Friday, March 7, 2014
Approximately 45% of the sales of the largest American companies come from customers outside our borders. The European Union is comprised of 27 countries and 500 million people, and represents 20% of the global economy. The EU is an important customer base for U.S. companies selling their goods and services overseas. What happens in the EU has a direct impact on jobs here in America.
After a home, buying a car is often the largest purchase made by a family. When a new vehicle leaves the dealership, the money ripples widely through the economy. Steel, plastic, glass, tire, electronic, leather, textile, computer chip, and other manufacturers sell their products to car makers. Automotive manufacturers directly employ 9 million people worldwide, with another 50 million jobs indirectly being created “downstream.”
Automobile sales are a key indicator of economic health. Consumers enjoy buying new cars when they believe their futures are bright. They shy away from such expensive purchases when they’re unemployed or fear losing their jobs.
If you missed it, have a look at this short Associated Press article from last week entitled “European car sales plummet, even in solid Germany.”
Car sales are collapsing in the European Union, where there have been 18 consecutive months of declines. This points to a deepening recession across the Atlantic, and another economic headwind in the U.S. as our companies try to sell their products to EU citizens and businesses struggling through their own difficult times.
There’s much we can learn from Europe’s troubles. Last Thanksgiving, I visited my son in Madrid who was studying abroad for a college semester. I was struck by the nearly 50% unemployment rate among young adult Spaniards, many with college degrees. Many have no choice but to continue to live with their parents, and to postpone starting their own families. Buying a car, new or used, is not possible for most. Sadly, many young Spanish lives seem to be on hold.
For years, European families have suffered under painfully anemic economic growth that doesn’t produce enough jobs for their workers. High unemployment, limited opportunities, and less freedom have become the norm for the residents of many EU countries. Expensive, unsustainable government-run retirement and health care entitlements drive up taxes and public debt; chase business investment and jobs elsewhere; and dampen the incentive to work. Big, unaffordable government has replaced a healthy business community and the jobs and tax revenues it creates.
Increasingly, parts of the American fiscal crisis resemble those of Europe. 43% of all U.S. federal government spending is for Medicare, Medicaid, and Social Security benefits. The Medicare and Social Security payments now exceed the taxes collected to fund them. Our nation’s fiscal crisis, including the growing $17 trillion mountain of smothering debt, cannot be solved without saving and reforming these huge entitlement programs.
The U.S. jobs problem will resemble the EU jobs problem until more business owners have confidence to invest in America, grow their companies, and hire more Americans. Our elected officials in Washington have the power and responsibility to provide this confidence by spending less, taxing less, borrowing less, and regulating less. Let’s hope our public officials have the courage to look beyond the next election and to make the tough decisions to put our fiscal house in order. Doing so will go a long way to strengthen our economy so more Americans can find badly-needed jobs.
Bruce Poliquin is the former Maine State Treasurer and a 2012 Republican primary candidate for the United States Senate. He has 35 years of experience owning and managing businesses. Bruce is a proud third-generation Franco-American Mainer and Harvard University graduate. Visit BrucePoliquin.net for his most recent commentary and analysis on media outlets throughout the State about the important issues facing Maine families and their jobs.