Posted on 08/27/2015 6:51:48 AM PDT by SeekAndFind
Here’s a historical fact that Donald Trump, and many voters attracted to him, may not know: The last American president who was a trade protectionist was Republican Herbert Hoover. Obviously, Hoover’s economic strategy didn’t turn out so well — either for the nation or for the GOP.
Does Trump aspire to be a 21st-century Hoover, with a modernized platform of the 1930 Smoot-Hawley tariff, which collapsed the banking system and helped send the U.S. and the world economy into a decade-long depression?
We can’t help wondering whether the recent panic in world financial markets is in part a result of the Trump assault on free trade.
Trump is also running full throttle on an anti-immigration platform that could hurt growth as well as alienate the GOP from the ethnic voters it needs to win in 2016.
We call this the Trump Fortress America platform. He clearly sees international trade and immigration as negative-sum games for American workers.
Trump recently announced that as president he would prohibit American companies such as Ford from building plants in Mexico. He moans pessimistically that “China is eating our lunch” and “sucking the blood out of the U.S.”
But following the anti-business, rule-making assault from Obama, strategic tax cuts and regulatory relief — not trade and immigration barriers — are the solution to America’s competitiveness deficit.
A draft of Trump’s 14-point economic manifesto promises that, as president, he would “modify or cancel any business or trade agreement that hinders American business development, or is shown to create an unfair trading relationship with a foreign entity.”
His immigration plan would not only deport illegal immigrants, it would lock the golden doors to those who come to this country lawfully for opportunity, freedom, and jobs. This could hardly be further from the Reagan vision of America as a “shining city on a hill.”
In his latest policy manifesto, Trump writes, “Decades of disastrous trade deals and immigration policies have destroyed our middle class.” This “influx of foreign workers,” he continues, “holds down salaries, keeps unemployment high, and makes it difficult for poor and working-class Americans — including immigrants themselves and their children — to earn a middle-class wage.”
There’s some evidence that competition for jobs in very low-skilled occupations holds down wages, but for the most part immigrants fill niches in the labor market that natives can’t or won’t fill. Immigrants add to the overall productivity of the labor force while starting new businesses, and thus are net creators of jobs. Tech CEOs will tell you there might not be a Silicon Valley were it not for foreign talent and brainpower.
In the 1980s and ’90s, the U.S. admitted nearly 20 million new legal immigrants — one of the largest waves of newcomers in our nation’s history. Over that time period, the U.S. created nearly 40 million new jobs, the unemployment rate plunged by half, and the middle class saw living standards rise by almost one-third (between 1983 and 2005).
When Washington gets the macroeconomic policies right — on taxes, trade, regulation, and the dollar — economic opportunity flourishes.
Free trade is also one of these prosperity building blocks, and Trump’s call for tariffs as high as 35 percent is worrisome in the extreme. We want Americans and workers all over the world to have access to the best-quality products at the lowest possible prices. This is the centuries-long economic law of comparative advantage first taught to us by David Ricardo.
Take the Ford plant in Mexico. If it’s more profitable for Ford to produce trucks in Mexico, fine. As the supply of Mexican trucks rises, incomes for all Mexicans go up. These same Mexicans then go out and spend their new money — not just on domestic products, but on U.S. goods and services available on the market, thus building up the U.S. economy. It’s win-win.
Trump is correct that there are unfair trading practices around the world. We know, for example, that China pirates U.S. technologies and patents. They counterfeit our goods. But slapping Trump’s punitive tariff on imported Chinese goods would hurt America at least as much as Beijing. The same is true for rolling back Reagan’s NAFTA — a great success. Mexico is now our second-largest export market. China is our third.
And China is our number-one import market, with Canada second and Mexico third. Do we really want to pick an economic war with them?
The U.S is the hub of the global trading system, so any lurch toward protectionism in America would give other nations an easy excuse to erect higher trade barriers. The ensuing domino effect could shut down the global trading system. No wonder financial markets are so jittery.
Trump’s idea of a 35 percent tariff on imported goods would represent the biggest tax increase on U.S. consumers in modern times. This won’t help the poor. Consider that Walmart has been one of the greatest anti-poverty programs in world history, achieving the “everyday low prices” that greatly benefit the poor and middle class in part through low-cost imports.
But trade is also vital to American jobs. A Heritage Foundation study finds that “international trade has boosted annual U.S. income by at least 10 percentage points of GDP relative to what it would have been without global trade, which translates into an aggregate gain of at least $1.7 trillion in 2013, or an average gain of more than $13,600 per U.S. household per year.”
Free trade is also the greatest antidote to poverty and deprivation in the world’s history. Over the past three decades, according to the World Bank and other sources, the spread of free trade has lowered abject, dollar-a-day poverty by nearly 1 billion people.
Hundreds of millions have moved upward into the middle class, primarily in China, India, broader Asia, parts of Latin America, and sub-Saharan Africa. It’s a phenomenal achievement, underscoring the benefits of free trade and open markets.
To his credit, Trump accurately recites many of the terrible problems afflicting the American economy: “Today, nearly 40 percent of black teenagers are unemployed. Nearly 30 percent of Hispanic teenagers are unemployed. For black Americans without high-school diplomas, the bottom has fallen out: More than 70 percent were employed in 1960, compared to less than 40 percent in 2000. Across the economy, the percentage of adults in the labor force has collapsed to a level not experienced in generations.”
But the American problems that Trump complains about — stagnant growth and wages and slow job growth — can be sourced principally to Washington, D.C., not Beijing or Mexico City.
The solution begins with substantially cutting or even eliminating the corporate tax. After that, policymakers should stop the double taxation of multinational profits by moving to a territorial system, like everyone else in the world. Also, we need to shift to full cash expensing for new investment in plants, equipment, and building structures.
The personal tax code should then be reformed by lowering the rates, getting rid of corporate-cronyist deductions, simplifying the whole system, and ripping out tens of thousands of regulatory pages from the IRS code. In general, we prefer a flat-tax structure.
We have seen firsthand how companies from Medtronics to Burger King have fled the U.S. for lower-tax nations like China, Canada, and Ireland because U.S. tax rates are 10 and even 20 percentage points higher. This is like imposing a tariff on our own goods and services. The real victims, according to a study by the American Enterprise Institute, are American workers who earn lower wages and find fewer jobs.
Next, we need a pro-America energy policy that expands the North American shale-oil and gas revolution, ends the war on coal states, builds pipelines, allows drilling on federal lands, and greenlights the export of our vast oil and gas sources — all of which will create millions of new jobs. In other words, we need the precise opposite of the Obama energy strategy.
After that we can tackle America’s massive regulatory burden — think Obamacare, Sarbanes-Oxley, Dodd-Frank, the Consumer Financial Protection Bureau, the EPA, and the National Labor Relations Board — which under Republicans and Democrats has expanded exponentially the incredible maze of licenses and regulatory codes that pose a huge barrier to small new-business startups.
Finally, we need a strong and stable dollar policy that ensures that the value of tomorrow’s greenback will be the same as it is today. The collapse of the dollar in the 1970s and 2000s led directly to the collapse of the economy. Right now, the unstable dollar is a huge deterrent to future investment from abroad and at home. Ideally, Fed monetary policy should aim at a commodity-price rule bolstered by forward-looking, inflation-sensitive market prices.
Trump says his goal is a pro-business policy that rewards companies that “invest in America, return to America, or stay and thrive in America.” Let us add, “create in America.” The good news is that Trump’s draft economic plan contains variations on most of these ideas.
And they are ideas that have worked. When they have been in place, growth has exploded. It happened under Republican Reagan and Democrat Clinton, both of whom were free traders who favored legal immigration.
– Stephen Moore and Larry Kudlow are co-founders with Arthur Laffer and Steve Forbes of the Committee to Unleash Prosperity.
Indeed, Hawthorn. The issue is over-taxation and over-regulation, not free trade.
Ha ha.
>> Levin has also called Kudlow a fake economist <<
I didn’t hear him say that. But if he did, I’d say Levin has forfeited any claim he might previously have had for understanding basic economics.
Moreover, just as with anybody else who indulges in such trash talk, Levin demonstrates that he has lost the argument.
>> And you knew where you were then
>> Girls were girls, and men were men
>> Mister, we could use a man like Herbert Hoover again
The lyricist has obviously confused Herbert Hoover with Calvin Coolidge.
I can by the same amount of gas for a silver dollar that I could 50 years ago.
NR on its TDS rant.
Is the United States being de-industralized? And why is it that the de-industralization began with the inception of free trade?
Ding! Ding! Ding!
>> Is the United States being de-industralized? <<
No, it’s not. Manufacturing as a percentage of GNP has stayed about the same over many years. But thanks to computerization and automation, the percentage of the labor force in manufacturing is down. Many people who used to have dirty, boring jobs in manufacturing are now working in the service industries. Some probably like their new jobs, others would like to go back into factories. I don’t know how many there are in each category. But it would be interesting to see a good survey on the matter.
When have you had a first choice since Reagan? Trump is an anomaly in the vein of Reagan that is why he is hated by the GOPe and admired by the anti establishment type.
If Trump can't beat whoever the democrat is, then the ballot box will no longer be able to salvage the Constitutional Republic. Meanwhile we should do everything we can to dirty up every gop candidate for the socialists in both parties.
We have nine of those Constitutional Scholars on the Supreme Court, have they made your life better?
Well, if we had nine Constitutional Conservatives instead of “Scholars” on SCOTUS, our lives would be better.
“Trump is also running full throttle on an anti-immigration platform that could hurt growth as well as alienate the GOP from the ethnic voters it needs to win in 2016.”
And with that folks, the reading stops. Another Trump hit piece by two more Establishment hacks.*
That’s about where I stopped, too.
Hildebeeste, and Joe Biden, and Bernie Sanders are certainly fascists in the mold of Franklin Deficit Roosevelt.
Huh? First you say Ludlow is right and that Washington is the cause of stagnant wage growth and slow job growth. Then you blame free trade for negative income growth, black unemployment and the declining labor force participation rate.
The problems you cite are based on bad policy from Washington on taxes, regulation, litigation and unions. It has nothing to do with freedom. Freedom is the solution.
There was no income tax nor hardly any government for at least 120 years and that's when America grew more than any country and became a world power.that was the golden age America and freedom . it ended in the early 1900's with the progressive era and woodrow wilson the ass
It's all an attempt to destroy the border and sovereignty of the USA. The establishment they are all for obaama trade which is a Trojan horse for unlimited 3rd world immigration into the USA
Trump is the only on that is for saving America and keeping the borders. Trump is the only pro-American running.
the globalist billionaires donors donate hundreds of millions to every politician. that's why they all supported obama trade and yes Cruz was rabid for obama trade and penned an op ed promoting it. funny that boner and mconnel were also for empowering Obama with TPA
The difference in the 198o’s & 1990’s is the mentality of the Liberals and the incoming immigrants!
Those coming back then WANTED to BECOME AMERICANS, the wanted to work to succeed and prosper, and they were WORKING towards the American Dream!
Those coming in today (and the last few years), want multi-cultural, anti-American environments (they don’t want to become Americans, they just want to live in America and enjoy our benefits), and speaking of “benefits,” they want the American Dream to be ISSUED to them, at the cost of their fellow residents!!
BIG, HUGE, DANG DIFFERENCE!!!
Right. How could anyone who understands economics blame tax policy, onerous regulations, trial lawyers and union thugs when we can blame freedom for the current state of affairs? This is what happens when you have too much freedom. Thank goodness government is going to do something about it!
Many people who used to have dirty, boring jobs in manufacturing are now working in the service industries.*
This comment is so idiotic on its face.
My father had one of those “dirty, boring” jobs working in a paper mill. Made a damn good living and mother stayed home and raised her kids.
Try doing that now.
My husband works in one of those jobs as well at a shipyard. This same shipyard has young kids out of high school, trying like hell to get a job there.
Instead, the company goes to Puerto Rico and brings back cheaper labor and our kids get stuck working in one of those service jobs at McDonalds.
Yeah, that’s worked out well.
By the way, that paper mill is no longer here. Nor is the other one that was here. All gone to China.
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