Posted on 06/16/2015 2:17:57 AM PDT by Cincinatus' Wife
How can it be that the largest pending trade deal in history – a deal backed both by a Democratic president and Republican leaders in Congress – is nearly dead?
The Trans Pacific Partnership may yet squeak through Congress but its near-death experience offers an important lesson.
It’s not that labor unions have regained political power (union membership continues to dwindle and large corporations have more clout in Washington than ever) or that the President is especially weak (no president can pull off a major deal like this if the public isn’t behind him).
The biggest lesson is most Americans no longer support free trade.
It used to be an article of faith that trade was good for America.
Economic theory told us so: Trade allows nations to specialize in what they do best, thereby fueling growth. And growth, we were told, is good for everyone.
But such arguments are less persuasive in this era of staggering inequality.
For decades almost all the gains from growth have been going to a small sliver of Americans at the top – while most peoples’ wages have stagnated, adjusted for inflation.
Economists point to overall benefits from expanded trade. All of us gain access to cheaper goods and services.
But in recent years the biggest gains from trade have gone to investors and executives, while the burdens have fallen disproportionately on those in the middle and below who have lost good-paying jobs.
So even though everyone gains from trade, the biggest winners are at the top. And as the top keeps moving higher compared to most of the rest of us, the vast majority feels relatively worse off.
To illustrate the point, consider a simple game I conduct with my students. I have them split up into pairs and ask them to imagine I’m giving $1,000 to one member of each pair.
I tell them the recipients can keep some of the money only on condition they reach a deal with their partner on how it’s to be divided up. They have to offer their partner a portion of the $1,000, and their partner must either accept or decline. If the partner declines, neither of them gets a penny.
You might think many recipients of the imaginary $1,000 would offer their partner one dollar, which the partner would gladly accept. After all, a dollar is better than nothing. Everyone is better off.
But that’s not what happens. Most partners decline any offer under $250 – even though that means neither of them gets anything.
This game, and variations of it, have been played by social scientists thousands of times with different groups and pairings, and with remarkably similar results.
A far bigger version of the game is being played on the national stage as a relative handful of Americans receive ever-larger slices of the total national income while most Americans, working harder than ever, receive smaller ones.
And just as in the simulations, those receiving the smaller slices are starting to say “no deal.”
Some might attribute this response to envy or spite. But when I ask my students why they refused to accept anything less than $250 and thereby risked getting nothing at all, they say it’s worth the price of avoiding unfairness.
Remember, I gave out the $1,000 arbitrarily. The initial recipients didn’t have to work for it or be outstanding in any way.
When a game seems arbitrary, people are often willing to sacrifice gains for themselves in order to prevent others from walking away with far more – a result that strikes them as inherently wrong.
The American economy looks increasingly arbitrary, as CEOs of big firms now rake in 300 times more than the wages of average workers, while two-thirds of Americans live paycheck to paycheck.
Some of my students who refused anything less than $250 also say they feared allowing the initial recipient to keep a disproportionately large share would give him the power to rig the game even more in the future.
Here again, America’s real-life distributional game is analogous, as a few at the top gain increasing political power to alter the rules of the game to their advantage.
If the American economy continues to create a few big winners and many who feel like losers by comparison, opposition to free trade won’t be the only casualty.
Losers are likely to find many other ways to say “no deal.”
I’ve had it with my kids.
Whats the opposite of “free”, mr. Reich?
Something we are not allowed to acknowledge in our society is that, like everywhere else, we have a sector of our population that will be unable to do more complex jobs simply because they lack the intelligence and work ethic. We pretend, for the sake of political correctness, that everyone is born equal, and therefore everyone can be trained for any task. Any free trade agreement should face this fact head on, and not run with the fallacy that we simply need to throw money at an inefficient government training program.
Especially since the premise is that productive and self-supporting line workers can be retrained as nuclear physicists and computer programmers.
I don't take a word they say seriously anymore.
American workers are my brothers and sisters. Bangladeshi, Indonesian, and Chinese workers are not. It's that simple.
If that's "protectionism", fine. Make the most of it.
Lots of sloganeering, talking points, and magic words. Saying “Listen to what Limbagh, Levin, and Sessions say” is being treated like some kind of magical incantation that should end all arguments.
It doesn’t.
I respect them and hear what they say but I still do my own research and thinking. Its why I’ve reached the conclusion that the bulk of our trade problems begin and end within our own borders and have nothing to do with global trade. If we deal with our own domestic issues of over taxation and over regulation, we’ll be 80% of the way there.
No, we have an H-1b program to kill that poverty escape route.
You sound like a jingoist fool. and I love it.
United States, Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, Canada, Mexico and Japan.
Embarrassed by Dems, Obama Turns to Boehner to Revive Trade Bill
Handed an embarrassing defeat by Democrats who smacked down his fast-track trade bill, President Barack Obama has turned to House Speaker John Boehner to resurrect the measure. [Full Story]
A doctor doesn’t let a patient die waiting for a cure.
Personally, I’m against illogical midgets and socialists.
I am a jingoist (I prefer “American nationalist). Not sure about the fool part...
Reich has been and will always be dishonest. This was a secret back room deal that smelled nothing of “free trade”. No wonder it was defeated.
I think the Munchkin may be right on this one.
You can only cry wolf so many times. For three decades now the American people keep being told over and over how THIS free trade agreement will launch our economy into spectacular growth, raising incomes and standards of living for all.
Apparently they’ve had it with Lucy yanking away the football. Thanks to the bozos who keep overselling these agreements, they may also be throwing in the towel on capitalism in general.
If Ross Perot had been sane he would have won that election.
I think the Munchkin may be right on this one.
...
He does make a couple of good points. Free trade may be good in theory, but in practice it hasn’t worked as well. Add in a dishonest government that can’t be trusted, and people are going to start throwing up some opposition.
I don’t know of anyone who thinks the standard of living has gone up for the middle class in recent decades, and that’s inexcusable for a country like the United States.
Americans don't like this current bill because it is another 1,000 page, unread, hidden from the public, backroom monstrosity giving huge powers to the current tyrannical King wannabe while stripping the Legislature of Constitutional powers and it contains God-only-knows-what-else slipped-in surprises just screaming to be revealed from the secret process. In other words, it is a big, fat stinking turkey law just like Washington lately so loves to pass.
The others (Democraps and union bosses) are against it because it doesn't give them enough free sh!t, political control, and personal power and spend enough money to further expand their own kingdoms.
Hard to tell as I don’t think we’ve ever tried free trade. Just accepted a bunch of crony capitalist agreements intended to please donors from the Chamber of Commerce.
China will be added after.
Political elite flim flam to get it passed.
The fast track negotiating authority for trade agreements is the authority of the President of the United States to negotiate international agreements that Congress can approve or disapprove but cannot amend or filibuster. Also called trade promotion authority (TPA) since 2002, fast track negotiating authority is a temporary and controversial power granted to the President by Congress. The authority was in effect from 1975 to 1994, pursuant to the Trade Act of 1974, and from 2002 to 2007 by the Trade Act of 2002. Although it expired for new agreements on July 1, 2007, it continued to apply to agreements already under negotiation until they were eventually passed into law in 2011. In 2012, the Obama administration began seeking renewal of the authority.
There is no "free hand" for the president.
Paul Ryan: Voting 'yes' on trade won't give Obama carte blanche
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