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#MakeAmericaCompetitiveAgain
Donald Trump hit a nerve on tariffs, American manufacturing, and competition from China. A lot of people find the arguments for free trade unpersuasive and feel they’ve been on the receiving end of a bi-partisan policy that that imposes rules on costs on Americans that lets the rest of the world (literally) profit at our expense. I don’t quite buy that narrative but — as I’d wager some of you are thinking — of course you wouldn’t, Meyer. That doesn’t mean it’s totally wrong, though, and of course I want of my fellow countrymen to have every opportunity to find remunerative, useful employment.
My problem with Trump on this matter isn’t so much his calling attention to problems, but that his solutions are bunk. More specifically, I think the kinds of tariffs he’s suggesting are going to hurt people by raising prices, will spark retaliation against our own manufacturing, and will suffer from all the pitfalls that happen when one person thinks he’s smarter than the combined wisdom of hundreds of millions. Trump may have an economics degree, but his reading seems to have stopped before Adam Smith.
Even if Trump’s ideas worked as promised, they still strike me as misinformed. First, most of the manufacturing jobs in China aren’t particularly attractive and don’t make economic sense when you factor for Americans’ productivity and education. As Kevin Williamson and others have said, if you want to build cars, airplanes, firearms, or other high-end manufactured goods, Americans are the people to go to; if you want to make flip-flops, cheap electronics, or things that should be labeled as disposables, you’ll go broke hiring people as expensive as us. Second, the 1950s were an aberration: there were far fewer industrialized nations 60 years ago, and those that existed were still digging out of the Second World War. Third — whether it’s a good thing or a bad thing — we’re living through an emergence of a service economy much like the emergence of an industrial economy that started 200 years ago.
So if tariffs aren’t the answer, what is? My sense is that — while American manufacturing will and should be more expensive than its competitors’ (because it’s higher-quality) — there’s a lot we’ve done to artificially jack that price up. For starters, there’s our absurdly expensive and mandatory healthcare system and the political uncertainty that’s likely added a lot of hidden cost to our jobs. Who wants to hire expensive Americans when you don’t know how much extra their labor will cost?
That’s likely just one part of the puzzle. What else can we do to make sure we aren’t needlessly hurting our own workforce? Over-burdensome regulation? Right-to-Work laws? As much as possible, be specific. And yes, immigration is a totally game answer.
Published in Domestic Policy, Economics
I took his globalism to mean increasing free trade. If it means following the lead of other countries, I wouldn’t have agreed.
Absolutely. If we ever figure out (on a policy level) that the fracking revolution will draw manufacturing like bees to flowers, manufacturers will flock to our shores (they are starting to do so, but it’s a trickle of what it could/should be). Cheap, abundant, supply-safe (by this I mean not subject to Russian blackmail or Middle Eastern volatility) is very attractive to companies whose processes are energy-intensive.
The problem for places like Detroit, Chicago, Cleveland, etc., is that the skilled folks have decamped for Texas, Georgia, Florida, etc. Policy matters, as Mr. Williamson pointed out today in NR re: Detroit.
Trump is not interested in what works, Trump doesn’t care about genuine solutions to real problems, Trump is a populist who only says what he thinks can gain him votes, Trump believes in only one thing Trump.
In regards to this issue, the problem isn’t free trade, it is the fact that trade isn’t free, government intervention is in every sector of the market, red tape means that many business (particularly small business) have to operate with both hands tied behind their back.
Every country in the world still uses market distorting tariffs and subsidies and finally we have trade unions pushing for wage increases above sustainable levels.
Just like the GFC and the Great Depression, the problem is caused not by the free market it is caused by government intervention.
Well, that’s true. I heard Mark Levin making the same argument recently.
However, isn’t that like the utopian argument that globalist libertarians make about immigration — Let in all the people you want into the United States as long as the welfare state is shut down. Well, the welfare is never going to be shut down completely. We can’t let everyone in, especially quickly. Some immigrant believe in sharia law, love dictators and socialism, are dangerous criminals, don’t speak English, etc.
Milton Friedman: “I thought NAFTA was a terrible treaty — except that it was better than nothing! … Other examples (of failed supranational institutions) are the IMF and the World Bank. We would never do with our own money what the IMF and the World Bank have done.”
I don’t know why Milton Friedman thought NAFTA was a terrible treaty, but I’d sure like to know.
I remember that the complexity and number of pages of NAFTA bothered me. Aren’t those the types of treaty where the real winners are the lawyers?
P.S. I don’t believe in free trade with our nation’s enemies. We should be supporting nations of similar values. Even people like Pat Buchanan never argued against the NAFTA Treaty as it relates to Canada. American businesses selling dangerous stuff to North Korea, Iran, or ISIS isn’t my idea of free trade. These American businesses should just have to suffer in defense of their own country.
No solution here but the data clearly points out that while the productivity of the US worker has continued to improve and profits have continued to improve what hasn’t improved on the same trajectory is wages. Perhaps it is time to reexamine how much profit is ‘rational’ to expect from a market traded company.
No one is going to convince me that Canada and Germany have less regulations than the US, especially environmental and healthcare regulations. They have socialist healthcare, for crying out loud.
We keep pointing out that you are looking at the wrong angle. It’s not just the level of regulation, but how it is implemented, and how it works with or against the culture.
Nobody here has claimed that Canada or Germany have fewer regulations than the US. You are misinterpreting our comments.
And also bear in mind that we have had quite a bit of socialized medicine in the US for decades – we just call it Medicare and Medicaid.
Yes.
The deep question is: “Is that such a bad thing?”
We are entering a Brave New World.
Reduce the corporate tax rate. Many jobs will come back. Probably not the ones in China, but certainly the ones in more developed countries like Ireland will. See paragraph 29. I agree with him in all other respects about what a disaster Trump would be, and agree with his assessment: Even if elected, Trump won’t be able to do it.
But he’s right about what would happen if we reduced the corporate tax rate. Too bad that it looks as if we’ll be forced to vote, once again, for gridlock.