Is Obama like Hoover?

The crisis in our economy has generated some hysteria over another Great Depression. Although the United States has weathered other financial crises since 1929, an Obama Presidency has the potential to knock the US economy back in time to the era of Herbert Hoover.

Obama’s promises to “end tax breaks for companies who ship jobs overseas and give breaks to companies who create jobs with decent wages here” and his overt disdain for trade agreements, are dangerous. By taking on the failed protectionist policies of the Hoover Administration, Obama’s trade war would result in a disastrous outcome for America once again.

Columnist John Fund observed: “There was another time when raw politics was allowed to trump what many in Congress privately admitted was common sense. In the spring of 1930, as the economic downturn set off by the previous year’s stock market crash set in, Congress was debating the Smoot –Hawley tariff bill that sought to raise U.S. import barriers to record levels.” Fund, noting the opposition of the Act by leading economists at that time, observed “for entirely selfish reasons, both Congress and Hoover went along with the protectionist hysteria. As a result, the Great Depression was probably deepened and extended for years.”

Seventy-eight years after the Smoot-Hawley Tariff Act, politics is once again defeating common sense.

During the presidential primary, Barack Obama’s populist rhetoric denounced Bill Clinton, Hillary Clinton and big business for destroying U.S. jobs and shifting them overseas as a result of free trade agreements. In doing so, Obama not only destroyed Hillary Clinton, but also the positive, if not great, economic trade message of the Clinton Presidency.

The trade agreements initiated by Clinton and Reagan opened up markets around the world, and in the process, helped developing democratic countries lock in and implement economic and political reforms effectively, spur regional integration and enhance the prospects for investment and economic growth. Those trade agreements were also a boon to America’s economy.

Obama tells us that 900,000 jobs were lost to NAFTA, but one study showed exports of goods support 6 million American jobs, exports of services support 5 million jobs and foreign countries moving to the U.S. to be close to consumers employ another 5 million American workers. That’s 16 million American jobs that would be affected by Obama’s arrogant trade policies.

American exports today are up 50 percent in three years. The U.S. in 2007 was the world’s largest exporter with $1.3 trillion in exports, or about 20 percent of our Gross Domestic Product and, by inference, 20 percent of the nation’s jobs. U.S. annual incomes are $1 trillion higher, or $9,000 higher per household, due to increased trade liberalization since 1945. If the world’s remaining trade barriers were completely eliminated, U.S. incomes could increase by an additional $500 billion, adding roughly $4,500 per household.

Reagan and Clinton convinced the world to invest hundreds of billions of dollars in the American economy, because they believed in its ability to create products and open markets. As the largest economy in the world for over one hundred years, we have commanded over 25 percent of the world GNP, and we will do so for the next fifty years, if we have free trade.

Even Al From, the founder of the Democratic Leadership Council accepts this: “History proves that expanding trade and productivity help create growth. We learned the hard way when the Smoot-Hawley Tariff Act of the Hoover administration helped crush trade and exacerbate the Great Depression. Conversely, we have seen trade drive the economy during the great expansions of the 1960s [Johnson] and the 1990s [Clinton].”
Despite an army of statistics that demonstrates the benefits of free trade, Obama, organized labor and environmentalists continue to argue that their primary concern is raising the wages of foreign labor and argue, incorrectly, that low wages abroad translate into lost jobs at home.

The “Blue Green” Alliance links 15.4 million labor union members with Americans who are part of the international environmentalist movement. The protectionist alliance, which demands new trade agreements incorporate onerous labor and environmental standards, is nothing more than a poison pill for would-be trade agreements. This partnership made for an unbeatable combination that Obama used to secure his primary victory.

Obama and the Blue Green Alliance neglect to mention that people on fixed incomes and low salaries are the chief beneficiaries of free trade. Free trade with poorer countries improves the buying power of middle and lower income consumers. Wealthier consumers seldom shop at Wal-Mart, Target, Sears, and other discount stores where much of the merchandise is manufactured inexpensively and imported to the U.S. from countries such as China, Vietnam and Mexico.

As a result of free trade agreements, the inflation rate for low-income Americans is six points lower than that for the wealthiest Americans. Labor and environmental lobbyists ignore this fact because their salaries would place them among America’s wealthiest. Rather than letting free trade and free markets lift the world out of poverty, Obama sponsored the Global Poverty Act in the US Senate. This bill would allocate seven tenths of a percent of the GNP ($845 BILLION) to be spent on foreign aid, trade and debt relief. That means millions of dollars for the farmer in Kenya, the coffee bean grower in Columbia and the poor living in countries like Korea and Peru, but nothing in return for American companies or consumers. Only five percent of the jobs created by this scam would be American jobs.

Obama fails to understand that everyone benefits from free trade, and we can only negotiate from strength with a president who will be firm in negotiations, not someone who must seek approval from partners who gave him money and votes to win the Democratic presidential nomination and the general election next month. The largest economy in the world for over 100 years will continue its domination as long as free trade continues to be a priority for our nation. If we destroy our free trade legacy by adopting the protectionist agenda of Obama and Hoover, we are in for a truly frightening economic period.

Seventy-eight years after the Smoot-Hawley Tariff Act, politics is once again defeating common sense.

Yes. But not the way the author intends this.

The "Free Ride" leftists / Globalists, who want to import without any concern for anti-competitive foreign governments interference to protect themselves or to undermine our own production...have gone so far as to concoct a revisionist history of smoot-hawley.

For most of the history of the republic, some substantial proportion of federal revenue has been derived from taxes on goods crossing the national borders. In the past decade or two that we've been increasingly substituting import tax revenue for domestic production tax revenue. This results in an increasing tax burden on domestic production and a lessened burden on domestic consumption. Not incoincidentally, it's been in the past decade or two that the latter has far outrun the former, the US current account deficit has gone past the red line, and it’s gone from being a creditor nation to a debtor nation.

The Smoot Hawley tarriff is one of the principal arguments raised as an objection to increasing tariffs, or even to resisting the process of eliminating them. Because it was put into effect around the time of the Great Crash of 1929, it is a popular rhetorical scapegoat among the globalists for the ensuing Great Depression. But the Smoot Hawley tariff did not cause the Great Depression. Yale University professor of economics Robert Shiller has specifically addressed the putative connection between Smoot Hawley and the Great Depression and roundly debunked it. From Irrational Exuberance, pages 84-85:

" ... It is conceivable that the Smoot-Hawley tariff might have been expected to hurt the outlook for U.S. corporate profits. One could have thought that it might have been expected to benefit corporations, many of whom actively sought the tariff … other economists, including Rudgier Dornbusch and Stanley Fischer, pointed out that exports were only 7% of the gross national product (GNP) in 1929 and that between 1929 and 1931 they fell by only 1.5% of 1929 GNP. This hardly seems like the cause of the Great Depression. Moreover, they pointed out that it is not clear that the Smoot-Hawley tariff was responsible for the decline in exports. The depression itself might be held responsible for part of the decline. Dornbusch and Fischer showed that the 1922 Fordney-McCumber tariff increased tariff rates as much as the Smoot-Hawley tariff, and the Fordney-McCumber tariff was of course followed by no such recession..."

So what did cause the Great Depression? According to Alan Greenspan (yes, the same one who ran the Fed for nearly twenty years), it was the Fed. He wrote in 1966 (http://www.321gold.com/fed/greenspan/1966.html):

" ... When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's..."

Smoot Hawley did not cause the Great Depression.

I.e., in point of fact, it was the FOREIGN PROTECTIONISM that preceded and caused any damage. Smoot-Hawley was not drawn up in total and complete isolation. The foreign tariff walls preceded ours by many months. And they were the defacto trade war...before we even responded.

Today, the Free Riders, the import lobbyists, suppress the evidence of foreign protectionism, monopoly and interference and subsidies ...and constantly misrepresent any U.S. response as "institgating" a trade war.

Look at the EADs/Lobbyists here, who constantly said we had to buy the French-made plane...or "esle it would be a trade war". H'mmm. This without any acknowledgement of their 30% governmental subsidies.

China is a still more perfect example of such. It is okay for them to brazenly tariff at will, to subsidize at will, and to conduct espionage basically at will, and to coopt our technology and intellectual property at will...and nothing is done.

They already have a Five-to-One trade Surplus against the U.S....as both a result. And their wage advantage is the result of governmental manipulations of both contracts and currency rates. They subsidize over $193 billion each year to keep their peg.

And You did see their technology cloning rampage...violating all of their claims to IP enforcement...right here at Free Republic, didn't you?

The Free Riders are farcical and phoney. They aren't for free enterprise. They are fronts for its demise.

As a result of free trade agreements, the inflation rate for low-income Americans is six points lower than that for the wealthiest Americans.

This is certifiable lunacy.

As Reagan always said, "Inflation is one of the cruelest forms of taxation...and it is the most regressive and burdensome on the poor and fixed incomes, the ones least able to cope with it."

And even the liberals at Time knew he was on to something, because they went out of their way to sneer about it in 1980:

Reagan's mind, inflation is the great economic enemy, and the cause of most other ills. Says Reagan, with breathtaking assurance: "Inflation is the cause of recession, and the only cause." And what brings about inflation? "The one basic cause of inflation is Government spending more than it takes in." So, proclaims Reagan, "the cure is a balanced budget." He argues that the Government should set a specific timetable for bringing spending into line with revenues and stick to it come what may. He implies that he would even accept a renewed recession as the price of carrying out that policy. Says Reagan: "In correcting inflation, I'm afraid there will temporarily be economic dislocation."

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