The “Deflation” Factor by Pat Choate (NAPSA)—Imaginea national economic whirlpool in which consumer confidence continues to fall, the supply of goods vastly exceeds the demand, prices persistently fall, and no stimulus can stop an accelerating financial free-fall. Such an economic nightmare has a name: “Deflation.” Japan has been Choate “ in its unbreakable —_——-_ grip for almost a decade. Now, strong signs suggest the U.S. economy may be slipping into a similar vortex. In June 2003, for instance, more than a quarter of U.S. industrial capacity is idle. New business investment continues to fall and joblessness is growing. In a May appearancebefore the Joint Economic Committee of the Congress, Alan Greenspan, the Federal Reserve’s Chairman, warned that deflation is now a possibility, though “minor” he said. In prior times, the Federal Reserve could deal with this by cutting interest rates and thereby encourage spending by business and consumers. However, the Federal Reserve’s short-term rate is already at 1.25 percent, its lowest level in more than four decades. In addition, the Federal Gov- ernment could run deficits and use that extra purchasing power to stimulate domestic demand. Yet, the federal debt is now more than $6 trillion and U.S. government is already running budget deficits that are at historic levels. How then can the U.S. encourage business to increase spending in the U.S.A. on factories, equipment and workers? The answeris obvious: Change U.S. trade policy. The current trade policy encourages ruthless global price wars. It forces companies to leave America to stay alive. It pits U.S. workers against penny-wage labor in places such as China. And it compels the persistent price drops and deflationary pressures that now threaten the U.S. economy. Every day, 365 daysof the year, the United States now imports almost $1.5 billion more goods than it makes. This is the economic demand the U.S. economy needsfor its stimulation. Fill most of that demand from domestic production and the threats of deflation, recession, and mass joblessness will quickly disappear. Manufacturing in the U.S.A. matters! Mr. Choate is director of the Washington, D.C.-based Manufacturing Policy Project.
