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What to Expect Next: A Double Whammy of High Unemployment, Inflation

NEW YORK (TheStreet) -- The economy is recovering from a harsh winter, and the pace of growth the rest of this year and next won't create nearly enough decent jobs for the millions unemployed and recent graduates working at places such as Starbucks (SBUX).

It's easy for President Obama to blame Republicans in Congress, and visa-versa, and for both sides to put their hopes in the Federal Reserve's stewardship of monetary policy, but decades of bad trade, energy and education policies pursued by both parties have torpedoed prosperity.

A succession of trade agreements has opened U.S. markets to foreign manufacturers in Asia, where governments continue to erect high barriers to competitive American products. Meanwhile, federal policies limit oil and gas development off the Atlantic, Pacific and Eastern Gulf Coasts.

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The United States has chosen to pay its way in the world with exports of knowledge-intensive services, but the math doesn't work. The annual international trade deficit on manufacturers and oil is about $615 billion, whereas the surplus on services is well less than half that amount.

Knowledge-intensive juggernauts such as Google (GOOG) and Citigroup (C) create high-paying jobs in science based disciplines and finance. And the U.S. still has notable knowledge-intensive manufacturers in industries such as pharmaceuticals. But jobs in those areas don't spur enough growth to compensate for the numbers of high-quality jobs lost to the surge of imported cars, coffee tables and computers.

Since the beginning of this century, the economy has grown 1.7% annually and has created only 6 million jobs, compared with 3.4% growth and 41 million jobs during the prosperous Clinton-Reagan years.

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