How Free Trade Is Killing Middle America

The American Conservative ^ | Jan. 24, 2014 | Patrick J. Buchanan

[1rudeboy]

“We’ve outsourced our manufacturing and much of our pollution, but some of it is blowing back across the Pacific to haunt us.”

So says University of California scientist Steve Davis. Smog from Chinese factories has already saturated cities like Beijing, where residents go about in surgical masks, and crossed the East China Sea to foul the air of Korea and Japan. Now China’s smog is coming to America’s West.

Among the pollutants wafting their way over the Pacific, says the Guardian, is black carbon, which is “linked to cancer, emphysema and heart and lung diseases,” and travels “huge distances on global winds known as ‘westerlies.’” Davis is one of a team of U.S. and Chinese researchers whose report has been published by the U.S. National Academy of Sciences. As the Chinese factories fouling Asia’s air arose to meet the demands of Western consumers, says Beijing, the West should help pay the cost of cleaning up their polluted and poisoned environment.

Seems that, despite the academic consensus that free trade is win-win for all, free trade is not free.

Great nations that have risen to global power by protecting their manufacturing, like Britain in the early 19th century, have begun their relative decline when they embraced free trade. Between 1870 and 1914, protectionist America and Germany both shoved Britain aside.

Since Y2K, China, which protects its industrial base by keeping its currency artificially cheap, has surged past Italy, Britain, France, Germany, and Japan to become the world’s second largest economy. And they are gaining steadily on us. Free trade appears to be the policy of fading nations.

Perhaps it is time for a profit and loss statement of its costs and benefits. Undeniably, free trade has been a bonanza for the top 1 percent and many among our top 10 percent. As U.S. manufacturers shut down scores of thousands of U.S. factories to finance new plants in Asia, their production costs plummeted. Wages and benefits for Asians were, and are still, but a fraction of those of American workers.

Health, safety, and environmental standards were in some cases almost nonexistent. The eight-story garment factory in Bangladesh that collapsed in April, killing 1,100 workers, mostly women, and injuring another 2,500, would never have passed a U.S. building inspection.

After having shifted production overseas and dramatically lowered costs, U.S. transnationals saw a surge in profits. These were used to push corporate salaries into the stratosphere, increase dividends to shareholders, and keep the Washington lobbyists working the Hill day and night for fast track and free trade. And the lifestyle of our corporate elites changed. Where their fathers walked sooty factory floors in smokestack towns in World War II, these masters of the universe fly Gulfstream Vs to Davos and Dubai to dine with titled Europeans, Saudi princes and Chinese billionaires.

These are America’s winners from free trade. The losers? Middle Americans. The average U.S. family has not seen a rise in real wages in 40 years. This is directly traceable to the loss of more than one-third of all U.S. manufacturing jobs. And that loss, that deindustrialization of America, is directly tied to the $10 trillion in trade deficits since Bush I. Writers who celebrate how U.S. imports have risen in this month or that year almost never mention the trade deficit for this month or that year. Perhaps that is because the United States has not run a trade surplus in four decades, whereas, in the first 70 years of the 20th century, we never ran a trade deficit. Trade surpluses add to GDP; trade deficits subtract from GDP.

And when in a company town the company closes the factory, the town often dies. And all the little satellite businesses—bars, diners, food stores, pharmacies—that rose around the factory, they die, too. The tombstones of countless dead towns across America should read: Killed by Free Trade. Tenured economists on college campuses call this “creative destruction.”

The stagnant wages of two generations of U.S. workers also help to explain the crisis of Social Security and Medicare. For, as workers’ wages fail to rise, or fall, so, too, do their contributions in payroll taxes. If, as Simpson-Bowles contends, our largest entitlement programs are heading for insolvency, free trade played a lead role in that American tragedy. And where is the liberal morality in passing laws to ensure U.S. workers a living wage and clean and safe conditions, and then, through fast track and free trade, signaling their bosses that they can evade these laws by shutting factories here, moving their plants to Asia, paying coolie wages, and subjecting Asian workers to conditions that would earn a U.S. industrialist a tour in Leavenworth?

Whatever happens from free trade is what should happen, free traders say. As Dr. Pangloss explained to Candide, whatever happens, happens for the best in this best of all possible worlds.

Sure.

[DannyTN]

"Bottom line does your tariff eliminate the compliance costs of Obamacare, OSHA, EPA, TORT Lawyers, NIMBYs, Taxes and so on and so forth?"

The tariff doesn't eliminate the cost. The tariff helps to eliminate any unfair advantage to the foreign producer due to these costs.

Again your suggesting killing the patient to cure a rash. We can eliminate all of the above costs to companies, by off-shoring all of the companies. But then we won't be able to afford to buy their products even though they are cheap.

Better to make foreign producers pay an amount equal to what domestic producers have to pay. That eliminates the unfair advantage.

[ex-snook]

Hey, I’m laughing, you think the government does not pay for the unemployed and include costs in taxes. Who knew?

[DannyTN]

"the notion that you think that total government expenditure drops when the unemployment falls from 10% to 5% is laughable, if not ridiculous. "

Unemployment, medicaid, food stamps, and other support programs would all fall if unemployment falls.

[DannyTN]

"the notion that you think that total government expenditure drops when the unemployment falls from 10% to 5% is laughable, if not ridiculous. "

Unemployment, medicaid, food stamps, and other support programs would all fall if unemployment falls.

[1rudeboy]

Hmm . . . what about government expenditures? Would you say that they would trend downward also? If not, why not?

[DannyTN]

Yes, if government expenditures for unemployment, medicaid, food stamps and other support programs falls, then total government expenditures will fall too.

I know where you are going. You’re going to claim that politicians will find another way to spend it. But that’s a wussy fatalistic argument that says we shouldn’t even try to fix the economy because no matter what we do, politicians are going to take all the money.

[Mad Dawgg]

"Better to make foreign producers pay an amount equal to what domestic producers have to pay. That eliminates the unfair advantage."

Oh OK so then tariffs are to offset the cost of compliance to government regulations and taxes and thus we give Congress more money to spend. (The tariffs go to the Gub'ment. Right?) And if you get the Tariff high enough it will offset the compliance costs and companies will start building manufacturing plants in the USA.

Is this your position?

[1rudeboy]

Wussy? LOL

Who knew that, if I only spent 10% more for everything, government expenditures would fall? [snort]

[1rudeboy]

And if you get the Tariff high enough it will offset the compliance costs and companies will start building manufacturing plants in the USA.

And pay higher wages. Never forget the higher wages. That you would pay out of your own pocket.

It's all about getting the government to spend less money, right?

[DannyTN]

"Oh OK so then tariffs are to offset the cost of compliance to government regulations and taxes and thus we give Congress more money to spend. (The tariffs go to the Gub'ment. Right?) And if you get the Tariff high enough it will offset the compliance costs and companies will start building manufacturing plants in the USA"

No. We offset the tariffs with cuts to the individual and/or corporate income taxes. A 10% increase in tariffs would fund a $1500 per worker cut in income taxes.

Government will still get a nice bump in revenues from the income taxes when people go back to work. Gov't will benefit on the expenditure side too, when they quit having to support all these unemployed people. Gov't should use the proceeds and the savings to reduce the debt and not go spend happy.

Compliance costs for most companies are small. Management complains about them because they are a headache to deal with, but the vast majority of workers in a company don't deal with them at all. Just a portion of management.

The tariffs have to be high enough to offset both compliance costs (small) and the wage differential (Huge) less the other costs differences like transportation. Then Industries will relocate to the U.S.

Taking advantage of cheap labor in foreign countries is fine as long as we are at full employment. At the current 24% unemployment (shadowstats.com) we are divesting of American wealth through offshoring industries and technology and making our own people unemployed.

[DannyTN]

"Who knew that, if I only spent 10% more for everything, government expenditures would fall? [snort]"

You're not going to spend 10% for "everything", only imports. And it's not going to necessarily be 10%, it's going to be whatever it needs to be to get the country back to full employment and restore our industries.

And yes, if we put Americans back to work, we will spend a lot less supporting them. Or maybe you think it's cheap to support 100 million Americans on food stamps.

[1rudeboy]

You're not going to spend 10% for "everything", only imports. And it's not going to necessarily be 10%, it's going to be whatever it needs to be to get the country back to full employment and restore our industries.

Let's take a momentary look at the contradictions in the above statement--I will spend 10% (or some such figure) more for imports, as I pay the tariff to the government, and I will pay 10% (or some such figure) to the domestic company, as some form of a subsidy. It's all about saving those high-paying jobs, I know . . . so spare me the sob story.

[1rudeboy]

And the food stamp roll will continue to increase, because Washington D.C.

[Mad Dawgg]

"The tariffs have to be high enough to offset both compliance costs..."

QED

And thus it is proved.

The unionistas just admitted they will fix the problem of outsourcing that was caused when the Gob'ment meddled in the markets when they instituted taxes and and other unfunded mandates like compliance costs and mandatory minimum wages by:

Wait for it...

Wait for it...

Wait for it...

Even more meddling in the markets by the Gub'ment via tariffs and even more tax regulations.

Question. Wouldn't it be better to just eliminate the government meddling in the markets than to just add on more?

You know its real hard for Congress and lobbyists to screw up the system if you just take away their power to do so.

Here is a graphic representation of the same exact plan used in the Gub'ment spending issue:

[ex-snook]

A well done to you.

The jobs should come back, whatever it takes, to support families, buy product, pay taxes and when they are financially well enough again to vote for the GOP as they have in the past. This government exists to make things better for American citizens not the world. Let’s make it so.

[DannyTN]

"Wouldn't it be better to just eliminate the government meddling in the markets than to just add on more?"

No. The wage differential dwarfs the cost of regulation compliance. So eliminating the costs of compliance isn't enough to solve our problem.

Do you want workers choked by smog like they have in china? Do you want buildings that collapse on workers like they have in China? It's okay to have compliance costs with reasonable regulations. But regulating and then opening your market without restrictions to countries with no regulations is an out of business strategy. Just don't do it. Restrict foreigners with a tariff.

Some of our regulations are good. Some aren't but that balance is an ongoing battle.

[RipSawyer]

As w/ everything there’s an up and a down, but really the new economy holds far greater potential for benefits than turning back the clock to assembly line/factory jobs.
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I reckon the possibility of turning the clock back as slim to none but that leaves me about to turn 70, very healthy and strong and maybe facing another thirty years of life, after which time, who knows, maybe there will be a shot I can take and become a one hundred year old fresh faced teenager. I need to find a new career for which I am suited, at present I am a world class expert at an obsolete profession and that is not a good position.

[DannyTN]

"I will spend 10% (or some such figure) more for imports, as I pay the tariff to the government, and I will pay 10% (or some such figure) to the domestic company, as some form of a subsidy.

No, you won't buy the same item twice both as an import and from a domestic company. You won't double pay.

You will either pay the tariff or you will pay the cost of unemployed Americans through taxes. If you are American, you are already paying the latter. I'd rather be paying the former.

[Mad Dawgg]

"The wage differential dwarfs the cost of regulation compliance."

Ahh then you missed the part where I showed the Gub'ment added to this problem by instituting the unfunded mandate of mandatory minimum wages.Also Obamacare and so on and so forth.

Face it all you are doing is more of the same and claiming it will magically fix everything.

It won't.

Every time the government tries to "fix" the situation they make it worse.

The time for fixing the system is over. Its time to dismantle the system and start from scratch.

Until that happens nothing will change and all your plan will accomplish is exactly two things.

1. Jack

2. Sh!t

[DannyTN]

You will either pay the tariff or you will pay the cost of unemployed Americans through taxes. If you are American, you are already paying the latter. I'd rather be paying the former.

I didn't say that quite right.

1) You can either buy imports without a tariff AND pay for the unemployed Americans through income taxes.

2) Or you can buy imports with a tariff, have lower income taxes, and not have to pay for unemployed Americans.

I like the second one.