Protectionism is a double-edged sword

Sen. Hilary Clinton continues to lead the protectionist rampage on the political front, she has yet to provide any hints as to her solutions to the various problems that are certain to arise should she win and enact her regulations. Protectionism has both positive and negative effects, the later of which Clinton ignores.

I doubt anyone questions the concern over the amount of outsourcing that has taken place since the early 1990s. Something needs to be done to revitalize the US economy, that isn't debatable. The methods for achieving the end means is where politicians and economists seem to differ.

Clinton tends to suggest that Protectionism will help keep jobs inside of US borders, lower the trade deficit and ultimately act beneficial to the overall economic well-being. She doesn't seem to realize that the trade deficit has no net affect on the United States. Entities and people trade, not countries. She should be more focused on U.S. GDP Growth rates because various factors influence trade, including tariffs, tax rates in respective countries and currency conversion rates.

If you look at Hilary's plan, implementing policies to force companies and Americans to buy home-grown products will certainly result in significant spikes in inflation. She doesn't seem to have any grasp of this concept. If strong tariffs or other protective measures are enacted, those goods that will be then produced by workers in America will most definitely be higher in price due to the wage and benefits difference.

Another key consequence on protectionism is a stronger US Dollar. Although some argue that would be beneficial for the United States and her citizens, this would only hold true when trading or converting currency or wealth with other countries. An inflated currency has proven to be part of the problem with outsourcing because a higher USD makes foreign imports cost less and become more attractive. This is a central factor in the massive import problem the US faces. Should the USD fall relative to the Asian currencies, which it still has yet to do, demand for US exports will rise dramatically.

The double edge sword comes into affect if the US Dollar were to fall too quickly, lowering the value of personal wealth and ultimately creating inflation simultaneously. By any means, the situation is complex and fragile, something Sen. Clinton needs to realize soon.

U.S. to be free of Middle Eastern Oil by 2012

Last night, Interior secretary Dirk Kempthorne was on CNBC touting a new offshore oil drilling program that would put to work 48 Million Acres in the Gulf of Mexico and off the coasts of Alaska and Virginia.

"Department officials estimated that the entire plan could produce 10 billion barrels of additional oil and 45 trillion cubic feet of additional natural gas over the next 40 years."

This would effectively provide enough energy for the US to completely cease its importing of oil from any Middle Eastern Country according to the Interior Secretary. In addition, they plan to make sure that certain environmental standards are being met:

"The proposal includes measures to protect against damage to coastal areas from oil spills and other accidents. It would not allow drilling within 50 miles of the Virginia shore and would wall off an additional “obstruction zone” near the mouth of Chesapeake Bay."

However, environmentalists are criticizing the plan for not being protective enough:

“The Bush administration is zeroing in on the most environmentally sensitive areas for offshore drilling,” said Richard Charter, a lobbyist for Defenders of Wildlife and co-chairman of the National Outer Continental Shelf Coalition. “These areas that they are characterizing as buffer zones are woefully inadequate when you consider that the Exxon Valdez oil spill traveled hundreds of miles in a matter of weeks.”

My thoughts on this issue are that it would be great for our own economy, hurt the purchasing power of the Middle Eastern countries, lower the price of oil in general and really help create a more energy independent country. The problem is, I do worry about potential oil spills and tend to question the safety of these offshore oil rigs with the oceanic environment. I feel split because nobody can guarantee environmental protection with these oil fields.

SOURCE: Kudlow & Company, New York Times

The US is jealous of the French economy and lifestyle?

Although I find this laughable, bonehead NY Times Columnist Paul Krugman believes otherwise.

This is the same Paul Krugman who is predicting a massive recession. Please, Paul, for humor's sake, let's compare the U.S. to France.

GDP : US - $12.455 Trillion , France - $2.126 Trillion according to the IMF

If you take into account Purchasing Power Parity (PPP), the US is around $12.229 Trillion compared to France's $1.835.

Unemployment : US - 4.4%, France - 8.4%

Krugman is certainly a smart man. You don't go to the schools he attended if you aren't a bright guy. Somewhere along the line though, he was misguided and his economics and sense of what Americans want or feel seems to be way off. He continues to be a pessimist in the current economy while the U.S. outperforms France year after year.