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Feb. 16, 2007 - Rush Limbaugh Program
36:40
February 16, 2007, Friday, Hour #1
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Welcome to today's edition of the Rush 24-7 podcast.
That is absolutely right, Johnny Donovan.
Look, ladies and gentlemen, Rush heroically made it through yesterday's show.
But I think he had an illness very similar to mine about a couple of weeks ago.
I was laying in bed, you know, it was like one o'clock at night.
I was by myself, and I was coughing, and it was pain all over my body.
And matter of fact, it was so, you know, I could hardly breathe.
I thought about calling 911 at the time, and I said America could lose its great American.
So, anyway, I recovered, and Russia will probably recover as well.
But however, Roger Hedgecock is going to be in on Monday, President's Day.
And hopefully, Rush will be back Tuesday.
But, ladies and gentlemen, what we have in store today, we're going to have a modified Open Line Friday.
But there's some issues I want to talk about.
And first, the first issue is I was reading the New York Times, and you know, a lot of times you're kind of disappointed when you read the New York Times.
But on the editorial page, they had actually a fairly decent editorial.
And the title of the editorial is The Auto Workers Pain.
And they point out that Daimler Chrysler has announced that it's going to cut 13,000 jobs in North America.
And in 2006, Ford and General Motors offered buyouts to 200,000 hourly workers.
And the Times article goes on to say that these losses stoke fears that America's manufacturing base is disappearing and there's deindustrialization.
And they point out that there's been a loss of 3 million American factory jobs since 2000.
But however, the article fails to or neglects to mention that there have been 9 million jobs created since 2000.
And so here's what we have with this manufacturing jobs that all you people are upset about.
We find that the manufacturing employment is going down, but however, manufacturing output is going up.
And matter of fact, according to a, I guess it, let's see where it is at.
Oh, oh, according to the United Nations, a study done for that, for them, the United States accounted for 21% of the world's manufacturing output in 2000, and roughly the same in 2005.
And while Americans, you know, Americans are only 5% of the world's population, but they're producing 21% of the manufacturing output.
And there's, let's say, we produce a record $1.5 trillion in goods that year.
Now, a lot of Americans are in a tizzy over this whole business about trade deficits.
And we have unprecedented international trade deficits.
But should we really be worried about the trade deficits?
Now, a lot of people think, well, a trade surplus is good and a trade deficit is bad.
Let me give you some information, folks.
My colleague, Professor Don Boudreau, he's the new chairman.
He succeeded me as chairman of the George Mason's very distinguished economics department.
And he wrote a piece a couple of weeks ago.
It's called, If Trade Surfaces Are So Great, the 1930s Should Have Been a Booming Decade.
And matter of fact, you can read this by going to cafehayek.com.
It's Hayek H-A-Y-E-K.
And here's what he said in that article.
During those 10 years, the 10 years of the Great Depression, we had a significant trade surplus with exports totaling $26 billion and imports totaling only $21 billion.
And matter of fact, during the 1930s, we had a trade surplus in nine of those 10 years, but we had an economic disaster in our country.
And matter of fact, a disaster made worse by the President Roosevelt's New Deal legislation.
And what we find, folks, is that you cannot draw simplistic causal connections between trade deficits and surpluses and on the one hand and economic welfare and growth on the other hand.
Now, there's so much nonsense written about international trade.
People say things like, well, we trade with, say, Japan or China, but that's nonsense.
I mean, it might be a convenient expression to say that U.S. trades with Japan, but is it literally true?
Now, here's the question I'm asking, and I want somebody to call up and tell me whether it's true or not, or whether they think to the contrary.
That is, when people say that U.S. trades with Japan, do they mean that the United States Congress and President Bush trade with the national deit of Japan, that's the Japanese legislature, and Prime Minister Shinso Abe?
Or is it U.S. and Japanese private parties as individuals and corporations who trade with one another?
Let's break it down a little further.
That is, when I purchased my Lexus a couple years ago, a Lexus produced by Toyota, did I deal with the United States Congress, the Japanese deit, George Bush, or the Prime Minister of Japan?
Or, this is an important test, or did I deal with Toyota and its intermediaries?
Now, if we think of, if we had the mindset that international trade is something that occurs between, let's say, the United States and Japanese governments, then all Americans as voters have a say-so.
But what is the basis of anybody having any say-so when one American engages in peaceable voluntary exchange with another person, be they Japanese, Korean, British, Chinese, or another American?
But people say, well, Williams, we're losing our manufacturing jobs.
Well, that might be a good thing.
We lost a lot of our agricultural jobs.
That is, at the turn of the century, let's say in 1900, 40% of Americans were involved in agriculture.
And now, about 2.5%.
Are we any worse off?
And then there's another, you know, what's so great about a manufacturing job?
I mean, let's pretend that you are a textile worker.
Or think of yourself as being a textile worker or somebody else being a textile worker.
Do you think that textile worker is saying about his little daughter, I hope my little daughter Sally grows up and one day have her own sewing machine?
Or do you think that they might say, well, I hope my little daughter Sally has a nice service job, such as being an accountant, or being a nurse, or being a doctor, or being a professor of economics?
I think it's the latter.
That is, people deride or demean service jobs as if they're not very, very important.
Anyway, I wish to congratulate the New York Times editorial writer who wrote the piece The Auto Workers Pain for having a little bit, not listening to the resident economist, who is Paul Krugman.
But I think that in the wake of the new elections or the successes of the Democratic Party, we're going to find even greater pressures for protectionist legislation, that is, tariffs and quotas on foreign goods.
And who will tariffs and quotas help, and who will be harmed by them?
Well, the people who will be helped by tariffs and quotas are those people, business owners or workers in the so-called protected industry that is protected from international competition.
The people that will be hurt are American consumers in general.
They will have to pay higher prices.
Well, people might say, well, Williams, well, look, the Japanese or the Chinese, they have all kinds of trade restrictions.
Well, that's okay for them to have trade restrictions.
That is, if they want to screw their own people, let them do it.
I mean, for example, the Japanese, I don't know the precise figures, I haven't kept up with it lately, but I think that the Japanese citizens pay two or three times the world price for rice.
And that's because of tariffs and restrictions on the importation of rice to China.
So the Japanese, in order to protect the Japanese farmers, rice growers.
Now, how do we retaliate against Japan for having those restrictions on rice?
Should we say, should our legislature say, well, look, since the Japanese are screwing their consumers, we ought to get even with them by screwing American consumers.
That is, to make Americans pay two or three times the world price for sugar or rice or other imports.
I mean, that is the height of stupidity.
And so my point of view is that if Japan wants to screw its citizens, let them go ahead and do it.
But we should not retaliate by making our consumers pay higher prices.
Milton Friedman, my colleague, my late colleague Milton Friedman, he explained it this way one time.
He said, look, if you and I are in a rowboat at sea, and if I shoot, if I take my gun and shoot a hole in my end of the boat, what are you supposed to do?
Are you supposed to retaliate by shooting a hole in your end of the boat?
He says to do so would be highly stupid because you'll send both of us down instead of sending, and you would not improve the situation.
Folks, we'll be back with a bunch of your calls after this.
We're back, and it's Walter Williams sitting in for the recovering Rush Limbaugh.
And Rush, hopefully, Rush will be back on Tuesday, but we have Roger Hedgecock in on President's Day.
With this New York Times editorial, there's another little feature, and it talks about Toyota.
Well, American cars, car manufacturers are having all kinds of problems.
Toyota reported record profits and sales this year.
And matter of fact, it's something interesting here as well.
Another little tidbit in this editorial is that Toyota provides 29,000 manufacturing jobs in the United States.
Now, what that shows, ladies and gentlemen, all you people who want to call for protectionist measures, it shows that foreigners are willing to invest trillions of dollars in the United States.
I mean, they just can't find a better place to put their money.
Now, what do you think about a country?
You know, people in a tizzy over this international trade and deficit.
Now, what do you think about a country whereby people all over the world are chomping at the bit to put their money into?
Well, that says something that's very, very good about the country.
It says they have confidence in the stability in the United States.
They have a confidence in a high rate of return.
So, people who are calling for protectious measures, they are people who are calling for us to be less wealthy in a less robust economy.
Folks, let me get out the number.
So, you guys can call.
We've got a bunch of calls that we'll get to in a minute.
And you can be on with us by calling 800-282-2882.
And let's go to the phones and take a call from Steve from Des Moines, Iowa.
Welcome to the show, Steve.
Hey, Dr. Walter, you are dead on, and I'm glad it's a subject you're bringing up.
You know, if you go back and just look at farming here in the heartland, as you alluded to, 40% of the labor that comprised GDP in 1900 was done on the farm.
Well, now it's less than 2%, but it's not because the farmers have done a bad job, it's because of the productivity gains.
And that was one of the things that Greenspan hit on an awful lot as well.
And the other thing that kind of cracks me up is everybody's so concerned about, quote-unquote, our deficit.
Well, look at what happened in Japan, a giant contraction, a deflationary period, because there were continent savers.
Yes, we spend money here, but the productivity gains and the wealth that we create allowed our economy to expand threefold over theirs in the same period, and they're still digging out from a deflationary period.
So you're dead on it.
Unfortunately, most Americans don't realize that.
And thank you very much.
You're absolutely right.
And the way that, and I believe that we don't measure savings properly.
That is, we do not include the kind of capital goods that Americans are investing in that don't show up in normal savings and stocks and bonds and IRAs and kyos and other kinds of programs like that.
Let's go back to the phones and welcome David from New Madrid, Missouri.
Welcome to the show, David.
Good morning.
Thank you for taking my call, Dr. Williams.
Yes.
I would like to offer an open line Friday questions specifically for you.
You're probably no doubt aware of the cartoons Ted Mellard Fillmore by Bruce Tinsley.
Yeah.
Okay.
Have you seen in recent days where he has been trying to draft Dr. Walter Williams?
Yes, you would be so interested.
And the second question, where could I sign up?
Well, thank you very much.
I'm very flattered.
And for those of you who aren't aware, Bruce Tinsley, he's the cartoonist, and he has a feature called Mallard, and it's in a whole bunch of newspapers across the United States.
And Mallard is a duck.
And I have been drafted for the United States presidency by a duck, which is probably unprecedented in American history.
But down through the years, I've been flattered by many of my fellow Americans that I should run for high political office.
And I'm flattered.
I'm deeply flattered.
But however, my response, and it might be somewhat flippant response, I tell my fellow Americans that in order to win high political office in our country, I would have to rise above principle and do the right thing.
That is, I would have to sound like the rest of them.
And ladies and gentlemen, that's too heady a trick.
And moreover, if the American people would elect a person like me to be president of the United States, they would not need me because they would.
Look what kind of guy I am.
I believe in obedience to our rules of the game, namely the United States Constitution.
And most politicians, those politicians in Washington, they have utter contempt for the United States Constitution.
I only know of three, two or three congressmen, that if the founders of our nation came back, if they were some miraculously resurrected from the dead, if they were to come back,
they would not have any respect for the members of Congress and the White House except for two or three congressmen and my longtime friend Ron Paul, Congressman Ron Paul from Houston, Texas, would be one of them.
And you might say, well, what is this guy talking about?
No respect for the United States Constitution.
Well, if you read the United States Constitution, you read it carefully, in Article 1, Section 8, it says what Congress can do.
And the Constitution, and if it's not in the Constitution, well, Congress does not have authority to do it.
And matter of fact, there's 21 things that the Congress can do.
And there's no authorization for handouts for farmers.
There's no authorization of bailouts and no authorization for food stamps, et cetera, et cetera.
But, however, anyone arguing those points would not be elected president of the United States.
We'll be back with more of your calls after this.
We're back.
And for those of you who just tuned in, this Walter Williams sitting in for Russia, who has a bit of illness, you know, and Kit Carson called me yesterday.
He almost didn't get me because I was on the way out of my house.
Mrs. Williams was shoveling our driveway, and I was on the way out of the house to get her a cup of hot chocolate because she was shivering out there while she was doing it.
But just as I closed the door, I heard the telephone ring.
And so I said I answered.
And so fortunately, I'm up here substituting today.
There's another New York Times study, story today.
And it's kind of related to another story.
And that is, it's a story, it says numbers of people are fleeing Iraq.
And it's estimated by some world body, some International Organization for Migration, that a million people will flee their homes this year.
And the United States will graciously accept 7,000 Iraqis in the United States this year.
Anyway, they're fleeing.
And okay, before I say why they're fleeing, you probably know why they're fleeing.
But there's a related story, and it says that people are fleeing New Orleans.
And the kind of interesting thing about it is that these people are fleeing Iraq and New Orleans for many of the same reasons.
For example, in New Orleans, many of the people are leaving.
They're saying high crime, a lack of leadership, lack of competency, and a lack of progress.
And that's what the people are saying in Iraq as well.
So we have a domestic counterpart to the Iraqi problem.
But that's not critically important to talk about today.
But you might want to weigh in on that as well.
Let's go back to the phones and talk to Claude from Kings Mountain, North Carolina.
Welcome to the show, Claude.
Hello, Dr. Williams.
My question is, and maybe I'm just an idiot and I don't understand, but if we do not manufacture things such as military uniforms, the boots that the military wears, the ammunition that they use, how can we protect ourselves?
You keep talking about free trade manufacturing.
Well, we'll buy them.
But the low-end manufacturing does matter.
Well, for example, let's say hypothetically we're at war with Iran and we do not have, and let's say we're no longer producing boots.
Well, do you think Canadians would sell us boots?
Yeah, they would, but that's not who supplies us the boots.
They don't make boots anymore.
They're made in third world countries.
Well, we buy from them.
Look, Dr. Williams, if you were the Chinese and you wanted to physically take over the United States of America, you would never have to invade our borders.
You would go to the satellite countries that are supplying us everything and shut them down.
No, that's what.
And look, look.
First of all, we have strategic supplies of many war, you know, things that we need to fight a war.
And moreover, do you think that the next war, next really important war that we'd fight would look anything like World War II?
Would have entailed all the military people on the ground that we've got there now.
Well, I wouldn't have thought so.
But look at it.
Wait, wait, wait, wait a minute.
See, if you had somebody like as the previous caller, he was proposing I run for president.
If you had Walter Williams as president of the United States.
We'd be in trouble.
No, no, as far as war is concerned, a war would be over in two days.
Okay, I agree with you.
I mean, we have, look, we have 18 Ohio-class submarines.
Each Ohio-class submarine carries 24 Trident missiles.
Each one of those Trident missiles has eight independently targeted nuclear warheads.
Sure, and if I were President of the United States, I wouldn't want to go to war at a drop of a hat.
But if we had to go to war anyway, anywhere, it would be over in two days.
And so we would not have to worry about boots.
That still, but you still, you're saying hypothetically, but we hypothetically didn't think there would be the type of war that we've got now.
Well, wait, a minute, wait a minute.
That war, see, see, this is what Bona had to pick with many critics of the war in Iraq.
The war in Iraq that is toppling the Saddam Hussein regime was the most brilliantly fought war in humankind.
Now, there have all kinds of occupation problems because we did not handle the occupation correctly.
That is, we made some mistakes, I think.
That is, in World War II, we did not make the kind of mistakes that we made now.
That is, we completely demoralized Germany and Japan, and they had no will to resist.
You still haven't told me, though, how we can be strong if we don't manufacture.
Well, we can be strong by being rich.
And we are the richest nation on the face of the earth does not fight wars.
Well, rich means that you have all kinds of goods and services, right?
Yeah, we do.
We're very fortunate.
We're blessed.
But if we come down to, I'm going to say again, if I were the Chinese, I would never step foot on this land.
Never would they have to step foot on our shoulders.
Oh, come on.
Come on.
Okay, so what are they going to do?
What are the Chinese going to do?
They're going to go all around the world and say, don't sell the United States any boots.
They don't have to go tell them not to.
They go and invade those areas.
Okay, well, okay, so what will happen is boot prices will rise, and people in Italy, people in Spain, or people in Portugal will start making boots.
I disagree with you, sir.
But I appreciate your time.
Okay, well, thank you very much for calling in.
Let's take a call from Chris in Olympia, Washington.
Welcome to the show, Chris.
Yeah, I want you to give my best to your lovely wife, and she's got one tough job to do.
You might give her a shovel or some mittens or something.
Well, I did give her a shovel, but I think I should have prepared her for yesterday.
I should have given her some salt.
Well, you need to thank her.
My question is relatively simple.
When we have a, I think current account measures the trade deficit that we have with other countries.
In goods and services.
Correct.
If we run a long-term deficit with other countries, my question is, where does that money go and how does it get back to us?
Because the way I envision it, there must be a pool of money that is constantly leaving the United States.
And I'm very curious how that affects our economy.
And then also, if it affects any kind of federal trade deficit we might have.
I'm sorry, a federal budget deficit.
Well, they're two different issues.
That is, let's say when I buy my Lexus, I give the $20,000 goes to the Toyota company.
Now, Toyota might not spend those dollars in the United States right away.
They might buy $20,000 or $30,000 worth of goods from England.
England might use those dollars to buy something from Canada.
But ultimately, those dollars come back in the United States.
And many times those dollars come back not in the purchase of goods and services from the United States, but they come back in the form of investments in the United States.
That is, Toyota builds factories and other companies build factories in the United States.
And so those dollars come back in that form.
And they don't have to necessarily come back in terms of purchasing goods and service from us.
Are those measured?
The reinvestment back in the United States?
Well, there's not really a deficit then.
No, in any kind of economics sense of the term, there's no international trade deficit because most people, when they talk about deficit, they're looking at the current account.
They're ignoring the capital account.
And the capital account would be stocks, bonds, and other kinds of investments that foreigners would make in the United States.
But it doesn't make any sense then to have a trade deficit if that money flows right back.
It's always balanced.
And when we come back from the break, I'll tell you how it's balanced.
We'll be back with your calls after this.
We're back.
Walter Williams sitting in.
The last caller we talked about goods account versus capital accounts.
Now, imagine, here's a simple case.
Imagine I have $100 and I go to my grocer and I buy $100 worth of goods from him.
And of course, he doesn't buy anything from me.
And so you might think that there's a deficit.
Okay, well, what really happens is that when I buy $100 worth of goods from him, my goods account goes up.
But my capital account goes down by $100.
The same thing with a grocer.
That is, when he sells me $100 worth of goods, his goods account goes down, but his capital account goes up.
And so there's a perfect balance of trade.
And so, I mean, he just doesn't use those dollars to put them in a cookie jar.
He may take $100 and buy from a wholesaler.
So his capital account goes down, but his goods account goes up.
And that's roughly the same with international trade.
Now, a previous caller was suggesting that we ought to be independent.
Well, yes, folks, we can be independent.
Let me give you an example.
That is, we don't have to do any international trade at all.
That is, we don't have to go and buy coffee beans from Brazil and cocoa from African countries.
We can produce them ourselves.
That is, for example, we could, and so some people say, well, look, we don't have the climate and soil conditions to produce cocoa.
Well, we don't need the climate and soil conditions.
I know our scientists could get together and we could simulate the cocoa growing conditions in Africa.
That is, cocoa trees, they might grow to about 40 feet.
We could use a superdome and create the soil conditions that exist in Africa and create the light conditions that exist in Africa and grow our own cocoa.
We could do the same thing with coffee.
But, ladies and gentlemen, what do you think that says about the price of cocoa and coffee?
If you said that we'd be paying much higher prices, go to the head of the class.
You're absolutely right.
So, why do we trade with Brazil and Africa for cocoa and coffee?
The answer is very simple: it's because it's cheaper to do so.
Now, that applies to almost anything that is cheaper to do so.
Now, people who are asking for us to be independent, independent of other countries, they're asking us to be poor because the poorest people in the world are very independent.
They don't depend on, and they don't depend on others to the extent that we do.
Just kind of think of that.
Think about it.
In your day-to-day life, how many things do you use that you produce yourself?
They're very little.
I mean, do you produce your eyeglasses?
Do you produce your radio?
Do you produce your TV?
Do you produce your car?
No.
You depend on others.
Now, if you want to find some independent people, go to Borneo or go to Darfur.
Those people, they're producing their own water.
They're producing their own houses, the little shacks that they live in.
They might be producing their own food.
They're relatively independent of others, but they're much poorer.
And anyone asking us to be independent of others, they're really asking us to be poor.
And keep that in mind.
Let's go to Chip in Jackson, Mississippi.
Welcome to the show, Chip.
Thank you.
Good afternoon, Dr. Williams.
How are you?
I want to set this up a little bit.
I have a friend that works internationally, and he's complaining that the economy is terrible because his dollar doesn't go as far overseas as it used to.
My question is, what's the relationship of a weak or a strong dollar to the economy?
Well, look, we have what people call a weak dollar, and we have the, our economy is the envy of the world.
That is, we have a rapid economic growth.
We have higher standards of living, even though we have a weak dollar.
There are periods in countries where their currency is quote-unquote strong.
And those people, it can be a very, very weak economy.
And so the value of the dollar, at least in the free trade market, the value of the dollar is determined by international trade markets.
I wouldn't worry about it.
Let's go to Peter in Orange County, New York.
Hi, Dr. Williams.
How are you?
Okay.
I think you mentioned the boat on just one thing.
You know when you made the analogy about the boat, one bullet on one side, one bullet on the other side?
Yeah.
Okay.
Well, the 30-foot wave is going to knock your boat over and kill you anyway.
And that 30-foot wave is China.
Oh, Carl.
Now, in regards, they've been spending so much of the money that they've been receiving from us and all of Western Europe on updating the military to the latest state-of-the-art.
And the latest example was that they were able to shoot down a satellite.
Now, my question is this.
I'm a big believer in international trade, but why do you want to trade with someone who wants to destroy you?
Why do you want to do that?
Because they have something that we want and we enjoy.
Yes, but at the same time, you're arming these people and their philosophy is to do you under.
Why would you want to keep importing and sending them money so they can spend even more on high-tech technology for the military?
Well, I do that.
Look, I think that people's concerns about China, I think they're, and the strength of China, I think they're uncalled for.
I think that China doesn't have even the inkling of being able to take us on militarily, and I don't see it in the foreseeable future.
We'll be back with your calls after this.
We're back.
By the way, that last caller was talking about trading with China, trading with the enemy, and it could be trading with anybody.
Now, let's look at the question.
Why is it that any country can sell anything in the United States?
Why is it?
It's because the American consumer wishes to buy it.
That is, if they did not buy it, then the countries couldn't sell it.
Now, the people who are talking about doing something about it, well, what they're really saying is that we're going to thwart the desire, we want to thwart the desire of American consumers to spend their money as they please.
And we want to use the force of government to use this brutal force to stop Americans from exercising their choice.
Now, do you want that?
I surely do not want that.
That is, I want to live in a country where I can buy what I want.
Now, you say, well, if Americans don't have any choice.
Well, yes, they do have choice.
They can just not buy those things.
So, as my colleague Milton Friedman said, people who are against free trade, they're really against freedom.
And I think that we all should be concerned about any threats to our freedom.
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