The United States woke up to a report from the San Francisco Fed picked up by just about every business news outlet announcing that the "Goods and services from China accounted for only 2.7% of U.S. personal consumption expenditures in 2010, of which less than half reflected the actual costs of Chinese imports." Only 1.2% of your spending was for stuff from China, say the well-paid wizards.
I am not going to begin to decipher their convoluted logic. Suffice to say:
In 2010 the average household income in the United States was about $67,000
In 2010 there were 113,146,000 households in the United States
In 2010 imports from China were $364,943,900,000 – or $3,225 per household
$3,225 to China per household is 4.8% of $67,000
Not 1.2%, but 4X that ludicrous figure.
In their math they left out things like the Chinese content in your house – apparently they don't spend a lot of time at The Home Depot - and the recent drywall debacle sailed over their heads. They assumed that nothing from China was used in any of the hotels you visit, at any if the Disney operations, or in any medical equipment. In fact, they went at the analysis by coming in through the back door, the side door, sneaking in through a second floor window – every way except straight on.
The analysis is simple – How much stuff did we get from China? How many of us are there? What does that come out to? No need to start with the retail price at Walmart and do a lot of convoluted gyrations to back into the landed China cost.
They ought to be intellectually honest in citing other folks analyses. They wrote, "This is partly because a large share of Chinese production costs consists of imports from other countries. Xing and Detert (2010) demonstrate this by examining the production costs of an iPhone. In 2009, it cost about $179 in China to produce an iPhone, which sold in the United States for about $500. Thus, $179 of the U.S. retail cost consisted of Chinese imported content. However, only $6.50 was actually due to assembly costs in China."
In fact, Xing and Detert's wrote, "In this paper, the authors use the iPhone as a case to show that even high-tech products invented by United States (US) companies will not increase US exports, but on the contrary exacerbate the US trade deficit. The iPhone contributed US$1.9 billion to the US trade deficit with the People's Republic of China (PRC)." Their data demonstrated quite the opposite of the Fed's.
So why does the Fed publish such misleading information? Are they really that dumb? That is hard to believe. The alternative is that they are deliberately trying to mislead the American public. That is a frightening thought. For what purpose would they do so? For that matter, why did they publish the paper at all? What is the goal in deliberately understating the amount of money flowing to China by 75%?
In the end, however, as with the productivity data, we cannot solve our serious economic problems when the people in charge will not or cannot provide honest information.