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Why Free Trade Works for America
The Heritage Foundation ^ | April 16, 2007 | Daniella Markheim, "traitor."

Posted on 04/22/2007 8:31:38 AM PDT by 1rudeboy

U.S. trade policy and the impact of globalization on America are regularly the subjects of contentious debate both on Capitol Hill and in the media, and 2007 promises more of the same. The free trade argu­ment is played out between those that fear the per­ceived negative effects of freer trade on their own narrow interests and those that embrace the eco­nomic and strategic benefits that open market poli­cies will bring to the economy as a whole. Consequently, in today's policy world, free trade leg­islation passes on the margin, where every vote is crit­ical. The loss of even a few proponents of freer trade policies could result in a costly shift away from the open market policies that have helped to bolster America's economic growth.

With free trade agreements (FTAs) with Peru, Colombia, Panama, and South Korea needing con­gressional approval; Trade Adjustment Assistance up for renewal; the struggle to advance multilateral trade talks in the World Trade Organization (WTO); and, critically, the need to extend the President's trade pro­motion authority (TPA) this summer, policymakers have ample opportunity to implement a more protec­tionist policy stance or to stay the course and con­tinue to allow America to reap the benefits of open market policies.

[]

The Tangible Benefits of Trade

The gains from freer trade are substantial. Today, the $12 trillion U.S. economy is bolstered by free trade, a pillar of America's vitality. In 2005, U.S. exports to the rest of the world totaled $1.2 trillion and supported one in five U.S. manufacturing jobs. Jobs directly linked to the export of goods pay 13 percent to 18 percent more than other U.S. jobs.[1] Moreover, agricultural exports hit a record high in 2005 and now account for 926,000 jobs.[2]

In Colorado, international trade supports one of every 20 private-sector jobs and more than 16 per­cent of manufacturing jobs. International trade sup­ports an estimated 6.1 percent of Ohio's total private-sector employment and more than 20 per­cent of all manufacturing jobs. In South Carolina, trade supports one of every 10 private-sector jobs and more than 23 percent of manufacturing jobs.[3] State by state across America, international trade promotes opportunity.

The service sector accounts for roughly 79 per­cent of the U.S. economy and 30 percent of the value of American exports.[4] Service industries account for eight out of every 10 jobs in the U.S. and provide more jobs than the rest of the economy combined. Over the past 20 years, service indus­tries have contributed about 40 million new jobs across America.[5]

As today's global economy offers unparalleled opportunities for the U.S., continuing to expand trade by lowering barriers to goods and services is in America's economic interest. Freer trade policies have created a level of competition in today's open market that engenders innovation and leads to bet­ter products, higher-paying jobs, new markets, and increased savings and investment. Small business, a critical component of the U.S. economy, creates two out of every three new jobs and accounts for about one-quarter of America's exports.

[]

U.S. Free Trade Agreements

[]

As of April 2007, the U.S. has 10 FTAs with 16 countries: Israel; Canada and Mexico (NAFTA); Jor­dan; Singapore; Chile; Australia; Bahrain; Oman; Morocco; and the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua (DR–CAFTA[12]).

While some countries are still working to imple­ment more recent trade agreement legislation, the U.S. has already seen impressive results. The FTAs account for more than $900 billion in two-way trade, which is about 36 percent of the total of U.S. trade with the world. U.S. exports to FTA partner countries are growing twice as fast as U.S. exports to countries that do not share FTAs with the U.S.[13]

The oft-demonized NAFTA has in fact generated significant gains for the U.S. since its inception. Canada and Mexico are America's first and second largest trade partners, accounting for about 36 per­cent of all U.S. export growth in 2005.[14] Between 1993 and 2005, U.S. manufacturing and agriculture exports to Canada and Mexico grew by 133 percent and 55 percent, respectively. Each day, NAFTA countries conduct roughly $2.2 billion in trilateral trade.[15] This trade supports U.S. jobs, bolsters pro­ductivity, and promotes investment.

[]

Free Trade Is Fair Trade

An artificial distinction has been drawn between "free trade" and "fair trade." The idea that free trade is fair only if countries share identical labor costs and economic regulations or if domestic producers are compensated for market losses to more compet­itive foreign producers is false. The economic bene­fits of free trade derive partly from the fact that trading partners are different, allowing any country embracing world markets a chance to be competi­tive. Free trade is fair when countries with different advantages are allowed to trade with a minimum of restriction and capitalize on those differences.

Low wage costs, access to cheap capital, educa­tion levels, and other fundamental variables all play a role in determining the comparative advantages that one country has over another in the global mar­ketplace. To "fairly" equalize those differences— provided those differences are based on a country's economic and demographic reality—only negates or reduces a country's ability to benefit from partic­ipating in the global trade system.

Such "fairness" also prevents countries from real­izing the tangible gains from freer trade: a more competitive economic environment and better, more efficient domestic resource allocation. These positive effects drive greater long-term economic potential, create economic opportunity, better pro­mote a cleaner environment, and improve living standards at home.

Free trade allows a county to compete in the glo­bal market according to its fundamental economic strengths and to reap the productivity and efficiency gains that promote long-run wealth and prosperity. In reality, there is no distinction between free trade and truly fair trade.

[]

Conclusion

Armed with the facts, Congress should bolster itself against "free trade fatigue" and protectionist sentiment and revitalize the drive to promote eco­nomic growth and prosperity by eliminating inter­national trade barriers. Renewing the President's trade promotion authority to facilitate the comple­tion of new bilateral free trade agreements, reform­ing and reducing the scope of the U.S. farm bill to promote a successful conclusion to the WTO Doha Development Round, and generally guarding against populist, protectionist trade policy changes would go far toward expanding economic opportu­nity in the U.S. and around the world.

Daniella Markheim is Jay Van Andel Senior Trade Policy Analyst in the Center for International Trade and Economics at The Heritage Foundation.





[1]Office of the U.S. Trade Representative, 2006 Trade Policy Agenda and 2005 Annual Report, March 2006, at (January 24, 2007).

[2]Ibid.

[3]U.S. Department of Commerce, International Trade Administration, "Exports, Jobs, and Foreign Investment," at
(April 1, 2007).

[4]U.S. Department of Commerce, Bureau of Economic Analysis, "International Economic Accounts," at (January 24, 2007).

[5]Office of the U.S. Trade Representative, "Free Trade in Services: Opening Dynamic New Markets, Supporting Good Jobs," May 31, 2005, at (March 30, 2007).

[12]Dominican Republic–Central America Free Trade Agreement.

[13]Office of the U.S. Trade Representative, 2006 Trade Policy Agenda and 2005 Annual Report, p. 3.

[14]U.S. Department of Commerce, "International Economic Accounts."

[15]Office of the U.S. Trade Representative, "NAFTA: A Strong Record of Success," March 2006, at (January 24, 2007).


TOPICS: Business/Economy; Constitution/Conservatism; Foreign Affairs; Government
KEYWORDS: cafta; freetrade; fta; nafta; wto
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1 posted on 04/22/2007 8:31:41 AM PDT by 1rudeboy
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To: 1rudeboy

Of course, all that CHINESE MELAMINE in the pet food — and NOW SOME HUMAN FOOD — is just an added bonus.

Can’t wait to see what’s next from the Wide World of Globalism and FREE TRADE.


2 posted on 04/22/2007 8:49:28 AM PDT by Dick Bachert
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To: Dick Bachert

Kinda’ like saying free(r) access to handguns causes crime, no?


3 posted on 04/22/2007 8:52:34 AM PDT by 1rudeboy
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To: 1rudeboy
With free trade agreements (FTAs) with Peru, Colombia, Panama, and South Korea needing con­gressional approval; Trade Adjustment Assistance up for renewal; the struggle to advance multilateral trade talks in the World Trade Organization (WTO); and, critically, the need to extend the President's trade pro­motion authority (TPA) this summer, policymakers have ample opportunity to implement a more protec­tionist policy stance or to stay the course and con­tinue to allow America to reap the benefits of open market policies.

Are we operating under unknown pretenses? Free trade would mean no restrictions whatsoever. As long as governments get involved there is no such thing as free trade - just agreements that put America at a disadvantage.

4 posted on 04/22/2007 8:53:12 AM PDT by raybbr (You think it's bad now - wait till the anchor babies start to vote.)
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To: Dick Bachert

Forgot to mention that all that increase in GDP will be needed to pay for added MEDICAL COSTS and FUNERALS due to the POISONINGS.

And I’m sure the ABA is licking it’s well-fed (with only the very best U.S. produced foodstuffs) chops about the fees flowing from the pending lawsuits.


5 posted on 04/22/2007 8:53:25 AM PDT by Dick Bachert
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To: 1rudeboy

Free trade forces Americans to get off their butts and be creative. Being dependent upon a corporation for a job is only slightly better than being dependent on the govt for a handout.


6 posted on 04/22/2007 8:55:14 AM PDT by HarmlessLovableFuzzball ( The Golden Rule : He who has the Gold makes the rules)
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To: raybbr

Thanks, Capt. Obvious.


7 posted on 04/22/2007 8:56:11 AM PDT by 1rudeboy
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To: 1rudeboy
Oh, so you finally agree that all these “free trade” agreements are putting America at a competitive disadvantage.
8 posted on 04/22/2007 8:58:22 AM PDT by raybbr (You think it's bad now - wait till the anchor babies start to vote.)
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To: raybbr
Seeing that the entire paper I posted above argues otherwise, I think not. Try reading an op once in a while before commenting.
9 posted on 04/22/2007 9:04:01 AM PDT by 1rudeboy
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To: HarmlessLovableFuzzball
I agree that Free Trade is the way to go. But we also should not allow our selves to be screwed either. We have done nothing about Chinese manipulation of currency or the high tariffs India places on our goods. I am all for free trade, I just think we should demand our trading “partners” do the same.
10 posted on 04/22/2007 9:06:21 AM PDT by spikeytx86 (Pray for Democrats for they have been brainwashed by their fruity little club.)
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To: 1rudeboy
Sorta like saying there's little to no inflation when you take energy and food prices out of the equation...DUH!

I noticed there wasn't one word about importing oil.

Isn't the call for eliminating the dependency on foreign oil a call for a "protectionist" act? Why is it freetraders are such hypocrites when it comes to dependency on foreign oil?...Or maybe you America haters think foreign oil dependency is also good for us.

11 posted on 04/22/2007 9:43:53 AM PDT by lewislynn
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Comment #12 Removed by Moderator

To: lewislynn
Sorta like saying there's little to no inflation when you take energy and food prices out of the equation...DUH!
You're going to have to elaborate on this one. It's almost a perfect non sequitur. I was remarking on the argument that freeing something up leads to abuse.

I noticed there wasn't one word about importing oil.
Brilliant! Explain the "hypocrisy" of me wanting to open-up ANWR for drilling, and being a "free-trader."

13 posted on 04/22/2007 9:51:56 AM PDT by 1rudeboy
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To: 1rudeboy

If “Free Trade” is such a good thing for America, why are we running a continual trade imbalance?


14 posted on 04/22/2007 9:57:53 AM PDT by gas0linealley
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To: gas0linealley
Because we're wealthy, and we buy lots of stuff (including imported oil, as lewislynn points out)? What do I win?
15 posted on 04/22/2007 9:59:26 AM PDT by 1rudeboy
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To: 1rudeboy

What you win is the opportunity to tell us precisely how you, personally, profit from US exports.


16 posted on 04/22/2007 10:05:36 AM PDT by gas0linealley
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To: 1rudeboy

3.2 million factory jobs in the US have been lost since 2000 (that’s one of every six.) Electronic components for our “smart bombs” are imported from China. What’s not to like?


17 posted on 04/22/2007 10:07:50 AM PDT by Malesherbes
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To: Malesherbes

Manufacturing jobs have been declining world-wide for more than thirty years. If we don’t want to purchase Chinese components for smart bombs (I know I don’t want to), we should tell our defense contractors not to do so. We don’t have a FTA with China, anyway.


18 posted on 04/22/2007 10:10:31 AM PDT by 1rudeboy
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To: 1rudeboy
The problem with "free trade" is that it isn't free. somebody pays! And right now the people paying are American citizens with domestically based businesses. Their businesses have a between 25% and 50% cost embedded in their business by our income tax system. It's like two people in a race, one person has to carry another 30% of his weight in a knapsack while the first only has to carry a tee shirt.

If you want fair trade as well as the mentioned advantages of free trade, change the taxing point from income to products. A product brought to market here will have the same tax in it regardless of its point of origin. People making products domestically will then be able to compete with foreign sources. Also, removing the yoke of income tax from our collective necks will free up billions currently wasted in the costs of forecasting, calculating, recording, collecting, tracking, managing, policing and disbursing income taxes.

19 posted on 04/22/2007 10:11:07 AM PDT by det dweller too
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To: raybbr
Free trade would mean no restrictions whatsoever

This is the common myth. This is what the average person would probably think before educating himself. Reality is the opposite: only a regulated market can possibly be free.

20 posted on 04/22/2007 10:14:49 AM PDT by RightWhale (3 May '07 3:14 PM)
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To: 1rudeboy

Good post. Where is Willie Green, so we can fight this out with him.


21 posted on 04/22/2007 10:39:14 AM PDT by GeorgefromGeorgia
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To: GeorgefromGeorgia

Willie Green’s job was off-shored. Turns out that it was discovered that his duties here were more cheaply and efficiently performed at DU and DailyKos.


22 posted on 04/22/2007 10:48:07 AM PDT by 1rudeboy
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To: 1rudeboy

I’d prefer FAIR Trade to Free Trade. There’s nothing fair about what we’ve got now.


23 posted on 04/22/2007 1:55:49 PM PDT by holyscroller (A wise man's heart directs him toward the right, but the foolish man's heart directs him to the left)
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To: Toddsterpatriot; Mase; expat_panama; nopardons
Let's play pin-the-quote-on-the-presidential-hopeful! Mark Steyn writes,

[this person] started out deploring the violence of Virginia Tech as yet another example of the pervasive violence of our society: the violence of Iraq, the violence of Darfur, the violence of . . . er, hang on, give him a minute. Ah, yes, outsourcing: ''the violence of men and women who . . . suddenly have the rug pulled out from under them because their job has moved to another country."

No cheating.
24 posted on 04/22/2007 2:39:08 PM PDT by 1rudeboy
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To: raybbr
- just agreements that put America at a disadvantage.

Our $13 trillion economy and 4.4% unemployment rate shows that trade is just killing us. LOL!

25 posted on 04/22/2007 5:35:14 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: lewislynn
Sorta like saying there's little to no inflation when you take energy and food prices out of the equation

You know they very publicly issue both sets of numbers, don't you?

I noticed there wasn't one word about importing oil.

You don't think we should import oil? That would crimp our economy.

Isn't the call for eliminating the dependency on foreign oil a call for a "protectionist" act?

You can call for eliminating dependency on foreign goods, just don't do it by making them expensive. Do it by making American goods more affordable.

Why is it freetraders are such hypocrites when it comes to dependency on foreign oil?...

I think we should get our oil cheap, cheap is better than expensive. Boosting our domestic production will make all oil cheaper.

26 posted on 04/22/2007 5:40:50 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: gas0linealley
If “Free Trade” is such a good thing for America, why are we running a continual trade imbalance?

If running a continual trade imbalance is such a bad thing for America, why do we have a $13 trillion economy and a 4.4% unemployment rate?

27 posted on 04/22/2007 5:43:20 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Toddsterpatriot
Boosting our domestic production will make all oil cheaper.

It ain't gonna happen. Why would record profiting oil companies want to "boost" production to make oil cheaper?

28 posted on 04/22/2007 5:59:14 PM PDT by lewislynn
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To: lewislynn
Why would record profiting oil companies want to "boost" production to make oil cheaper?

If we open up ANWR, oil companies won't drill? That's funny.

29 posted on 04/22/2007 6:01:36 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Toddsterpatriot
If running a continual trade imbalance is such a bad thing for America, why do we have a $13 trillion economy and a 4.4% unemployment rate?

If we have a $13 trillion economy the reason is that Treasury has well oiled printing presses. If you think that isn't so, then tell me what makes a gallon of gas worth more today, at $3+, than when it sold for 25 cents.

And as for the unemployment rate, do you believe everything the government tells you?
30 posted on 04/22/2007 6:48:30 PM PDT by gas0linealley
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To: Toddsterpatriot

Maybe they’ll decide they’ve earned enough money?


31 posted on 04/22/2007 6:57:16 PM PDT by 1rudeboy
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To: gas0linealley
If you think that isn't so, then tell me what makes a gallon of gas worth more today, at $3+, than when it sold for 25 cents.

Let's see here . . . thumbing through notebook . . . inflation, demand, supply, regulation, taxes . . . .

32 posted on 04/22/2007 6:59:20 PM PDT by 1rudeboy
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To: gas0linealley
And as for the unemployment rate, do you believe everything the government tells you?

As compared to you? LOL!

33 posted on 04/22/2007 7:04:27 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: 1rudeboy
Let's see here . . . thumbing through notebook . . . inflation, demand, supply, regulation, taxes . . . .

Not a bad answer...if I'd asked why gasoline costs more today than when it sold for 25 cents a gallon. But, of course, I didn't ask why it costs more, I asked why it's WORTH more.

When you can understand the difference between "cost", and "worth", then perhaps you'll understand why I have no confidence in cheerleader's glowing economic reports.
34 posted on 04/23/2007 1:57:05 AM PDT by gas0linealley
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To: Toddsterpatriot

Your mock laughter fails to conceal your gullability.


35 posted on 04/23/2007 2:03:26 AM PDT by gas0linealley
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To: gas0linealley

Worth may be folded into demand, if you think about it . . . if you choose not to, then gasoline is worth more today than when leaded regular was selling for 25 cents because of “urban sprawl,” and related factors such as improved road networks, less emphasis on public transportation, the decline of “nuclear” communities, as well as rising incomes, etc. We are simply more “mobile.”


36 posted on 04/23/2007 4:31:32 AM PDT by 1rudeboy
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To: Tolerance Sucks Rocks

I’d be interested in hearing your answer to the question in #34, if you have an opinion.


37 posted on 04/23/2007 4:38:47 AM PDT by 1rudeboy
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To: 1rudeboy; A. Pole
Why Free Trade Works for America

I'd feel better if it worked for Americans too.

38 posted on 04/23/2007 4:45:19 AM PDT by Wolfie
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To: Wolfie

I believe the author spoke toward your concern in the second sentence.


39 posted on 04/23/2007 4:47:45 AM PDT by 1rudeboy
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To: gas0linealley; 1rudeboy
understand the difference between "cost", and "worth"

Maybe it's a guy thing.  Guys like Rudy and me work with what we can see; that's why we make the money that pays the bills and the ladies in our families deal with the feelings.   Rudy and I know where we can find a market price for something because the price is something that everyone can see.  Afterwords, you and the rest can go ahead and really really feeel whether things are worth a lot more or not really worth anything at all.

Don't get me wrong, I understand we need both.  Prices exist so I can make sure we have food and clothing so we can survive. Afterwards you can talk about how much something is worth say, spiritually or something.

40 posted on 04/23/2007 4:59:32 AM PDT by expat_panama
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To: expat_panama

Except for the fact that I run from females dealing with feelings, your comment is accurate.


41 posted on 04/23/2007 5:04:03 AM PDT by 1rudeboy
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To: gas0linealley
Your mock laughter fails to conceal your gullability.

Laughing at your anecdotes makes me gullible? If you say so. LOL!

42 posted on 04/23/2007 6:17:33 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: 1rudeboy
I run from females dealing with feelings...

I don't.  My wife does wonders with my feelings and I got no problem with it...

43 posted on 04/23/2007 9:05:05 AM PDT by expat_panama
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To: expat_panama

I’ve never thought of it that way . . . why should I bother with dealing with my feelings when I can find a woman to do so?


44 posted on 04/23/2007 9:13:48 AM PDT by 1rudeboy
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To: 1rudeboy
why should I bother with dealing with my feelings when I can find a woman to do so?

You got that one right.

I deal with reason and reality because I know that's all I can handle.  Any time feelings get involved I can tell I'm way out of my league.

Let's face it, women are much more complicated than we are and they can do things that we can't even imagine..

45 posted on 04/23/2007 10:13:10 AM PDT by expat_panama
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To: HarmlessLovableFuzzball

>Free trade forces Americans to get off their butts and be creative. Being dependent upon a corporation for a job is only slightly better than being dependent on the govt for a handout.<

REALLY! Americans were NEVER known to be ANYTHING BUT creative, self starting, and fabulous entrepreneurs in my generation, and up to it. Through that indomitable ambition America was bustling, building, beautiful, and blessed.
Corporations provided jobs. Jobs are not a handout in any body’s book. That is, corporations became successful because of Americans, and they provided jobs for Americans before they went multinational, moving abroad and taking the jobs with them. Our tax system is blamed for this, and it is partially to blame. But greed and globalization is also a large part of the exodus. Globalization is death to America’s sovereignty.

Sometime after the 50’s creeping Socialism became the poison of choice of the people. Children were being dumbed down in public schools. “Entertainment” brought down good family values and morals in general in every livingroom in the country via a television set.

America was strong because of her industrialization. Her farms supplied healthy food for the nation. Opportunity to succeed was there for anyone who wanted to work for it.

If that spirit is not stirred to back life in this country soon, what will she become?


46 posted on 05/10/2007 5:59:15 PM PDT by Paperdoll ( Duncan Hunter '08)
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To: ovrtaxt

Here’s some Sunday reading for you. Be sure to finish it all.


47 posted on 06/10/2007 4:28:38 AM PDT by 1rudeboy
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To: 1rudeboy

Gosh thanks. Never heard that before. /s


48 posted on 06/10/2007 4:34:49 AM PDT by ovrtaxt (THOMPSON NEEDS TO CLARIFY HIS POSITION ON THE SPP BEFORE I SUPPORT HIM.)
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To: ovrtaxt

You didn’t read it. Well, I tried. Please return to your regularly-scheduled demagoguery.


49 posted on 06/10/2007 4:36:50 AM PDT by 1rudeboy
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To: editor-surveyor

Here’s what happens when you drive-by me.


50 posted on 06/21/2007 9:33:26 PM PDT by 1rudeboy
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