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Published: Fri, 20 Jan 2017 00:00:00 -0500

Last Build Date: Fri, 20 Jan 2017 20:53:38 -0500


White House Site Relaunches with Trump’s Populist Policy Proposals

Fri, 20 Jan 2017 13:55:00 -0500

The website for the White House has been updated and relaunched to fit the new President Donald Trump administration. It is obviously pretty bare bones for now (you can read his inauguration speech here), but the issues section puts his agenda on open display. For those less interested in speeches and more interested in actual upcoming policy hints, it's worth looking over to see where things are going. He has six sections—energy, foreign policy, jobs, military, law enforcement, and trade. Here's a few interesting things worth noting, both good and bad: The administration will embrace fracking. Sound energy policy begins with the recognition that we have vast untapped domestic energy reserves right here in America. The Trump Administration will embrace the shale oil and gas revolution to bring jobs and prosperity to millions of Americans. We must take advantage of the estimated $50 trillion in untapped shale, oil, and natural gas reserves, especially those on federal lands that the American people own. We will use the revenues from energy production to rebuild our roads, schools, bridges and public infrastructure. Less expensive energy will be a big boost to American agriculture, as well. Unfortunately, but not unsurprisingly, Trump is also "committed" to the white whale of "energy independence." Just as with trade, America benefits when we get energy cheaply no matter where it comes from. It's great that he recognizes that cheaper energy creates jobs (by reducing costs). It's a shame he doesn't realize it's another good that can free Americans up to do other things if we can get it more cheaply elsewhere. The administration will use military action to fight the Islamic State (and increase the size of the military) Defeating ISIS and other radical Islamic terror groups will be our highest priority. To defeat and destroy these groups, we will pursue aggressive joint and coalition military operations when necessary. In addition, the Trump Administration will work with international partners to cut off funding for terrorist groups, to expand intelligence sharing, and to engage in cyberwarfare to disrupt and disable propaganda and recruiting. The Trump administration is also calling to "rebuild" the military even though America still overwhelms every other country's forces, saying "our military dominance must be unquestioned." But he does also call for embracing diplomacy and his saber-rattling here is focused entirely on terrorist groups and has no suggestion of interference in other countries' governance. The administration is calling for a moratorium on new federal regulations. As a lifelong job-creator and businessman, the President also knows how important it is to get Washington out of the way of America's small businesses, entrepreneurs, and workers. In 2015 alone, federal regulations cost the American economy more than $2 trillion. That is why the President has proposed a moratorium on new federal regulations and is ordering the heads of federal agencies and departments to identify job-killing regulations that should be repealed. Tim Carney at the Washington Examiner noticed last night that right as Barack Obama's administration was packing up, the Department of Energy released a new rule that will likely kill off cheap incandescent three-way light bulbs. Libertarians and conservatives who love trade should be doing the best they can to push Trump into focusing on these kinds of issues. This is what is hurting both manufacturers and consumers. Foreign trade makes goods cheaper for Americans and should be supported. All these regulations make both the production and the consumption of goods more expensive. That's where the focus should be. Speaking of which. The administration is really committed to screwing up trade: This strategy starts by withdrawing from the Trans-Pacific Partnership and making certain that any new trade deals are in the interests of American workers. President Trump is committed to renegotiating NAFTA. If our partners refuse a renegotiation that gives American workers a fair deal, then t[...]

Donald Trump Is Wrong about Manufacturing and Economic Patriotism

Fri, 20 Jan 2017 13:40:00 -0500

How misinformed—delusional, even—is Donald Trump's understanding of the economy? Totally. Here's a key passage from his inauguration speech (full transcript after the jump): We've made other countries rich while the wealth, strength and confidence of our country has dissipated over the horizon. One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind. The wealth of our middle class has been ripped from their homes and then redistributed all across the world. Let's be clear: Manufacturing jobs (factory jobs) peaked as a percentage of the workforce in 1943 at around 40 percent, during the mobilization efforts for World War II. Since then, they have declined at a perfectly steady rate (red line below). In terms of raw numbers, manufacturing jobs peaked in 1979. The United States produces more stuff with fewer workers. Not only are these jobs never coming back, they disappeared from our shores decades ago. Only people who are wilfully naive or mendacious about basic economic reality and history can continue to assert that declines in manufacturing employment are recent or a major part of contemporary economic dislocation. FFS, I lived in Buffalo from 1990 to 1993 and even then people were saying the factories and the mills had just shut down, even though the big declines were already 20 and more years in the past. Of course, Donald Trump is not alone in constantly talking about bring factory jobs back to America. Bernie Sanders never stops talking about and it was a regular line in Hillary Clinton's stump speech, too. In his early years in the White House, especially while selling the stimulus, Barack Obama also pushed that line, along with a very Trumpian "buy American" provision in the stimulus. To paraphrase Bob Dylan paraphrasing Samuel Johnson, economic patriotism is the last refuge to which a scoundrel clings. In today's global economy—a system that has not only lifted billions of horribly poor people out of extreme poverty but has delivered increasingly improved living standards for Americans—there simply is no such thing as "made in America." Or perhaps a bit less categorically, nothing good will come of increasing the price of imports, whether we're talking about finished goods or raw materials (such as steel). If Donald Trump thinks the "strength and confidence of our country has dissipated over the horizon" due to, say, NAFTA, which increased the amount of U.S. good sold in Mexico, just wait until you have to buy a car built with steel only sourced from western Pennsylvania or made more expensive due to tariffs. One more point: The industrial Midwest (also known as the Rust Belt) was key to Donald Trump's victory. The region remains mired in a decades-long slump; states such as Ohio and Michigan have for years been at or near the top when it comes to job loss and population declines in percentage terms. They don't need less trade with foreign countries, they need more; they also need more in-migration from other states. Whether U.S.-born or foreign-born, an influx of people is a sign of a thriving economy. These states need to create better, cheaper business climates by reducing taxes and regulation if they want to have any chance of competing with parts of the country that have better weather and lower start-up costs. When Reason TV and Drew Carey looked at ways to save Cleveland and other once-great American cities, the comparisons between the Mistake on the Lake and Houston were incredibly telling. Cleveland had dozens of different types of business zones, for instance, while Houston had essentially zero. The paperwork to start a business in Houston took an afternoon, while in Cleveland it stretched on for weeks. These are the fixes that should be discussed and implemented, not cynical and utterly unrealistic appeals to xenophobia and trade wars. Here's a 2009 Reason TV video that is freshly relevant in the wake of Trump's inaugural address. I post it partly because it explains [...]

The Perils and Promise of International Food Safety

Sat, 14 Jan 2017 08:00:00 -0500

"China's top leadership has called for more efforts to ensure food safety," a China-based news service reported last week, "noting there are still many problems despite an improving food safety situation." By most accounts, it appears the problematic-but-improving characterization of China's current food-safety situation is an accurate one. A recent report found nearly half-a-million food-safety violations reported in the country through the third quarter of 2016. That's evidence of serious problems, no doubt. But it's also the product of stepped-up enforcement, which helps reveal (and, hopefully, mitigate) such problems. In his recent remarks, Chinese President Xi Jinping called for stricter regulations and enforcement to help turn the tide against food-safety issues. One thing Xi didn't stress, it appears, is ability of the food industry itself to improve the culture and climate of food safety. That's an important omission. While regulations and enforcement are necessary tools to promote food safety, the private sector plays a pivotal role in protecting consumers around the globe. In 2014, for example, Walmart set out to pump nearly $50 million into its food-safety efforts in China. In 2016, the company pledged an additional $25 million there over five years. Increased food-safety expectations created by a giant like Walmart have the ability to resonate beyond the company and its suppliers, helping to change the broader food-safety culture. "U.S. companies are responding to food safety challenges in China in ways that are collaborative and innovative, and help promote food security across the whole supply chain," a recent report by a U.S.-China nonprofit found. Given our increasingly globalized economy, questions about the proper level of food-safety regulations and the role of the private sector in ensuring a safe food supply aren't limited to China. Many ongoing fears over the looming Brexit pertain to what Great Britain's food-safety rules—currently based mostly in EU law—should look like after the schism. If Great Britain opts to loosen its rules, for example, doing so could help those who produce food for sale domestically but harm their ability to sell in other countries, including across the EU. That's because rules there—as in the U.S.—require those abroad that wish to enter the local market to meet standards similar to or exactly the same as domestic producers must meet. Food-safety issues can also cross borders, even in cases where the food in question does not. For every domestic story about gluten-free labeling regulations in the U.S., you're as likely to find a similar story in a place like Ireland. For every story about a controversy over raw milk sales in the U.S., you'll probably find a similar tale abroad. While countries like China lag behind the U.S. in terms of food safety outcomes, food-safety concerns can cut both ways. U.S. beef producers have been excluded previously from international markets—including China—over fears about mad cow disease. And in lectures I've given to visiting Chinese food-safety regulators about the history and evolution of the U.S. food-safety system, I've noted nearly uniform disbelief about a handful of things these regulators had assumed—incorrectly, it turns out—their FDA peers have done and do to protect U.S. consumers. Even as the global food supply has become safer thanks to a combination of public and private rules and enforcement, it's possible food-safety bans may only increase in the coming years. If, for example, the administration of president-elect Donald Trump indeed decides to practice trade war, one can almost be certain a result of those disputes will be bans of U.S. food imports—in countries targeted by Trump—under the guise of protecting food safety. Reason readers may recall a tit-for-tat along similar lines several years ago, when the administration of George W. Bush sparred with France over U.S. beef exports (which had been restricted due in part to alleged food-safety concern[...]

Trump: ‘There will be a major border tax on these companies that are leaving and getting away with murder’

Wed, 11 Jan 2017 17:10:00 -0500

Taking seriously but not literally the trade-related comments that President-elect Donald Trump made at his long-overdue, frequently bizarre, and eminently watchable press conference today, a pro-trade observer might linger for a moment on the term Trump used to describe the act of moving a manufacturing facility from America to somewhere else. "There will be a major border tax on these companies that are leaving," our next president warned, "and getting away with murder." What purpose does such over-the-top figurative language serve? Well, it's entertaining, for one, and Trump has derived enormous value from being able to hold our attention. (My favorite such moment from today was when he called BuzzFeed a "failing pile of garbage.") It's also a pretty direct political signal to his Rust Belt voter base that the incoming president takes their job displacement personally. He was explicit about that linkage today: [T]hat was a beautiful scene on November 8th as those states started to pour in. And we focused very hard in those states, and they really reciprocated. And those states are gonna have a lot of jobs […] [W]hat really is happening, is the word is now out, that when you want to move your plant to Mexico or some other place, and you want to fire all of your workers from Michigan and Ohio and all these places that I won—for good reason—it's not going to happen that way anymore. A third and more far-reaching use of such hyperbole is that it probably helps in Trump's audacious yet preliminarily promising project (from his point of view, not mine) of transforming the Republican Party's fundamental views on capitalism, trade, and economics. While former free traders like Mike Pence, Reince Preibus, and Steve Moore look on and applaud, the standard-bearer of the GOP is mouthing words that would fit snugly in a Hillary Clinton speech: src="" allowfullscreen="allowfullscreen" width="560" height="340" frameborder="0"> Speaking of Democratic talking points, Trump in his opening remarks singled out Big Pharma as his second major industrial target, after the auto industry. Check out the lefty: We've got to get our drug industry back. Our drug industry has been disastrous. They're leaving left and right. They supply our drugs, but they don't make them here, to a large extent. And the other thing we have to do is create new bidding procedures for the drug industry because they're getting away with murder. Pharma, pharma has a lot of lobbies and a lot of lobbyists and a lot of power and there's very little bidding on drugs. We're the largest buyer of drugs in the world and yet we don't bid properly and we're going to start bidding and we're going to save billions of dollars over a period of time. There's that "murder" word again…. Trump has been making this pharmaceuticals-bidding argument for a while now, and as Peter Suderman pointed out last year, his approach thus far has not been tethered to realism. And his browbeating of companies, sometimes on an individual level, is already becoming a recipe for crony capitalism, as Eric Boehm has pointed out here. But the big policy kahuna—and therefore the biggest threat to all Americans—will be his strong desire to enact a border tax: You want to move your plant and you think, as an example, you're going to build that plant in Mexico and you're going to make your air conditioners or your cars or whatever you're making, and you're going to sell it through what will be a very, very strong border […] not going to happen. You're going to pay a very large border tax. So if you want to move to another country and if you want to fire all of our great American workers that got you there in the first place, you can move from Michigan to Tennessee and to North Carolina and South Carolina. You can move from South Carolina back to Michigan. So will Republicans go along with the Hillaryification of GOP economics? Many of their voters appear ready, as Reaso[...]

Worst of Times

Wed, 11 Jan 2017 00:01:00 -0500

Now that I no longer do a weekly TV show, I have more time to read my local paper. Sadly, that's The New York Times. The Times actually does some good reporting, but their political and economic coverage is filled with deceit. Can I find deceit every day? You bet. Take a look at a few days just last week. --Thursday: The front page: "NAFTA's promise is falling short, Mexicans agree." Wow, the Times now embraces Donald Trump's position on trade? Economists estimate that 14 million jobs depend upon NAFTA, but people everywhere often oppose trade because the smaller number of jobs lost is more visible than gradual gains. What evidence of NAFTA's failings does the Times offer? Oddly, the article says "the workforce has grown." Ah, hello? Job growth is good. Jose Luis Rico "earns well under $10,000 a year." Not much by American standards, but good for Latin America, and the reporter mentions that Rico got "a handful of raises." Have you gotten "a handful of raises"? Despite NAFTA, the "gap between the nation's rich and poor persists." Duh. Trade doesn't eliminate wealth gaps—it may increase the gap because the cleverest traders get rich. But since the poor gain jobs and wealth, too, so what? Finally, the clueless Times reporter quotes a Mexican politician and crony capitalist complaining: "Government has not established policies to protect Mexican businesses." But "protection" for some businesses is corporate welfare—welfare for the rich. It hurts poor people by raising prices. The Times wants that? Maybe they're sucking up to Donald Trump and his friend Carlos Slim, Mexico's richest crony capitalist, and the Times' biggest shareholder. --Friday: A front-page story smears David and Charles Koch (the former of whom is a trustee of Reason Foundation, the nonprofit that publishes this website) First, the reporter labels them "the ultraconservative billionaire brothers." Ultra? Why ultra? Why conservative even? The Kochs favor liberal immigration rules, gay marriage, legal drugs, ending racial discrimination in criminal sentencing, fighting in fewer foreign wars and getting rid of government bailouts and favors for businesses, including their own. David Koch supports higher taxes to reduce the deficit. Which of those things is conservative?! Maybe the Times calls the Kochs "ultraconservative" because a political group they support points out, "Policies that subsidize electric vehicles and solar panels for the wealthy raise energy prices" and gas and oil are cheaper for everyone. The reporter adds that the group even showed a "video of people driving, turning on lights and plugging in appliances." Oh, no! How terrible! The reporter claims the "Kochs have long worked to quash... renewable energy sources like wind and solar." But they haven't! They try to quash subsidies for renewables. Big difference. Doesn't the Times know the difference? The Times appeals to its Trump-hating readers with a headline that begins "Sensing Gains Ahead Under Trump, the Kochs ..." But the Kochs didn't give Trump a penny. It's time for the Times to stop calling all their opponents "conservatives." Some of us are libertarians. America has other choices besides the anti-capitalism of the Times and anti-capitalism of Trump. --Saturday: The Times quotes left-wing New York Governor Andrew Cuomo (D) saying it "defies common sense" to have a nuclear power plant near New York City. Green activists oppose the plant and Cuomo now says it will close. But where will New Yorkers get power? The "options include hydropower from Quebec and power from wind farms." Great. But what will we do when the wind doesn't blow? At least the reporter admits that "New York City could be burdened with higher energy prices." Could be? Will be! --Sunday: "Trump Denies Climate Change, These Kids Die." That's the headline on a Nicholas Kristof column about drought in southern Africa. Apparently, there were no dry spells before "man-made global warming." In truth, starvation [...]

The Neoliberal Era Is Over

Wed, 04 Jan 2017 10:20:00 -0500

Yesterday brought three bits of trade-related news from President-elect Donald Trump. The first was that he has nominated as the next United States Trade Representative Robert Lighthizer, who has long railed against what he calls "the utopian dreams of free traders." The second was, obviously, a tweet: General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax! — Donald J. Trump (@realDonaldTrump) January 3, 2017 And third was the announcement from Ford Motor Co. that it is cancelling a $1.6 billion plant in Mexico while launching a $700 million factory in Michigan, which Ford Chairman Bill Ford Jr. told Trump himself in a phone call. We've already seen this cycle play out before—five weeks ago, over the span of a few days, the president-elect vowed to enact a 35 percent border tax, slammed an Indiana ball-bearings plant for moving its factory to Mexico, then declared victory after intervening in another manufacturer's siting decision. But coupled with recent political and societal developments in the increasingly morose continent of Europe, this latest bout of Trumpism spray-paints an exclamation point on a 2017 reality many are still slow to acknowledge: The post-Cold War age of ever-increasing trade, immigration, multilateral integration, and technocratic celebrations thereof, is in the rearview mirror. Once-dominant neoliberalism—I'm using the term here as it is deployed these days by its critics, rather than how it was used by its more domestically inclined originators—is on life support in the democratic West. And this deterioration long predates Donald Trump. Start with trade. After the destruction of World War II and the post-war European incursions by the Soviet Union, tariff reductions and free-trade zones have been understood in Paris, Bonn, London, and Washington as the best available tool to cement peace and stave off authoritarianism. American presidents from both major political parties—sporadic rhetorical spasms notwithstanding—have without exception assumed their role as the world's lead trade negotiator. Dwight Eisenhower, in the teeth of the Cold War, bucked nearly a century of Republican protectionism. Bill Clinton and Al Gore, after the collapse of communism, shouted down giant sucking sounds from all over the political spectrum. Even Barack Obama, who campaigned more vociferously against trade pacts than any postwar president, predictably reneged on his promise to renegotiate the North American Free Trade Agreement (NAFTA), and appointed as his second-term Trade Representative a guy whose resume—Council on Foreign Relations, Citigroup, chief of staff in Robert Rubin's Treasury Department—couldn't be more neoliberal if it was cooked up in a laboratory. Compare that to the mercantilist economic views of Trump's pick, as expressed in a 2008 New York Times op-ed headlined "Grand Old Protectionists": Modern free traders […] embrace their ideal with a passion that makes Robespierre seem prudent. They allow no room for practicality, nuance or flexibility. They embrace unbridled free trade, even as it helps China become a superpower. They see only bright lines, even when it means bowing to the whims of anti-American bureaucrats at the World Trade Organization. They oppose any trade limitations, even if we must depend on foreign countries to feed ourselves or equip our military. They see nothing but dogma—no matter how many jobs are lost, how high the trade deficit rises or how low the dollar falls. While the Trump administration's pivot on trade will feel abrupt, the politics behind it have been percolating for more than a decade. Free-trade Democrats, once a common sight on Capitol Hill, became all but extinct after the party re-took Congress in 2006 on a more economically populist platform. Hillary Clinton twice ran for president by campaigning against her husband's tr[...]

Gurgaon: India's Private City

Thu, 15 Dec 2016 12:15:00 -0500

The last time I was in India, it was a familiar scene. The rickshaws rumbling through busy bazaars. Shoppers haggling over everything from gemstones to silk sarees. Pilgrims prostrating their way to salvation. Authentic street food, enhanced by locally-sourced infectious pathogens. This time around, I knew the country had changed. I wanted to see the effects of thirteen years of market reform and hypergrowth since my last visit. So I summoned an Uber (already something new) and headed 15 miles south of my Delhi hotel. As the crumbling roads of the capital city opened up into a 32-lane expressway, the old India I thought I knew, gave way to the future. I'd arrived in the city of Gurgaon. It's hard to imagine, but twenty-five years ago, there was nothing here. No high-rises. No kitschy shopping malls with Vegas-like trompe l'oeil ceilings. No 27-hole Jack Nicklaus signature golf courses. Stretching back to medieval times, Gurgaon was nothing more than a plot of rocky soil with a small marketplace. Until six years ago, it didn't even have a municipal government. So what happened? When Delhi banned private real estate development in the 1950s, Kushal Pal Singh began buying land south of the city limits. His company, Delhi Land and Finance, offered cash and equity stakes to farmers in Gurgaon. Many of these cowherds became instant crorepatis—millionaires, in the local lingo—while KP Singh would become the fifth richest man in India by the turn of the century. The state of Haryana eased land use restrictions, making it easy for developers to use their land as they saw fit. But once land was converted from farmland to commercial use, it was still classified as rural. That's how Gurgaon ended up as a city without a city government. Haryana also allowed women to work past 6pm—a bold policy decision in a socially conservative country. Without flexible labor laws, India would never have been able to develop its famous call center industry, where phone operators must work through the night in order to match times around the world. Maruti was the first to arrive with an auto manufacturing plant in the 1980s. As India stepped back from socialism in the 90s, foreign investment bypassed Delhi, and poured into Gurgaon. When General Electric set up shop, hundreds of multinationals followed. Soon Gurgaon was generating middle class jobs by the hundreds of thousands. Today, it boasts an absurd 30 percent annual GDP growth and the third highest per-capital income in India. Over time, other developers have entered the market, competing with DLF, and diluting its share of Gurgaon. But DLF remains the dominant provider of roads, sewage systems, security, and India's only private fire department. While Gurgaon isn't exactly crime free—the crime rate is on par with Phoenix, Arizona—it doesn't lack for protection. 35,000 private security guards keep a watchful eye on the city, compared with 3,000 public officers. Gurgaon's services and cleanliness are like nothing else I've seen in the country. India's only privately run metro system is fast, modern, and efficient. Employees compulsively sweep floors that already look spotless. It's unclear if Gurgaon's metro turns a profit. But as it increases the value of land owned by DLF and others, it may have already accomplished its mission. I'd like to tell you that Gurgaon has solved all of India's problems. But even here, in the beating heart of hypergrowth, the worst of Old India stubbornly refuses to die. Sixteen percent of Gurgaon's population lives in slums. If that seems like a lot to you, the shocker is that it's less than the average Indian city. There are 150 million fewer poor people in India since my last visit. That's half of the population of the United States, lifted out of the slums. India's achievements over the past decade are awe-inspiring. But as my own country turns its back on the same global markets that transf[...]

Free Trade Has Worked. Just Look at Texas.

Tue, 13 Dec 2016 13:20:00 -0500

"It's funny because out of all the rhetoric coming out of this year's campaign this is the one issue thats going to have the most effect," states Erica Grieder, former senior editor at Texas Monthly. "We're going to have a lot of economic growth in Texas in the coming years because of trade. So if there's a hostility in Texas to trade that's not going to work out too well for us." Free trade came under attack this election cycle with all major party candidates making statements that blamed bad trade policies for the loss of manufacturing jobs and and the decline of the middle class. The top target of scrutiny has been the North American Free Trade Agreement (NAFTA), a bipartisan deal that removed all trading barriers between the United States, Canada, and Mexico. While President-elect Donald Trump has referred to NAFTA as the "worst trade deal" ever signed, economists have come to the general consensus that NAFTA has had an overall positive effect on the economy since its passage in 1993. Regional trade has increased from roughly $290 billion in 1993 to more than $1.1 trillion in 2016. And while foreign direct investment stock in Mexico has increased from $15 billion to over a $100 billion in that same period, U.S. exports with partnering NAFTA countries have tripled since the legislation took effect and Canada and Mexico now account for one-third of U.S. exports according to the Congressional Research Service. "There's this kind of demagogue-ish concept that life is a zero-sum game. That the economy is primitive. That you take jobs from one country and move them to another country and there's only a finite number of jobs to go around," states Grieder. "Texas is proof that's not the case." Since the passage of NAFTA, Texas has led the country in exports for over a decade and the state's gross domestic product (GDP) has gone from $444 billion in 1993 to nearly $1.6 trillion today. The state's employment rate has fared better than the national average—a 2016 Business Roundtable study showed that international trade was responsible for over 3.1 million jobs in the Lone Star state. But even though the state is benefiting, the constant attack on free trade during the 2016 election cycle has turned even traditional supporters against international trade deals like NAFTA. The University of Texas at Austin's Texas Politics Project found that 51 percent of Texas Republicans think international trade deals have harmed the United States in a June 2016 poll. The findings out of Texas are similar to overall national numbers—just 48 percent of Americans think international trade deals have been good for the country according to the most recent Pew Research polls. "You have areas that do feel dislocated by globalization," says Grieder. "It's not really NAFTA, it's more the growth of China as a role player in the world economy, automation, technological change. But it's kind of easy to point to NAFTA." Grieder explains that it is important that community industries that may be threatened by trade deals have the ability to apply for trade adjustment assistance. But she cites examples where cities have adapted. "Look at Pittsburgh—how much it has evolved and changed and now it's more stronger than it used to be. Indiana has done very well. It is possible for things to get better even if things change and that's the thing people need to look for." Produced by Alexis Garcia. Camera by Zach Weissmueller and Alex Manning. Graphics by Joshua Swain. Music by Chris Zabriskie and Puddle of Infinity. Subscribe to our YouTube channel. Like us on Facebook. Follow us on Twitter. Subscribe to our podcast at iTunes.[...]

Trump's Self-Defeating Trade Policy

Mon, 12 Dec 2016 00:01:00 -0500

Opposition to free trade was to Donald Trump's campaign what burgers are to McDonald's: not the entire menu but the essence of the brand. His fabled appeal to rural whites and unemployed steelworkers arose largely from his vow to get tough on foreigners who have been flooding us with goods. It has never been clear whether Trump sincerely believes what he says—given his history of making products in other countries offering low-cost labor—but it's always been apparent that he has no real grasp of the subject. He doesn't know much, and he doesn't know what he doesn't know. When he bragged about the $50 billion the Japanese SoftBank Group plans to invest in the United States, Trump clearly had no clue that it will actually hinder his effort to curb imports. Before people in Japan can make such an investment, they need American dollars, which are not printed in Tokyo. How do Japanese get American dollars? By selling goods or services in the United States. Every increase in foreign investment or lending here has to be accompanied by an equal increase in our trade deficit. It's a simple accounting truism. A $50 billion increase in Japanese investment translates into a $50 billion increase in Japanese imports. Trump can boost foreign investment or reduce imports, but not both. His threat to hit China with stiff tariffs has had similarly self-defeating consequences. Worries he'll start a trade war have caused a sharp decline in China's yuan against the dollar—which will reduce the price of Chinese goods shipped here while raising the cost of American products sold there. After attacking the Chinese for lowering the value of their currency, the president-elect has driven it down for them. He exhibits scant knowledge even on his favorite topics. Though Trump denounces NAFTA as a disaster, I've never heard him cite a single provision he doesn't like. All he knows is that we run a trade deficit with Mexico, which he assumes is a terrible thing. When he visited the Chicago Tribune for an interview with the editorial board last year, he claimed to favor free trade but complained that Ford was building a plant in Mexico and employing Mexicans. Asked whether that isn't how free trade works, he replied, "What do we get out of it?" His answer: "We never get anything." What we get from plants in Mexico that ship goods to the United States is just that—goods Americans want at a price they are willing to pay. The chief benefit of international commerce is that it allows the people of a nation to consume more than they would be able to if they had to make everything for themselves. This proposition is one of the oldest and most durable insights of economics. Trump has the idea that he can save and add American jobs by discouraging U.S. companies from moving production to other countries. He's even threatened to punish those that do. But this is a futile remedy. If gas furnaces can be made at a lower cost in Mexico, it ultimately doesn't solve anything for Carrier to keep manufacturing them in Indiana. Why not? Because its competitors, foreign or domestic, can put their plants in Mexico, gain a cost advantage and take sales away from Carrier. In the long run, Indiana may find that these jobs won't move away; they'll just disappear. Trump assumes he can force companies to build more in the United States by imposing tariffs on goods they make overseas for sale here. It would surprise him to learn that such duties would harm not just American consumers but also American producers. U.S. automakers use a multitude of imported components. Most of the cars built on our soil, in fact, contain more than 25 percent foreign parts. A lot of other products assembled here include materials or pieces made elsewhere. As a result, any duties slapped on imports would inflate costs for American manufacturers, making it harder for them to s[...]

Trump Has Little Latitude to Change Trade Policies...So Far

Wed, 07 Dec 2016 16:55:00 -0500

Over at Bloomberg Politics, Sahil Kapur has a useful piece detailing congressional unease at President-elect Donald Trump's recent rhetoric about slapping a 35 percent border tax on U.S. companies that offshore production and then try to sell their stuff back to America. In keeping with most coverage of Trumpian tweets, Kapur doesn't get to Question 1 of my 5-Step Process for Playing Defense Against Trump's Bad Ideas—What could President Trump actually do?—until paragraph 21: Legally, Trump does have some unilateral powers to tax particular goods that cross the border, but not entire companies' products, said Gavin Ekins, a research economist at the right-leaning Tax Foundation. "In reality, a tariff doesn't quite work that way," he said. "But you can tax a class of goods. It's possible to say 'I'm going to put tariffs on heavy trucks within this time range.'" Ekins said Trump will likely face legal challenges and may need buy-in from Congress and the World Trade Organization to make his plans stick. "He can technically do this but there's going to be push-back in many ways if he does," he said. "He's extremely constrained in what he actually can do in the very end." Chad Bown, a senior fellow at the pro-trade Peterson Institute For International Economics, said Trump has broad authority to apply import restrictions under national-security exceptions, but he argued that going after entire companies' products would be "unprecedented" and could "backfire along a number of different dimensions." […] He cited one example: "In 2009, the Obama administration imposed restrictions on Chinese tires. In response, they hit restrictions on U.S. poultry products, in particular chicken feet, a Chinese delicacy that we exported a lot of." Trump wouldn't be the first president to unilaterally pursue protective tariffs. In March 2002, for example, George W. Bush slapped tariffs of as much as 30 percent on steel imports to protect the ailing domestic industry, after his administration concluded that trading partners were engaging in predatory practices known as "dumping." The move faced international push-back, and 21 months later Bush abandoned the tariffs under threat of a trade war with Europe. So even though Trump ran a far more explicitly protectionist campaign than Barack Obama did in 2008, he will be constrained by the Constitution, by U.S. law, international treaties, the potential for bilateral retribution (though he'd certainly be less gun-shy about entering into such conflicts), and by the GOP-led Congress. Kapur's piece, in fact, is largely a collection of hold-on-there quotes from congressional Republicans, such as House Majority Leader Kevin McCarty ("I don't want to get into some type of trade war"), Senate Foreign Relations Chairman Bob Corker ("I'm not much of a tariff-oriented individual"), and Rep. Jusin Amash (R-Mich.): "Maybe the slogan should be #MakeAmericaVenezuela." So the question soon becomes, Might Congress change its mind? On the yes-it-damn-well-might front, comes this shock of a poll this week from YouGov, showing 57 percent of Republicans and 55 percent of conservatives (compared to 38 percent of independents and moderates, 33 percent of Democrats, and 31 percent of liberals) agree with Vice President-elect Mike Pence's appallingly inaccurate statement that "The free market has been sorting it out and America has been losing." The poll additionally showed that 73 percent of Republicans and 70 percent of conservatives agreed with "imposing stiff tariffs or other taxes on U.S. companies that relocate jobs," 78 percent of Republicans think it's proper to "offer tax breaks or incentives to individual companies to keep jobs in the U.S.," 75 percent of Republicans think it's Jim dandy for the federal government to "negotiate with individual private companies on a [...]

The 5-Step Process for Playing Defense Against Trump’s Bad Ideas

Mon, 05 Dec 2016 15:19:00 -0500

By now we should be familiar with the pattern: President-elect Donald Trump tweets out some crazy-sounding policy-related ideas, journalists and Democrats freak out, the conversation quickly progresses from an argument over the proper adjectives to describe the idea to meta-arguments over Trump's possible motives and whether we should even be paying that much attention to what the president-elect tweets in the first place. Then before you know it there's a new crazy-sounding policy-related idea transmitting from Trump Tower through social media, and away we go again. From flag-burning to alleged massive voter fraud, it's a profoundly unsatisfying way to process an unusual politician's public utterances. Instead of beginning with generalized hyperbole and speculative divinations of dark motive, I suggest something closer to the opposite: Working from the practical specifics backward, and saving the ominous political vagaries for last, so that you can rally defenses where necessary and also arrive at a bit of perspective before declaring every impotent brainfart proof of incipient fascism. You can use my still-in-beta 5-Step Process for Playing Defense Against Trump's Bad Ideas™ on any number of topics—why, just yesterday, the incoming president was complaining that China didn't "ask us if it was OK to devalue their currency"! But to get things rolling here I'm going to apply it to Trump's weekend tweetstorm about unleashing "retribution" against U.S. companies that dare close down any operations in America while opening facilities abroad. First, the president-elect in his own words: The U.S. is going to substantialy reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. ...... without retribution or consequence, is WRONG! There will be a tax on our soon to be strong border of 35% for these companies ...... wanting to sell their product, cars, A.C. units etc., back across the border. This tax will make leaving financially difficult, but..... these companies are able to move between all 50 states, with no tax or tariff being charged. Please be forewarned prior to making a very ... expensive mistake! THE UNITED STATES IS OPEN FOR BUSINESS Trump had previously tweeted that "Rexnord of Indiana is moving to Mexico and rather viciously firing all of its 300 workers. This is happening all over our country. No more!" So how do we deal with statements such as these? By asking ourselves five questions. Question 1: What could President Trump do right away about this, using his executive authority? Scott Lincicome, a Cato trade analyst and must-follow on Twitter, sorted through the policy translation this way: 3 ways to read Trump's outsourcing tirade: 1) he's really talking abt, albeit poorly, the House corp tax plan re border adjustability... — Scott Lincicome (@scottlincicome) December 4, 2016 2) he's really talking abt an ignorant/harmful, legally dubious (US/WTO) border tax on "outsourcers" 3) he has no idea what he's talking abt — Scott Lincicome (@scottlincicome) December 4, 2016 Option 1) is the best (& most likely) choice - even tho it has no actual long-term econ effect - but he's so unclear/nonsensical (35%, etc) — Scott Lincicome (@scottlincicome) December 4, 2016 In other words, the president does not have the authority to wave a magic wand and conjure a 35 percent tariff. However, he might well be referring to a concrete proposal percolating in the House of Representatives, which gets us to Question 2: What relevant legislation might Congress—including a 52-48 Republican Senate majority that includes at least 11 GOP senators who didn't endorse Trump and t[...]

A 'Change Election'? Just the Opposite

Thu, 24 Nov 2016 00:01:00 -0500

Was this a "change election"? Donald Trump's victory is widely attributed to the public's thirst for something new, which he represented and Hillary Clinton didn't. It would be more accurate to say the outcome stemmed from too much change—which has discombobulated conservatives, as well as liberals. Trump would be very different from past presidents, and that quality appealed to voters fed up with the status quo. But his supporters were voting for something old. "Make America Great Again" is a cry of nostalgia. Clinton stood for stability, predictability and caution. So the choice boiled down to "undo all the changes I don't like" vs. "don't change a thing." The problem is that change, however disruptive, is a defining achievement of our age. The modern capitalist economy is continually adapting to serve the demands of the populace. Material progress and more choices come about through the creation of new methods and new products that make old ones obsolete. The 20th-century economist Joseph Schumpeter called this phenomenon "creative destruction," which he argued is "the essential fact about capitalism." It has become the essential fact about modern life, indispensable to the rising living standards that Americans expect. But it carries a price: No one is guaranteed that life will forever remain as it is. Trump ran well, we are told, among working-class whites who have seen the industries that once employed them shrink or vanish. Both he and Clinton, as well as Democratic insurgent Bernie Sanders, cultivated these voters by turning against international trade. But most of the upheaval in our industrial landscape has not been caused by foreign competition. By one measure, total employment, American manufacturing has wasted away. Since 2000, 5 million jobs have disappeared. But U.S. manufacturing output is 15 percent higher now than it was then and nearly double what it was in 1987. A lot of automaking jobs have moved not to Mexico but to Tennessee and South Carolina. A lot of coal mining jobs in Appalachia have been lost to natural gas fracking operations in Texas. But politicians act as though well-paying jobs should be tenured perches. That can't be the case in a healthy, dynamic economy—not with blue-collar jobs and not with white-collar ones. Law was once a lifetime ticket to a high income. Not anymore. Law firms are shedding partners, and the Bureau of Labor Statistics says lawyers can expect to see more price competition, more tasks going to paralegals and some work being outsourced overseas. The number of people working at newspapers has been slashed by 38 percent in the past decade. A century ago, 1 in 3 Americans worked on farms. Today, it's 1 in 50. Change is something to navigate, not something to obstruct. Our lives are easier, better and longer than those of generations past, and those achievements have been built on the ruins of defunct businesses and occupations. I would prefer that people get their news on printed pages, but my preferences hold no sway with readers who like electronic transmission. Remember video stores? Economist Mark J. Perry of the conservative American Enterprise Institute notes that in 1999, they employed 170,000 people. Good luck finding one now. But the ubiquity and familiarity of change don't make it less a source of anxiety. And the endless transformation extends to the realms of culture, religion and family life, where it's also often unwelcome. The resistance comes in different forms among different people. Conservative whites feel besieged by immigrants, whose language and customs are sometimes jarringly alien. Liberals and minorities in places such as San Francisco and Brooklyn resent gentrification and rising housing prices, which remake the neighborhoods they call home. Nost[...]

Globalization and Poverty

Tue, 22 Nov 2016 07:00:00 -0500

Remember the good life during the 1970s? If you do, your experience is not likely to have been a typical one. In fact, the economic liberalization and globalization that started in the late 1970s and accelerated in the 1980s, has led to a massive and historically unprecedented decline in global poverty. Contrary to much of the public perception, liberalization and globalization have not led to an increase in U.S. poverty rates, which continue to fluctuate within a comparatively narrow and, by historical standards, low, band.

Let us look at the global picture first. In 1981, the year Ronald Reagan became America's 40th President, 44.3 percent of the world lived in extreme poverty (i.e., less than $1.90 per person per day). Last year, it was 9.6 percent. That's a decline of 78 percent. In East Asia, a region of the world that includes China, 80.6 percent of people lived in extreme poverty. Today, 4.1 percent do—a 95 percent reduction. Even in sub-Saharan Africa, a relatively under-performing region, the share of the population living on less than $1.9 per day dropped by 38 percent.


Have those advances come at the expense of the American worker? They have certainly led to economic dislocation, but America's poverty rate has remained relatively steady. When talking about U.S. poverty rates, it is important to keep in mind that extreme poverty in America is vanishingly rare. Instead, our poverty rate is determined by the U.S. Census Bureau "by comparing pre-tax cash income against a threshold that is set at three times the cost of a minimum food diet in 1963, updated annually for inflation using the Consumer Price Index. It's also adjusted for family size, composition, and age of householder."


According to both the Nobel Prize-winning economist Angus Deaton and Cato's Michael Tanner (who relied on U.S. Census Bureau data), the American poverty rate has moved between 15.2 and 11.3 percent over the last four decades. On three occasions (1983, 1993 and 2010) it reached over 15 percent of the population. Those were post-recession peaks that disappeared as soon as the economy recovered.


In fact, America experienced her lowest poverty rate since 1974 in 2000, when openness of the American economy, as measured by the Fraser Institute's Economic Freedom of the World index, was at its highest. Since then, America's economy has become less free. Could that be the reason why the American recovery from the Great Recession was so sluggish and why America's poverty rate has not retreated as fast as it did on previous occasions?


Donald Trump and the End of Free Trade

Mon, 21 Nov 2016 17:30:00 -0500

"Canada, Mexico, and China are the top three customers for U.S. exports," says Dan Griswold, a senior research fellow at the Mercatus Center at George Mason University. So what are the top three countries President-elect Donald Trump wants to pick a trade fight with? "Canada, Mexico, and China."

Griswold, who's also the co-director of Mercatus' Program on the American Economy and Globalization, says he's "cautiously pessimistic" about what Trump will mean for U.S. trade policy. In a new Reason podcast with Nick Gillespie, he dispels some of the classic myths about free trade, such as that it's a major job killer (technological progress is the real culprit), and that trade deals such as NAFTA, CAFTA, and TPP establish systems of "managed trade" and thus should be opposed by "real" libertarians.

"These trade agreements have left us freer," he says, "and I think libertarians should support that."

For more, read Griswold's recent piece, "What the Trump Win Means for U.S. Trade Policy," on his blog, Mad About Trade.

Click below to listen to that conversation—or subscribe to our podcast at iTunes.

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Will Trump Supporters Like What They Get?

Thu, 10 Nov 2016 00:01:00 -0500

"Democracy is the theory that the common people know what they want, and deserve to get it good and hard." So wrote H.L. Mencken a century ago. In our form of democracy, though, the people often don't get what they want. But with the election of Donald Trump, that is about to change. Among the central elements of the U.S. Constitution are checks and balances, achieved through separation of powers. The idea, James Madison wrote, is that "ambition must be made to counteract ambition." By design, Congress is a restraint on the president. The president has tools to contain Congress. The Supreme Court, whose members are chosen by the other two branches, has the last word on what they do. "In framing a government which is to be administered by men over men," explained Madison, "the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself." The scheme is the source of chronic frustration born of stalemate. Presidents fail to keep their promises because Congress rebels. Congress can't enact its agenda because it lacks the votes to override vetoes. And even if they can agree on what to do, their plans may die in the Supreme Court. The beauty of a parliamentary system is efficiency. If you elect a party that promises to take some action, you can bet the action will be taken. The prospect of getting what you vote for concentrates the mind on what you really want. Our system encourages voters to be less careful, because winning candidates often fall short of their proclaimed intentions. Barack Obama's 2009 stimulus package had to be smaller than liberal economists urged so it could pass. He got health care reform, only to see the Supreme Court invalidate significant portions. In 2008, his supporters voted for "hope and change," but the ensuing change was glacial and dispiriting. Things will be different for President Trump. His party controls both houses of Congress, and he will get to restore the Supreme Court's Republican-appointed majority. The constitutional checks will be largely irrelevant. Trump and his party will be free to do what they campaigned on. Voters who didn't take their plans literally may be surprised when they come to pass. A trade war is imminent because Trump has vowed to scrap the Trans-Pacific Partnership, signed by Obama, while threatening to levy a 45 percent tariff on Chinese goods and abandon NAFTA. Obamacare will be history. The nuclear deal with Iran is a dead letter. Construction will start on a border wall with Mexico, and the government will step up efforts to deport undocumented immigrants. Tax cuts to boost economic growth will become law. His supporters may cheer each achievement. But they may not be so pleased when they go to Wal-Mart or Home Depot and find that Trump's tariffs have raised the price of everything from clothing to power tools. He tweeted that instead of Obamacare, "we will have MUCH less expensive and MUCH better healthcare." Some of his supporters may miss the Affordable Care Act when they lose their coverage. What will they think when they have to pay more for something they like less? How will Trump's followers feel when Iran resumes the nuclear weapons program that Obama's deal halted—or if the United States and Israel launch a war against Iran in response? What will they say when Mexico refuses to pay for that wall? Or when it turns out that, as an editorial in The Wall Street Journal noted, deporting all the undocumented foreigners "would demand the departure, on average, of 84 buses and 47 chartered flights every day for two years"—which isn't going to happen? Trump can promise 4 percent annual GDP growth year[...]