On Tuesday, 2016 Republican presidential frontrunner Donald Trump gave an on-teleprompter speech about job creation in Oscar the Grouch’s living room – before a giant wall of trash. Yes, a wall of trash.
That wasn’t symbolic, although it could have been had someone set the trash on fire.
Trump’s entire plan to create jobs relies on trade protectionism – the single most debunked economic fallacy of the last two centuries, an idea so bad that it has largely reduced Latin America, which bought into “dependency theory,” to poverty and food riots. Trump’s theory seems to be that if we increase the price of imports, make it more difficult for American companies to export, and punish American companies for locating overseas, this ridiculous combination of counterproductive policies will result in alchemist economic gold.
Trump began by stating that the workers of America have been repaid for their hard work with “betrayal.” What, exactly, was the betrayal? Was it the corporatism Trump backs? The regulations Trump’s bought-and-paid-for politicians supported? The taxes Trump used to advocate?
No, it’s free trade.
“Our politicians have aggressively pursued a policy of globalization - moving our jobs, our wealth and our factories to Mexico and overseas,” Trump said, in total contravention of facts. “Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache.”
Trump cited free trade as the reason for America’s steel industry collapsing, for example – “When subsidized foreign steel is dumped into our markets, threatening our factories, the politicians do nothing…Skilled craftsmen and tradespeople and factory workers have seen the jobs they loved shipped thousands of miles away.” But both Bush and Obama put restrictions on trade with regard to steel, and that didn’t stop the bleeding from the steel industry. Besides, Pittsburgh – where Trump was speaking – has moved its jobs from the steel industry to high tech. Instead of Pittsburgh looking like an open furnace, it’s a clean, growing city.
Trump thinks that’s a bad thing.
And overall, job loss in certain sectors in the United States is almost entirely due to technological advancement, including advancement in shipping technologies that lower costs to move product overseas. And Trump’s contention that “globalization has wiped out our middle class” simply isn’t true either: instead, the upper middle class is growing at the expense of the middle class. People are getting richer, in other words. In 1979, the upper middle class was just 12 percent of the population; by 2014, it was 30 percent. The number of poor and lower middle class Americans has shrunk dramatically.
But facts have never stopped Trump.
And thus he continued, channeling Bernie Sanders:
But if we're going to deliver real change, we're going to have to reject the campaign of fear and intimidation being pushed by powerful corporations, media elites, and political dynasties. The people who rigged the system for their benefit will do anything - and say anything - to keep things exactly as they are.
Connecting American nationalism with economic protectionism, Trump stated, “We lost our way when we stopped believing in our country. America became the world's dominant economy by becoming the world's dominant producer. The wealth this created was shared broadly, creating the biggest middle class the world had ever known. But then America changed its policy from promoting development in America, to promoting development in other nations.”
This is conspiratorial nonsense. No free trader has ever believed that free trade was good because it impoverished America in favor of people abroad. Nor has it. Free trade has lifted half the globe out of abject poverty – and lifted Americans’ living standards dramatically. This mythical halcyon era of American industry was far worse for most Americans than today’s economy. It isn’t close. If you don’t believe that, give up your iPhone, your laptop, your central air conditioner, your flat-screen TV, and all the other perks of modern life in favor of domestically produced crap from 1950. It’s not a good look for Cuba, and it’s not a good look for the United States.
Nonetheless, Trump thinks of the economy in zero-sum terms. So he blathers, “We allowed foreign countries to subsidize their goods, devalue their currencies, violate their agreements, and cheat in every way imaginable. Trillions of our dollars and millions of our jobs flowed overseas as a result.” Again, if currency devaluation were such a boon, the Weimar Republic would still be standing and Venezuela would be in solid shape. But Trumponomics says that America is losing because we have a trade deficit – a nonsensical argument, given that most Americans have a trade deficit with their grocery store, but aren’t exactly losing sleep over it.
Trump calls free trade “globalism,” as though absence of a global elite ruling over our independent economic activities represents some sort of evil. Protectionism is a loss of sovereignty from the individual to the government. Free trade is a restoration of that sovereignty – my ability to buy and sell with partners of my choice.
But Trump promoted a nonsense version of American history on economics that puts George Washington in league with Pat Buchanan. He quoted Washington stating, “the promotion of domestic manufactur[ing] will be among the first consequences to flow from an energetic government,” but ignored Washington’s far more famous statements in his farewell address endorsing free trade. He quoted Alexander Hamilton with regard to protectionism, but ignored that James Madison largely ignored him. The founders deliberately framed the United States to be a free trade zone. Abraham Lincoln endorsed protectionism, yes, but so what? His protectionism quickly turned into party patronage. Trump’s citation to the Constitution with regard to tariffs rather than the income tax ignores the fact that Republicans amended the Constitution to include the income tax in order to preserve tariffs with Democratic support under William Howard Taft – certainly the worst trade in American economic history.
Next, Trump began advocating pure Latin American dependency theory: “As a result, we have become more dependent on foreign countries than ever before. Ladies and Gentlemen, it’s time to declare our economic independence once again.” This is the language of Hugo Chavez. It didn’t work out well there.
From there, Trump bashed NAFTA and the World Trade Organization and the Trans-Pacific Partnership. There are honest questions to be asked about TPP -- but those questions don't include whether free trade is inherently bad. Trump said, “Trade reform, and the negotiation of great trade deals, is the quickest way to bring our jobs back.” He laid forth a theory of economics that no first year business student would believe: that trade deficits create poverty (false). Russia has a trade surplus, and they’re dying on the vine. So does Iran. Would Trump want to live there? Venezuela, too, has a trade surplus.
Trump suggested “bilateral trade agreements” – as though multilateral trade agreements are somehow inferior to bilateral ones. Then he proposed initiating a trade war:
I am going to withdraw the United States from the Trans-Pacific Partnership, which has not yet been ratified…I'm going to appoint the toughest and smartest trade negotiators to fight on behalf of American workers…I'm going to direct the Secretary of Commerce to identify every violation of trade agreements a foreign country is currently using to harm our workers. I will then direct all appropriate agencies to use every tool under American and international law to end these abuses…I'm going tell our NAFTA partners that I intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. And I don't mean just a little bit better, I mean a lot better. If they do not agree to a renegotiation, then I will submit notice under Article 2205 of the NAFTA agreement that America intends to withdraw from the deal…I am going to instruct my Treasury Secretary to label China a currency manipulator. Any country that devalues their currency in order to take advantage of the United States will be met with sharply…I am going to instruct the U.S. Trade Representative to bring trade cases against China, both in this country and at the WTO. China's unfair subsidy behavior is prohibited by the terms of its entrance to the WTO, and I intend to enforce those rules…If China does not stop its illegal activities, including its theft of American trade secrets, I will use every lawful presidential power to remedy trade disputes, including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962.
It's one thing to enforce trade agreements. It's another to explicitly police those agreements because you're looking for an excuse to destroy free trade agreements. It would be hard to come up with a policy more designed to impoverish Americans and destroy global trade than this. But Trump said that free trade creates trade wars (dumb! sad!). He said that he would usher in a new era of prosperity – an era, presumably, in which nobody can sell their products abroad and nobody can buy cheaper products at home.
That was Trumponomics. One sentence on tax reform; another on regulations.
Six pages on tariffs.
Pretty soon, we’ll all be living with Oscar the Grouch, if Trump has his way.