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The Buck Stops Where?

12:00 AM, Oct 8, 2011 • By IRWIN M. STELZER
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Equally politically potent is the falling or frozen standard of living of American workers. David Autor of the Massachusetts Institute of Technology, Gordon Hanson of the University of California, and David Dorn of the Centre for Monetary and Financial Studies in Madrid studied the impact of Chinese exports on 722 clusters of counties. They found that regions with manufacturers most exposed to competition from China lost not only more manufacturing jobs, but more non-manufacturing jobs as well, have higher levels of overall unemployment, and more workers receiving food stamps and disability benefits. “There are really huge adjustment costs to local communities that were far worse than people had appreciated,” Professor Autor told the press. Voices crying that this study overstates the costs and understates the benefits of free trade are having difficulty getting heard.

It is not only the loss of jobs to foreign competition that rankles. The middle class is watching its living standard decline. The deal struck last week between the United Auto Workers Union (UAW) and Ford makes clear just how much the world has changed for workers in the manufacturing sector, once the breeding ground of the middle class. To persuade Ford to take on some 12,000 new workers over the next four years the union agreed that new workers would be paid half of the $28 per hour that veteran workers now get. That will enable Ford to bring back to the U.S. manufacturing facilities now located in Mexico, China, Britain, and Turkey. But at a cost to the new generation of autoworkers, who will find their predecessors’ middle class life style difficult to attain.

Obama concedes that the answer to the question put so devastatingly to President Jimmy Carter by then-candidate Ronald Reagan—“Are you better off than you were four years ago?”—is an emphatic “no.” The president, of course, blames the plight of the middle class on George W. Bush and “the mess” that he, Obama, inherited: “millionaires and billionaires” who are not paying their fair share of taxes, “fat cat bankers” who believe they have “an inherent right … to a certain amount of profit,” the crisis in the eurozone, and the Tea Party. Polls suggest that he is having considerable difficulty passing the buck, which President Harry Truman famously said stops in the Oval Office, on the president’s desk. 

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