Trump may be a great real estate developer but his understanding of trade stops at the water’s edge. It’s almost childlike, as it probably is for most people.
In recent rallies, Trump talks like a Democrat in his boasts of the prospect of $100 billion for the US treasury from his tariffs. The Dems do the same when trying to jack you with tax increases. It’s advertised as more money for “investment” – i.e., government spending out the wazoo.
The reality is different. If you want less of something, tax it. So, the Dems get less money to transform America into the image of their frenzied imaginations as people scurry about to escape Bernie-bro policies. Trump gets less money from his tariffs as they drive up prices which leads to less imports, fewer sales, and less dough for Uncle Sam. It’s elementary.
Of course, Trump might be guilty of good ol’ hucksterism. He’s been known to do that. Remember his crowing about his inaugural crowds.
He routinely bellows about the “trade deficit” sucking out the life blood of the nation. Each quarterly $124-billion hole is treated by him as a debt. It ain’t that simple.
In fact, it’s not the whole trade enchilada. The thing hawked by Trump is one third of the “balance of payments” super stat. Add the capital and financial accounts to the mix. Jury-rig one of the trio and you unexpectedly alter the other two. Anyway, ignoring the other two makes them as optional as sight for a driver’s license test. There’s a good chance in both instances that you’ll end up in a bad place.
The trade hole isn’t even a good barometer of the health of the economy. It’s ups and downs appear to be mostly irrelevant. Of the 120 months of the 1930’s and the Great Depression, 102 were trade surpluses. Being in the black in trade didn’t make a dent in industrial collapse and 25% unemployment. (See here)
Good times and trade surpluses don’t necessarily correlate. Policies intended to create trade surpluses can backfire. No best-laid-plans are immune. A blowback can erupt with nearly all policies, including globalization.
Globalization isn’t a golden brick road either. Nothing is. Costs and benefits aren’t evenly distributed in whatever economic tack is taken. The rich do get richer despite the Lenin-style attacks of Bernie and the congresswoman from the Bronx. There’s just a greater likelihood that enough of the blessings spillover to everyone else.
Socialism isn’t a prettier alternative. It lodges benefits in the growing numbers of meddlesome government workers while the costs show up as everybody else descending into a worsening mediocrity.
Take your pick: richer government workers and malaise for the masses, or the filthy rich getting filthier and the masses living marginally better. My money is on the latter.
With socialism, either of the national or international variety, a nation’s vitality is smothered. With globalization, the financial centers of megalopolis USA ride a wave as flyover country sinks into depopulation and a meth epidemic. Bernie bros bewail an inequality of wealth in the vertical dimension. They’re blind to an inequality of the geographical, horizontal dimension. It’s real and troublesome. It’s the only justification for Trump’s trade demagoguery.
This goes to show that cocooned knowledge in real estate doth not translate into hyper-wisdom on everything any more than an inside-the-beltway existence ensures good sense. The crooked timber of humanity is evident everywhere from the administrative state to party hacks to zealots of the left, right, and center.
A classical understanding of economics would help. Is anyone delivering it? Kudos to the few who are trying.
RogerG