Export-Led Growth?

Robert Samuelson echoes the point I made over the weekend—that there are limits to what a stimulus package can accomplish:

We should resist the temptation to see the forthcoming “economic stimulus” package as a panacea. It won’t be. At best, it would represent traditional “pump priming.” This familiar metaphor is worth pondering. To get the pump started, you add water; then the pump operates independently. Similarly, the stimulus will succeed only if the economy resumes spontaneous expansion and job creation.

If the Obama Administration succeeds in cutting taxes:

WASHINGTON — President-elect Barack Obama and congressional Democrats are crafting a plan to offer about $300 billion of tax cuts to individuals and businesses, a move aimed at attracting Republican support for an economic-stimulus package and prodding companies to create jobs.

The size of the proposed tax cuts — which would account for about 40% of a stimulus package that could reach $775 billion over two years — is greater than many on both sides of the aisle in Congress had anticipated. It may make it easier to win over Republicans who have stressed that any initiative should rely more heavily on tax cuts rather than spending.

the stimulus could actually be more effective than I’d feared. A payroll tax holiday, enacted quickly, could be particularly helpful but I wonder how possible it would be politically.

He goes on to advocate increasing our exports as our domestic consumption shrinks:

What the United States needs is export-led growth. The rub is that many other countries want that, too. Just as large U.S. trade deficits signified American overspending, large trade surpluses in China, Japan and other Asian countries signified their oversaving. In China, consumption spending is 35 percent of GDP, notes economist Nicholas Lardy of the Peterson Institute. That’s half the American level.

at least I think that’s what he’s advocating. Our domestic consumption is shrinking. For exports to make up the difference the dollar has to be weak. Our shrinking consumption means we won’t be importing as many Chinese goods as we have been, that creates a problem for China where something like 70% of the growth in their economy comes from exports, and China’s authorities won’t let the dollar weaken enough to make U. S. exports attractive.

I’d like to see more U. S. exports and I think the best candidate for that is agricultural exports. For that to be a reality the growing economies, China and India, need to abandon their decades-long policies of food self-sufficiency and, as I’ve said before, I think that negotiating that should be among the highest priorities of U. S. foreign policy.