war. Similarly, the breakup of the USSR and the collapse of Japan’s bubble economy in the early 1990s briefly put the U.S. back on top by a significant margin, and all the more so because other potentially powerful countries (e.g., Japan and the EU) had been free-riding on the US and were punching below their weight [Stephen M. Walt, “Power and Decline: Why Other Countries Ought to Envy the United States,” Foreign Policy, 2012.10.01].

Our powerhouse cranks out a lot of power, but it is only dominant if other powerhouses have broken down. The fact that other powerhouses (Europe, Japan) start cranking again or that new powerhouses (China, Brazil) come online doesn’t mean that our powerhouse is no longer a powerhouse.

Amid the growth of other powerhouses, the United States has remained throughout our recent history a vigorous and dominant economy:

There is another way to think about America’s power position, and it ought to give comfort to those who worry that the country is slowly sliding into a position of vulnerability. Just compare the U.S. to other countries today, and ask yourself… Which states are masters of their own fates to a considerable extent, instead of having to worry constantly that others might threaten their independence or territorial integrity?

…From this perspective things still look pretty good for the United States. It still has the world’s largest and most diverse economy, and its per capita income is much higher than China’s, which means there is more wealth available to mobilize for shared national purposes. It has no serious enemies nearby.

…The U.S. economy isn’t doing great, of course, but it is performing better than most of the other industrial powers [Walt, 2012.10.01].

Read the date on Walt’s characterization of the powerhouse American economy: October 2012, just two short years before Mike Rounds convinced us to forget his own economic debacles and make him a Senator. In 2012, the United States economy was recovering from the Recession and still outpacing the rest of the world. There was no recession in 2013 or 2014. We have been the world’s largest economy for over a century. By some math, China has overtaken us, though even with four times as many eager consumers, they’ve taken a long time to catch up with us:

(Hmm… no 2014 pre-Rounds dip in that graph, and no 2015 post-rounds surge, just the same steady growth.)

…and that catching up is not happening because the United States has weakened economically; it is happening because China is getting stronger and investing in its future:

Closing this gap may just be a matter of time though, not least because China is committed to education, with around 4% of total GDP now being invested in training its people. China’s education system is the largest in the world. It has more university students than the EU and the US combined, and there is growing demand for higher education among its young people.

…as The Guardian reported recently, while China’s rise has been powered by “cheap, dirty” coal, it has been gradually reducing its dependence on fossil fuels. According to a 2016 UN report, the country is now the biggest investor in renewable energy globally, spending more than the US and Europe combined Andrea Willige, “The World’s Top Economy: the US vs China in Five Charts,” World Economic Forum, 2016.12.05].

Funny: Willige doesn’t mention that China is gaining economic strength by giving tax breaks to the big corporations making early ads for Rounds or whatever little else Rounds has voted for in his five years in the U.S. Senate. Willige does say that “in order to surpass the US’s highly diversified, tertiary economy, there’s more to do: China still needs to make the all-important transition from a resource-intensive manufacturing hub to a modern, consumer-driven economy.”

And again, notice the date on that article: in 2016 as in 2012, the United States was the standard for China and other competitors to target and emulate. When were we not the powerhouse that Rounds’s out-of-state friends say he has made us “once again”?

Where the American economic powerhouse has shuddered and fluttered, improvements have come from actions prior to and independent of Mike Rounds’s purported non-headline-seeking action. Consider manufacturing, as explained in this 2016 article:

Factory jobs are on the rise here, and many of these new jobs are coming back to North America from China, which is struggling to maintain its manufacturing capacity. Since March, 2010, when manufacturing employment in the U.S. hit a trough of 11.45 million jobs, nearly a million new factory positions have been created, most of them in the Southern states, particularly North Carolina, South Carolina, and Tennessee. Better still, the jobs are typically good ones: across that same five-year period, average hourly manufacturing wages have increased over ten per cent, to more than twenty dollars. On the whole, U.S. manufacturing, as measured by the Purchasing Managers’ Index, has steadily expanded.

…Perhaps the biggest stimulant to American manufacturing is the move toward reshoring. In recent years, companies have increasingly been bringing manufacturing jobs back to the U.S. from China and other countries. The practice received its most public boost in 2012, when General Electric announced plans to invest a billion dollars in an appliance plant in Louisville, Kentucky, reshoring four thousand jobs that had been in China and Mexico, and adding, over time, nearly twenty thousand factory positions at the plant’s regional suppliers. Walmart has also helped to stoke demand for U.S. manufacturing, thanks to an initiative, launched in 2013, to purchase an additional two hundred and fifty billion dollars worth of American-made goods by 2023, which it hopes will create as many as three hundred thousand new jobs [Jeffrey Rothfeder, “Why Donald Trump Is Wrong About Manufacturing Jobs and China,” The New Yorker, 2016.03.14].

Rothfeder notes that part of the motivation for reshoring is the increasing cost of Chinese labor:

For most businesses, the calculus in favor of reshoring or maintaining existing U.S. operations is obvious. Chinese hourly manufacturing wages rose about twelve per cent a year, on average, between 2000 and 2013 [Rothfeder, 2016.03.14].

In this case, China’s gain is our gain… and it’s not happening because of any vote Mike Rounds has cast between fundraisers.

The United States has without interruption in our lifetimes been a global economic powerhouse. But the global economy is getting more powerhouses. That global growth may decrease our relative dominance, but it need not decrease our vigor. However, in such a dynamic, multiplayer global economy, we will only remain a powerhouse if we increase our connections to the global show, tapping new buyers in new markets into which our power can flow. And on that count, Rounds’s facilitation of Trump’s reckless protectionism and disruption of global cooperation does more to harm America’s long-trem economic prospects than any illusory good for which his out-of-state backers are trying to assign him credit.