Wednesday, June 29, 2016

Arg... It is Impossible to keep up with Donald Trump's Bad Ideas

Donald Trump just spoke in Pennsylvania (outside of Pittsburgh) about trade.  His populist appeal is undeniable, but even a few seconds thought should convince people otherwise.  I'll talk about the parallels in general historic terms later, because I think there is a lot people are missing in the mood of the country and world that have echoes from the past.

But this trade idiocy must be addressed.  Here is the general idea he is peddling, China (and Mexico and Japan) are cheating at free trade agreements, and he will come in a smack a 40% tariff on them right away.  Worse, this is something the President could reasonably do, at least until the courts inevitably snuff it out.

Here's the thing, this is - like - EXACTLY what moved the economic depression of 1930s into the Great Depression.  It was a short tariff war that prompted a gigantic crash in world trade and world output.

Sure, American could make everything we import, given the time to come up to speed.  But our tariffs will be matched by tariffs from other countries (not a huge deal) and by limits on American Services - financial and other (a HUGE deal).  Also, it isn't the trade deals that are putting Americans out of work - often.  The NY Times has a great story about job loses that aren't exclusively the result of trade deals, but a combination of lower cost production (sometimes but not always in China) and greater productivity by automation in America.

The high wage jobs lost in manufacturing in the 1950s aren't coming back, because they aren't there anymore.

Worse, a trade war with China will have follow on effects that he MUST know are horrible for the US.  During the Cold War with the Soviets, there was a policy of Mutually Assured Destruction - MAD.  The idea that any nuclear war would destroy us both.  In many ways, we have that same scenario with China on an economic front.  US consumers and US companies (internationally as well as domestically) drive the sales that China depends on.  Chinese bond purchasing drives the deficit spending that allows the US to afford an International Military system of 800 bases, a safety net for Medicare and Social Security and one of the lowest tax rates of an internationally powerful and well off economy.


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