Trade and the Economic Roller Coaster

February’s trade data continues to highlight the reality that we are all on an economic roller coaster, going up and down without getting ahead.

On exports, after growing from January to September last year, they were down in October and November. Growth resumed – albeit slow growth – in December and January. But in February, exports effectively experienced no growth compared to January. In fact, February exports stood at the same level as they were in September.

Given the economic troubles and concerns elsewhere, such as Europe, Japan, China, and Canada (some slowing), perhaps we should not be surprised about the lack of U.S. export growth.

But the bigger part of the trade story in February was the large drop in imports, with a decline of 2.7 percent.

Even more so than exports, it was an up-and-down story on a month-to-month basis when it came to imports in 2011. That bouncing-ball scenario has now continued into 2012, with January imports up and February imports down.

It is important to keep in mind that despite what’s being reported in the media, falling imports are not a positive for GDP growth. To the contrary, falling imports reflect a sluggish domestic economy that is experiencing poor consumer spending and/or capital spending.

Despite all of this, some still point to the decline in the trade deficit in February as an economic plus. Not only do the underlying numbers tell a different story, but a declining trade deficit usually comes with a slowing or recessionary economy. We saw that in 2008 and 2009, for example, and it makes sense when you understand the size of the U.S. economy and how imports tie back to domestic economic growth.

In recent times, trade has been critical to U.S. economic growth. The roller coaster to nowhere largely reflects the reality and continuing concerns about the overall economy. Rather than experiencing the robust growth we should during an economic recovery, we’re either inching ahead or simply running in place.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

The Value of IP to the U.S. Economy

Protection of intellectual property (IP) is essential to innovation, investment, U.S. competitiveness and entrepreneurship. SBE Council continues to remind policy makers and elected officials about this reality, as well as the importance of IP to America's small businesses. IP protection must remain a top priority for our government, and a new report released on April 11 shows why this is important.

The U.S. Commerce Department released the new study, which finds that millions of American jobs are tied to the robust use of IP. The new report -- "Intellectual Property and the U.S. Economy: Industries in Focus" -- examines 75 IP-intensive industries that together directly and indirectly employed 40 million workers with average weekly wages that are 42% higher than those of non-IP-intensive industries. IP-intensive industries accounted for $5.0 trillion in value added, representing 35.5% of U.S. gross domestic product in 2009. Additionally, in 2010, merchandise exports of IP-intensive industries totaled $775 billion, equating to 60.7% of total U.S. merchandise exports.

“If we’re going to continue to be the most innovative economy on Earth, we must ensure that American IP-intensive industries remain confident that their copyrights, patents, and trademarks will be enforced,” said U.S. Chamber of Commerce President & CEO Tom Donohue at an event where the report was unveiled. “The Commerce Department’s new study demonstrates that 40 million jobs also hinge on the proper and adequate enforcement of IP rights, which are frequently threatened by criminal organizations overseas. It’s a challenge we must tackle together.”

Particularly for small firms that lack the resources to fight or track IP theft, the government's role in combating such theft is critical. The U.S. government can also play a lead role in helping to build a cultural respect for IP around the world. After all, global theft of American IP destroys jobs and hurts U.S. investment and economic growth, which in the end hurts global economic growth and prosperity as well.

Karen Kerrigan, President & CEO

POTUS vs SCOTUS on Affordable Care Act?

Apparently, President Barack Obama did not like how the arguments over his massive health care measure went before the U.S. Supreme Court. On April 2, he not only came out swinging against the Court, but questioned the Supreme Court's role in our system of checks and balances. It was an unprecedented attack from a president of the United States.

For good measure, Mr. Obama, who taught classes in constitutional law, either misled people or proved that he fails to understand what judicial activism is.

On challenging the Court's role, Obama argued that the Court should "not take what would be an unprecedented, extraordinary step of overturning a law that was passed by a strong majority of a democratically elected Congress."

Was the President serious here or is this just a case of playing politics? Either way, it's quite troubling.

Of course, there is nothing "unprecedented" or "extraordinary" about the Supreme Court having to take the step of "overturning a law" when that law flies in the face of the Constitution. After all, the Supreme Court's job is to make sure that laws do not cross the line and violate the Constitution. This was made clear by the Founding Fathers, and in the 1803 Marbury v. Madison decision.

Given that serious responsibility, even if a law were passed by significant majorities, that would not influence or affect the Court's responsibility. But large majorities most certainly were not the case with ObamaCare. The President declared that his health care measure "was passed by a strong majority of a democratically elected Congress." This is another troubling declaration.

Again, is the President misleading for political purposes, or has he talked himself into something that does not align with reality? ObamaCare just got enough votes to avoid a filibuster in the Senate (60 votes), and squeaked by in the House of Representatives by a margin of 219-212, without any Republican support.

So, Mr. Obama got the history of his own health care law wrong, and served up a disturbing assessment of what the proper role of the Supreme Court is.

But there was more distortion when it comes to the Court's role and judicial philosophy. President Obama said, "And I'd just remind conservative commentators that, for years, what we have heard is, the biggest problem on the bench was judicial activism, or a lack of judicial restraint, that an unelected group of people would somehow overturn a duly constituted and passed law."

Well, the President is correct that judicial activism, or a lack of judicial restraint, has been the biggest problem on the bench. But judicial activism is not about the Court overturning a law when that law is unconstitutional. Rather, judicial activism is when the Court decides to take on the role of constitutional author and/or legislator. That is, rather than following and properly applying the Constitution, judicial activists decide to ignore what the Constitution actually says and replace it with their own preferences. They decide to rewrite the Constitution as they see fit. This is where the unelected seek to take on the job of elected lawmakers, which is completely inappropriate.

For example, judicial activism was on full, unsavory display in the Court's 5-4 decision in the Kelo v. City of New London eminent domain case, when the Court redefined "public use," as written in the Constitution, to mean public purpose, and then allowing politicians to define public purpose however they like.

In the end, President Obama did not like the signals that were being sent by justices during the arguments over ObamaCare, in particular, that the individual mandate represents an unprecedented, sweeping and constitutionally groundless expansion of federal government powers. His responses amounted to a political fit, in which he said things that undermined his own reputation. The President seems to be laying the groundwork for accusing the U.S. Supreme Court for playing politics with ObamaCare during his reelection campaign. But if the Court overturns ObamaCare on true constitutional grounds, that is not politics. Instead, it is our government's checks and balances working as they should.

It was bad enough that President Obama pushed a costly, damaging health care measure through Congress that makes no economic sense, but now he is levying unwarranted attacks on the Supreme Court as it considers serious questions about the law as it pertains to the U.S. Constitution. Shame on the President.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.