The problem is that pie is getting smaller and will one day just be an empty pie pan .

Surely you jest?

You had me right until you threw the U word out there.

That is an interesting question. There are two issues here, if I take your meaning correctly.

The first issue is that of the Chinese buying our debt. If we are getting outside financing to invest in some component of the American economy, that is not necessarily a bad thing. Yes, we would owe the Chinese the original investment and the interest they made over the course of the loan; however, if it was a productive investment something would emerge that would pay back the Chinese in full and still produce value for us. The problem is that much of the capital we are receiving from the Chinese is not being invested, it is being consumed. That is certainly a redistribution of wealth as capital that is eaten will never repay the loan.

The second issue is that of products being sold by the Chinese to the Americans. If the products are economically valuable and we are able to purchase them cheaply, that is good for the US consumer. US producers are typically not as happy. I think the problem is that the our economy is circumscribed by regulations. Moving on to a new enterprise in the US is fraught with legal snares, liscensure issues, regulatory approval, environmental impact, and the like. When innovators are copied, as they will inevitably be copied, the innovator should be able to move up to the next thing. In an economy domesticated by regulation that does not happen.

WW

What do you mean by innovators being copied and moving up to the next thing? In my amateur opinion, I would think intellectual property should be protected, but I may miss what you mean. Honest question.

A fair question.

I was actually thinking abstractly--like Henry Ford inventing the assembly line. I think Milton Friedman's example was the first guy who invented the supermarket.

As far as more concrete examples go, consider the automobile industry. Except for hand crafted machines in wealthy countries, the United States was once the only game in town. But innovators (led by the Japanese) saw an opportunity and competed. Consumers were winners, weaker American producers were losers. So it goes. I think I said above that in a free market, American producers would have moved on to something else; but, our economy is not free and instead of new opportunities we have unemployment and calls for protectionist tariffs.

Your point about intellectual property is an important one. I once read (info not verified) that if the Chinese manufacturing sector actually used paid-for software to run their businesses, there would essentially be no trade imbalance (unverified). The ability to copy, perfectly, software and entertainment media is as new as the digital age. In theory, everyone should pay for licensed content. Similarly, communism is a great idea, in theory. I don't know the way to fix this problem for innovators that create digital media.

I do know, however, that having the government work on this problem will make it worse for everyone.

WW

I am really caught on the fence as to how much government is necessary and good. I am not really at Dem nor Repub. I had a really good economics class in college that wasn't left leaning (heaven forbid!). The course was really informative, and I became more conservative by choice, not just parroting Fox or my friends. The bandwagon thing on both the left and the right annoys the crap out of me. I think a great deal of people just go with the flow of how they are brought up, not trying to see the other side's perspective.

But for sure, the government programs and spending are choking America. I think there are some other societal things that need to get straightened out too, like individuals having some level of financial and social responsbility.

There are some interesting points here-but to travel much further risks a political, rather than economic, discussion.

How much gov't is necessary for an economy? According to the way of thinking of my tribe it is sufficient that the people, through their government, establish fair and consistant laws regarding the economy. After that, the gov't enforces contracts and prevents theft by fraud or force. That is all.

WW

very long article, but touches on material discussed above:

Charles Murray on the New American Divide - WSJ.com

Here is an analysis of a subject that was mentioned previously:

Inequality and Stagnation

An excerpt:

One source of data that people often use is median household income. It’s a good idea to use the median rather than the mean–the mean can be very misleading. For example, the mean income of Harvard graduates who studied economics is going to be very high in the year that Jeremy Lin graduated. John Elway, another econ grad, pulled up the mean dramatically for Stanford grads that year.
But there is a problem with median household income and those who use it relentlessly to grind their policy axes never mention it. The problem is that when household structure is unstable, comparing medians over time is a very poor way of assessing the progress of the typical person.
As I have written many times, rising divorce rates in the 1970′s for example, meant that the number of households in the US grew 26.7%. Population grew only 11.5%. There was an increase in the number of households as one household became two. If both people were working, that alone would likely decrease median household income. If only one of the spouses was working, it was usually the man. The former wife found herself in the labor force unexpectedly. Her income is likely to be below the median. Both of these effects create new households with incomes below the median, dragging down the median over time.
It also lowered the home ownership rate. Politicians interpreted this fall as a problem with the housing market. It had nothing to do with the housing market. It had to do with a change in the marriage market.
So I have written about this many times. I’ve never thought about the fact that an increase in the divorce rate isn’t the same for every demographic group....If the poorest people have the highest divorce rates, the increase in households in the 1980′s and beyond are going to come from the poorest people, adding numbers of households below the median and pulling the measured median down as a pure statistical artifact. That fall in median household income tells you nothing about the health of the economic system. It’s telling you something about the health of American marriages.

WW