Posted on 06/30/2016 8:53:36 AM PDT by Kaslin
Donald Trump is not a professor, but for years he will be yielding insights to every student of economics. His Tuesday address on trade did a masterful job of combining antiquated fallacies with misinformation and ignorance to create an encyclopedia of error. Instructors have never had so much free help constructing their lesson plans.
The vision Trump conjures is one of alluring simplicity. He promises to achieve "economic independence" by abandoning globalization, instead using American workers to produce American goods. This change, he said, would "create massive numbers of jobs" and "make America wealthy again."
It's a scam, skillfully pitched to fool the gullible. His framework is a house of cards built on sand in a wind tunnel. Its most noticeable feature is a total divorce from basic economic realities.
He scoffs at those who warn he would start a trade war. "We already have a trade war, and we're losing badly," he said. But what he objects to is everyday global commerce, which is not a form of war. It's a form of peaceful cooperation for mutual advantage.
In a war, the Japanese drop bombs on Pearl Harbor that we don't want. In trade, they sell us TV sets and cars that we do want. See the difference?
In war, both sides lose, because their people get killed. In trade, buyers and sellers in each country win -- which is why they trade with each other. What's true of individual consumers and producers is also true of nations.
Trump, however, thinks our economic troubles stem from the destruction of manufacturing production and employment, which he blames on foreign competitors. He's wrong on every point of this addled argument.
In the first place, the expansion of manufacturing jobs is not synonymous with prosperity. As countries grow richer, manufacturing's share of employment declines. South Korea, singled out by Trump for killing American jobs, has seen it shrink by nearly half since 1991. Japan and Germany have followed a similar path.
But U.S. manufacturing output is 54 percent higher today than in 1994 and 27 percent higher than in 2001. Those years are pertinent because 1994 was the year NAFTA took effect and 2001 is the year China gained entry to the World Trade Organization -- events Trump portrays as catastrophic for American industry.
Manufacturing jobs have vanished not because we don't manufacture anything but because companies have learned to produce more goods with fewer people. Higher productivity is what eliminated most of the jobs Trump mourns. He's no more capable of restoring them than he is of bringing back the dodo.
"NAFTA was the worst trade deal in the history of this country," he exclaimed. But he gives no sign of knowing what it actually did. The main provision was removing import duties among the U.S., Mexico and Canada. Before, the average tariff on Mexican goods coming here was 4.3 percent -- while the average tariff on U.S. goods going there was 12.4 percent.
So under NAFTA, Mexico had to cut its import duties much more than we cut ours. Even by Trump's logic, how could that have been bad for Americans?
Trump would have us believe that producers abroad succeed only because they have a free hand to cheat. "When subsidized foreign steel is dumped into our markets, threatening our factories, the politicians have proven ... they do nothing," he charged.
Wrong again. At the moment, the U.S. government is punishing allegedly unfair trade practices with special duties on 338 different imports -- nearly half of them steel products.
Blaming Mexico and China for the fate of our steel industry is like blaming email for the decline of telegrams. The biggest reduction in steel jobs came before the globalization of the past two decades. The number fell from 450,000 to 210,000 in the 1980s.
The total today is about 150,000. Even if Trump could manage the impossible feat of doubling the number of steelmaking jobs, it would be a blip in the overall economy -- which adds more jobs than that every month.
All he would achieve by putting up trade barriers, imposing tariffs and treating our trading partners as enemies is to inflate the cost of imported goods -- which would lower the living standard of every American household.
A Trump presidency would be useful for economists because it would serve to refute his misconceptions about trade -- just as a massive mudslide in Los Angeles is useful to physicists in dramatizing the power of gravity. But everyone else is advised to flee.
We start imposing tarrifs those costs will be without a doubt passed to the consumer. There is no debating that. That is why I hate tarrifs when a federal income tax is in place. Either get rid of fed income tax and impose tarrifs or get the hell out of the way of a free marketplace and keep the fed tax in place.
Steve Chapman’s economic expertise comes from his student days at Harvard where he worked on the Harvard Crimson.
In other words he’s just another pompous Harvard know it all parroting conventional wisdom.
‘Drat! Does this mean that townhall.com is a hotbed of RINOs’
Of course. It’s part of the Salem Media octopus. They gobbled up every once-independent conservative outlet that they could.
Salem Media uses itself as the propaganda arm of the GOPe.
And he’s modernized some very famous golf courses in Scotland, of all things. Can you imagine in the future when the Open Championship is played on one of Trump’s golf courses in Scotland like Turnberry? :-)
I tariff imposes the TRUE cost of goods on the consumer which includes social cost. Also a 20% tariff balances the budget tomorrow. Vote for Hillary if you like the status quo.
A tariff increases the cost of imported goods and lowers the demand causing unemployment - in China.
Yup. Prosperity is driven by higher taxes and a five year plan. It's the conservative approach to economics. Fact.
those that changed the trade policies...
Yup. It has nothing to do with overreaching government bureaucracy, stifling regulation, the highest corporate taxes in the world, or out of control litigation.
Nope. It's all because of trade.
If other countries shoot themselves in the foot, economically speaking, and punish their citizens/consumers, then we should do the same. Freedom is so overrated
It is odd how many “conservatives” defend the status quo, income taxes and open rape trade. Whew in fact all the founders were for severe import tariffs. I guess those founders were a leftist lot...
Glad you finally figured that out...
I agree with what you are saying and it is very logical. However unemployment in China doesn’t necessarily create employment here. We tarrif a good or product China does so in kind. Now yes we do have quite the trade deficit however you don’t think they’ll target an American good that is selling at the top in China as retribution? Tarrifs should ONLY be in place for its original intent to provide revenue to the government as its sole means of funding and nothing else. Today it is used by the government to pick product winners and losers. Drive those out of business you want while at the same time the ensuing tarrif war drive out of business more American companies as well.
Mase, I’ll give you ten guesses to figure out which nation was second to none without sending 90 million of it’s jobs to China.
You folks could buy a clue.
I don't think that's how all those jobs I saw loaded into shipping containers and moved overseas are going to come back, but if it makes you feel better then so be it.
Mase, we took sub normal savings off the backs of 90 million of our neighbors.
Explain to me how making zero is not as bad as paying a few more percent on goods coming into our nation, which you don’t pay until you purchase something when you can afford it. Well you can’t.
Right now, those unemployed folks aren’t buying anything. Do you think that has impact on local communities? Evidently not.
Not only are we hollowing out our own nation’s (missing) employees, their families, their neighbors, their communities, their states, and the nation, since they have no income, don’t contribute to the local economies and pay taxes on that income, at the same time we are empowering the biggest global threat.
China won’t allow manufacturing on the mainland unless our businesses turn over all proprietary information. Thus China has been gifted with over 100 years of our patent database affecting anything manufactured in China by U. S. businesses.
China has rebuilt it’s infrastructure through this process.
Our infrastructure has been completely ignored.
You are a clueless wonder.
You want to blame the freedom of free people to freely buy and sell goods and services that are in their best interests, as long as no laws are being broken, for the state of the current economy. Although you see your efforts as noble, they are hopelessly misguided. If you really cared about the plight of those who suffer from businesses leaving our shores or not being able to compete, you'd be demanding that government get the hell out of the way and allow the most competitive workers and the most innovative economy in history do what it does best. Instead, you argue that we need to further empower the very people who created the problems in the first place so they can fix the problems they created. Denying free people their right to freedom is no solution - not a conservative one anyway.
Trade isn't the problem. Government policies that chase industries away is the problem. Fixing the problem (government) is the answer. Treating industry like criminals is not. Your faith in even bigger government is unfortunate.
Make stuff up? LMAO
You’ve had things your way for 25 years.
Tell me how that has worked for our nation.
Free trade has not been free, and you’re stuck here with your eyes glued shut.
At no point does it dawn on you that with basically the same government regulations in place, we became a nation second to none.
Now you blame our losses on simply government over-regulation. I don’t agree with government over-regulation, but we don’t have more of it now than we did in 1990.
There was no magic tipping point in 1990.
It was a lust for more profits at any cost that spurred this and you know it.
And while capitalism is great when common sense is applied, it can be very destructive too, when it is corrupted.
And in this sense Capitalism was corrupted to drain our nation dry and jump start China into a major world power.
You haven’t got a leg to stand on there.
Yeah we do.
There was no magic tipping point in 1990.
No, it was 1992.
Just the demolition of health insurance in half the country, and the unobtainable EPA regs on the auto and energy sectors are enough to do serious damage to the US economy.
Then there was The Community Re-investment Act.
Thank God for the Reagan build-up, and Newt and the boys.
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