How’s Trump Doing?

October 3, 2017

With some slack time on a rainy day in the north woods, I thought I’d take a few moments to share some thoughts about Trump and his policies to date, as they relate to the economic problems wrought by worsening overpopulation: falling per capita consumption and the inevitable trade deficits caused by attempting to trade freely with badly overpopulated nations. So here goes:

Immigration:
Still no border wall. Other than that, I’ve been quite pleased with his other actions – the travel ban, the dramatic slowdown in visa processing, going after sanctuary cities, deporting illegal aliens, and so on. I also applaud him for his stance on the “dreamers,” those brought here as young children by their illegal alien parents. It may surprise you to learn that I’m actually in favor of allowing them to stay, even providing them a path to full citizenship. By all accounts, we’re talking about 800,000 people here. But it needs to be a one-time program. And it needs to be part of a bigger immigration reform that includes dramatic cuts in legal immigration – at least 50% (including student visas), and an end to the pyramid scheme of “family preferences” that, within a few generations, would make virtually every person on earth a candidate to become a permanent legal resident in the U.S. Trump is right to kick this issue back to congress and to demand action, but I don’t understand why he’s “selling it” so cheap. By demanding the above reforms, he could put an end to our out-of-control immigration. No senator or congressman would dare vote against it because all anyone would ever remember is that they voted against the “dreamer act” and in favor of deporting the dreamers.

Trade:
Here I have to say that I’m “hugely” disappointed in Trump’s failure to deliver on his promise to raise tariffs and/or border taxes in order to rebalance trade. But perhaps I’m impatient for action on this issue. His administration has taken some tough stances and is in the process of renegotiating NAFTA while also trying to reform the World Trade Organization. Last week it was revealed that the U.S. has been quietly blocking the filling of vacancies on the panel of appeals judges at the WTO and is now trying to assume a veto power if judges aren’t available. Reportedly, Trump told John Kelly, his new chief-of-staff, that he wants someone to bring him some tariffs. And most recently, when Boeing complained of Bombardier “dumping” planes on the U.S. market, the Trump administration promptly levied a 216% tariff on Bombardier planes. So there’s still reason for optimism.

Tax Reform:
Though this is the issue that excites the business community, the media and maybe even average Americans the most, for me it’s a non-issue unless a border tax is included as part of the reform. Dramatic cuts to corporate taxes, combined with some minimal cuts for average taxpayers, will blow a huge hole in the budget, just like it did when Reagan did the same thing back in the ‘80s. Sure, it’ll stimulate economic growth just a little, but no more than the amount of tax reductions that are plowed back into the economy. To expect a trillion dollar tax cut to generate economic growth of $4 trillion (the amount of growth it’d take to make it revenue-neutral) is a hocus-pocus fairy tale. And cutting corporate taxes that much will simply leave corporations with more money to invest in more job-killing manufacturing overseas. But all of that would change if a border tax were part of the package. Then it would truly be revenue-neutral and would fuel an explosion in economic growth. Trump is missing a huge opportunity by not insisting that a border tax be part of the package.

Paris Climate Accord:
Trump was 100% right to pull out of this agreement. Ask anyone and everyone the purpose of that agreement and every single person will tell you that its goal is to stop climate change. And every one of them would be wrong, because they haven’t read the stated mission of the accord, which is to merely slow climate change to a pace that would allow “sustainable development” to continue and, by the way, would essentially “tax” Americans to help fund that development in the rest of the world. “Sustainable development” is the very reason the world now finds itself in this global warming fix – because what world leaders thought was “sustainable” has proven not to be. So if global warming is slowed so that “sustainable development” can continue unabated, then every other problem associated with our exploding population – environmental and otherwise – will worsen, including mass extinction as habitat loss accelerates, more landfills, more trash in the ocean, more underground disposal of various hazardous wastes (including nuclear), and now a new one – the underground disposal of CO2 removed from exhaust streams. Where does it end? It needs to end now, and just maybe mother nature is doing us a favor by using climate change to wake us up. With all of that said, it disturbs me to hear that Trump may consider re-entering a renegotiated climate accord.

Repeal and replace “Obamacare”:
For me, this is another non-issue. The unaffordability of health care is a symptom of a deeper underlying problem, namely that every year the U.S. economy is drained of about $800 billion through the trade deficit, making everyone poorer and more dependent on deficit spending by the federal government to maintain an illusion of prosperity. Fix the trade deficit and the whole health care issue will go away.

So that’s it. Although I never really liked Donald Trump very much, and cringe at a lot of his “tweets” and some of the things he says, overall I’ve been pretty pleased with where the country is headed under his direction. But the trade/tariff/border tax issue is critical. If we don’t see action on reducing the trade deficit in manufactured goods, I fear that all will be lost. Like you told John Kelly, Mr. Trump, “we want tariffs and we want them now!”

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Manufactured Goods Deficit Rises to 2nd Worst Level of Obama’s Administration

July 12, 2012

On the surface, yesterday’s release of May trade data sounded like good news.  The trade deficit fell for the 2nd consecutive month to $48.6 billion after hitting $52.6 billion in March, preceded by the worst level of the Obama administration in January – $53.0 billion. 

Good news?  Not so fast.  Nearly all of the decline was due to a drop in oil prices.  That in itself is good news, but what would make oil more affordable for all of us is if jobs were plentiful and incomes were rising.  So what happened in May regarding the more important category of manufactured goods, where the jobs are to be found?  There, the news is grim.  The deficit in manufactured goods rose to the 2nd worst level of the Obama administration – $41.3 billion.  (That’s an annual rate of nearly $500 billion and represents a loss of about 7 million manufacturing jobs.)  And, for the 8th consecutive month, manufactured exports lagged the president’s goal (set in January of 2010) of doubling  in five years.  Here are  charts of the balance of trade in manufactured goods and a chart of manufactured imports and exports vs. President Obama’s goal:  Manf’d Goods Balance of Trade     Manf’d exports vs. goal

Overall exports, including all goods and services, failed to meet the president’s goal for the 10th consecutive month.  Here’s the chart:  Obamas Goal to Double Exports.  And here’s a chart of the total trade deficit since President Obama set that goal, the cornerstone of his economic policy, in January, 2010:  Balance of Trade.  As you can see, judging by total trade, May was merely a “one-step-forward” month in the “one-step-forward, two-steps-back” decline in manufacturing that has persisted not just for two years, but for decades. 

As I predicted, this “plan” to double exports in five years, the cornerstone of President Obama’s economic plan, is already proving to be an abysmal failure.  Merely saying that we will double exports in five years was no plan at all.  It was wishful thinking.  Assembling a team of CEO’s of “American” manufacturing companies to address the issue of exports wasn’t a strategy, it was a show.  There is nothing that anyone can do to boost exports, since exports are driven by foreign demand and no one in America has any control over that. 

“Nonsense,” you might counter.  “There’s a lot we can do to make ourselves more competitive.”  True, but there’s nothing you can do to stop foreign competition from working just as hard to remain competitive, as they surely do and will.  The end result is no change in our competitive position and no change in foreign demand for American-made products.  Imports, on the other hand, are totally within our control, which means that the ability to force a return to domestically manufacturing the products we consume is also totally within our control, if only we choose to exercise that power, through the use of tariffs, quotas and other import controls.

“We can’t do that; international law prohibits it” you might say.  Baloney.  There is no such thing as “international law.”  There are only obligations that go along with the terms of agreements, treaties and international organizations.  It is completely within our power to terminate agreements and withdraw from treaties and international organizations (like the World Trade Organization) any time we want.  Sure, it would result in some turmoil.  But when did Americans vote to cede their rights to international organizations in order to avoid a little turmoil?  The point is that there are plenty of actions the president can take to immediately have a major impact on jobs and the economy, even without the consent of Congress,  if only he had the intestinal fortitude.  He doesn’t.  He’s content to paper over our problems with more deficit spending designed to obscure the fact that, thanks to decades of idiotic trade policy, America is in decline and Americans are growing poorer. 

* * * * *

My charts on trade in manufactured goods contain a major revision this month.  I discovered that my data was understating the size of the deficit in manufactured goods by the amount of the surplus in services.  I had been subtracting from the total trade deficit the balance of trade in food, feeds and beverages and in petroleum products to arrive at a figure for manufactured goods, forgetting that services were included in the total balance of trade.  I should have been using the balance of trade for goods alone, a larger deficit than the total deficit because of the surplus in services. 

* * * * *

This post is my first since returning from a 3-week hiatus at my north woods retreat, where internet access is available only by taking a 13-mile drive to town, time that is better spent in my little fishing boat, jigging for walleye and bass.  I have a lot of catching up to do, so stay tuned.  Here it comes. 

 


Where Does the TEA Party Stand on Trade?

September 3, 2011

As I was commenting on some editorial the other day, I began to wonder where the TEA Party stands on the issue of foreign trade.  The TEA Party has been extremely effective in driving the debate on debt and government spending.  If the TEA Party ever aspires to become a real force in American politics in general, it has to have a position on every issue, especially one as important to the American economy as trade.

So I visited their web site to learn more.  For starters, here’s how their banner reads:

FISCAL RESPONSIBILITY * LIMITED GOVERNMENT * FREE MARKET

Hmmm.  “Free Market.”  What does that mean?  Searching further on the site, here’s their explanation:

… we support a return to the free market principles on which this nation was founded and oppose government intervention into the operations of private business.

What exactly does this mean?  It sounds like it’s focused more on intervention in the market by the federal government.  But what about intervention by world government, which is exactly what the World Trade Organization does, stripping the U.S. of its right to set trade policy and manipulating international trade in favor of developing nations.  When the TEA Party says “… free market principles on which this nation was founded …,” does it understand that our founding fathers relied heavily on tariffs to protect our fledgling economy and build it into an industrial powerhouse?  Does it realize that “free market principles,” at least as they relate to “free trade,” didn’t even exist in the late 1700s when our nation was founded?  It wasn’t until 1812 that economist Ricardo came up with his “principle of comparative advantage,” laying the foundation for free trade theory.  And it wasn’t until 1947 that we were bamboozled by economists into giving it a try.

So I used their web site’s contact form to submit to them the following question:

I run a blog that’s dedicated to a new economic theory and its ramifications for trade policy.  I’m interested in learning the TEA Party’s stance on U.S. trade policy.  In its banner, the TEA Party champions “Free Markets.”  Does that apply only to government interference in markets or more broadly to international trade in general?  Does the TEA Party support America’s membership in and deference to the World Trade Organization, or does it support America’s right to set trade policy in its own best self-interest?

If the TEA Party supports U.S. membership in the WTO, then I’d like to understand how the TEA Party reconciles that stance with the fact that deficit spending is necessary to offset the negative consequences of a trade deficit?  Also, does the TEA Party believe that it’s possible to balance the federal budget while enduring a continuing trade deficit?

Thanks.  I look forward to your reply.

I hope I get a response.  I suspect that the TEA Party hasn’t really given foreign trade much thought.  If they did and if they came to realize that membership in the WTO is “government intervention” in the extreme, and that trade deficits only exacerbate deficit spending, I believe they could become a formidable force in the move to take back our right to manage trade in our own best self-interest.


An Interview with the Leader of the World Trade Organization

September 2, 2011

http://www.cnbc.com/id/44352671

Here’s something rich!  Yesterday, the leader of the WTO (World Trade Organization) stated that there’s no way that the world can return to “protectionism.”  (See the above link.)  If only the CNBC reporter who took the interview was well-versed enough to know that the WTO is the world’s biggest practitioner of protectionism, the interview could’ve gotten interesting.  Perhaps it’d have gone something like this:

CNBC:  But Mr. Lamy, doesn’t the WTO actually use protectionist policies to the benefit of undeveloped and developing nations, including China?

Lamy:  No, no.  Those policies are what we refer to at the WTO as “developmentism.”

CNBC:  So “developmentism” works well for these nations?

Lamy:  Oh, very well, indeed!  Just look at how successful it has been in China.  Millions of people have been lifted out of poverty.

CNBC:  But “developmentism” isn’t applied evenly.  What do you call the policies applied to other nations, the U.S. being the prime example?

Lamy:  That’s free trade.  Free trade is a marvelous thing that has been very beneficial for the U.S. in many ways.

CNBC:  In what ways, exactly?

Lamy:  Many ways.  Ways that are difficult to quantify and thus difficult for the average American to comprehend. 

CNBC:  So developmentism works well for some nations while free trade is better for others?

Lamy:  I guess you could put it that way.

CNBC:  So when does “developmentism” stop being the right trade policy for a nation as opposed to free trade?  Have any nations developed yet to the point where they graduate from “developmentism” to free trade?

Lamy:  No.

CNBC:  I’m confused.  If “developmentism” helps a nation develop, then wouldn’t the continued use of “developmentism” by wealthy nations allow them to develop even further? 

Lamy:  No.  The use of “developmentism” by wealthy nations is actually “protectionism.” 

CNBC:  How does that work?  How does “developmentism” morph into “protectionism” when it’s actually the same set of trade practices? 

Lamy:  Oh, look at the time.  I’ve got to run.  I’m late for a dinner with Chinese trade delegates.  We must talk more again some time. 

There are actually a couple of aspects of this article that I found encouraging.  First, that Lamy is jittery enough about the potential for a return of protectionism in the U.S. that he feels it necessary to speak out against it.  Secondly, read the comments by readers.  (My own is amongst them.)  With one exception, readers were unanimous in their criticism of Lamy and the WTO. 

I also found it interesting that, shortly after I posted my comment, the article was yanked from CNBC’s front page and I actually had to do a word search to find it again.  Not that my comment alone was responsible, but the tidal wave of negative comments. 

As I wrote my comment, a thought occurred to me that will be the subject of an upcoming post.


Here They Come: More Free Trade Deals

November 4, 2010

http://www.reuters.com/article/idUSTRE6A270720101103

Does anyone recall the electorate clamoring for more trade deals before the election?  No.  That’s not what the Republicans have been sent to Congress to do.  Wasn’t it all about creating jobs and cutting spending?  Nevertheless, here they come.  (See the above-linked Reuters article.)

Although President Obama welched on his promise to scrap NAFTA and has failed to respond to Mexican tariffs, Japanese dumping and China’s currency manipulation, give him credit for at least tabling any new free trade deals.  But all that is over now.  Republicans are already licking their chops at the prospect of moving forward the free trade deal with South Korea.  More will soon follow. 

The stated goal is to “open new markets to U.S. exports.”  But has anyone ever seen a trade deal that didn’t begin with the U.S. first opening its market to those nations’ imports?  And can anyone recall the U.S. ever following through to assure that U.S. exports get fair treatment?  Do people understand that the terms of free trade deals are dictated by the World Trade Organization and are stacked against the U.S., enforcing protectionism in favor of most nations while banning such practices by the U.S.?  Do they understand that, even if the playing field is level, disparities in population density and per capita consumption make trade with overpopulated nations a sure-fire loser? 

No, they don’t understand such things, but they do understand that, for whatever reason, our manufacturing jobs have been lost to such trade deals and they want it stopped.  No one sent Republicans to Congress to go back to their old ways of cutting lopsided trade deals as payback to their corporate benefactors.  If this is the mandate they think they’ve been given, they’re sorely mistaken.


New World Order Unraveling as Patience with Trade Imbalances Wears Thin

October 11, 2010

The “New World Order,” a term I use to describe international cooperation through organizations like the United Nations, the World Trade Organization, the International Monetary Fund (IMF) and the World Bank, as opposed to the term used by conspiracy theorists, is beginning to unravel over the issue of currency exchange rates.  It’s about time. 

All of these organizations (or their precursors) were established in the wake of World War II in the hope of breaking the cycle of misunderstanding, mistrust and nationalism that fostered global conflict twice in a span of less than thirty years.  It’s not that I have a problem with international cooperation.  But such cooperation and organizations, based on false premises and flawed economics, have been doomed from the beginning.  Cooperation toward a goal of perpetual exponential growth (including population growth), coupled with a seismic shift in trade policy to unproven and flawed 18th century trade theories, produced ever-worsening global trade imbalances, culminating in the fall of 2008 with the only logical outcome possible – the bankrupting of the United States and the collapse of the global economy. 

In the wake of that crisis, world leaders pledged cooperation in enacting stimulus to arrest the slide, and cooperation toward eliminating the trade imbalances.  Predictably, the Obama administration tried to fly under the radar with approaches that wouldn’t ruffle any feathers – verbal arm-twisting of China on their currency and cajoling Europe and Japan to boost their domestic economies.  None of it worked and now Obama and the Democrats are paying the price for their timidity, facing huge losses in the mid-term election.  Finally, U.S. Treasury Secretary Tim Geithner, having had enough of China’s delay tactics, dropped his opposition to labeling China a currency manipulator.  In short order, the House last week, by a wide margin, passed a bill that (if also passed by the Senate and signed into law by Obama) does just that, opening the door to punitive tariffs on Chinese products. 

Predictably, howls of protest from China and hand-wringing by other export-dependent nations over the prospects for rising U.S. protectionism soon followed.  Japan, alarmed over the unrelenting rise of the yen has just resumed blatant manipulation.  And the U.S. Federal Reserve has all but said that it will soon be dumping huge volumes of dollars on the world market to further erode the dollar’s value.  Emerging nations (led by China, of course) have taken their concern to the IMF, demanding that it intervene and stop this escalating currency war. 

All of this is good news and I expect that it will continue.  It’s good because it’s finally getting at the root of our economic woes.  But, in the short run, it won’t make a bit of difference for the U.S. economy, since currency exchange rates have very little to do with global trade imbalances, which are actually rooted in population density and per capita consumption disparities that can only be mitigated by across-the-board tariffs.  But at least the trade imbalances are coming under fire and eventually, one way or another, we’ll arrive at a point where a return to sensible trade policy will put this economy back on its feet.  It’s going to be a long road, but finally the first steps are being taken.


Cumulative U.S. Trade Deficit Surpasses $10 Trillion

September 14, 2010
Today, September 15th, 2010, America’s economy has reached a very sad milestone.  Our cumulative trade deficit, since our last trade surplus in 1975, expressed in current dollars, has now eclipsed $10 trillion.

America experienced its last surplus of trade in 1975. Since then, through July, the most recent month for which trade data has been released by the U.S. Bureau of Economic Analysis, when adjusted for inflation using the Consumer Price Index published by the Bureau of Labor Statistics, the cumulative trade deficit was $9.93 trillion. Assuming a continuing monthly trade deficit of $45 billion (the current 3-month moving average), it is estimated that the trade deficit has now reached $10 trillion as of September 15th.

The U.S. is on track for its 35th consecutive annual trade deficit in 2010 since its last trade surplus in 1975. The U.S. trade deficit of $759 billion set a record in 2006. With the onset of the global recession in 2007, it fell steadily to $375 billion in 2009, but is expected to rise again to over $500 billion in 2010.  Almost half of all Americans alive today have never known an America with a trade surplus.

Through July, 2010, America’s largest trade deficit is with China, at $145.3 billion. The trade deficit with Mexico is second at $38.4 billion. The trade deficit with Japan is third at $31.6 billion. The trade deficit with Germany is fourth at $18.7 billion.

America is $10 trillion poorer today as a result of bone-headed trade policy based on failed 18th century economic theories.  That’s $32,250 for every man, woman and child in America – almost $130,000 for every family of four.  It’s enough money to solve virtually every financial challenge facing America, including putting the social security fund back on sound footing.  It’s enough money to nearly wipe out our national debt.

In 1947, when America signed the Global Agreement on Tariffs and Trade, it was so easy for our leaders to come together and hold hands with the rest of the world, like the old “I’d like to teach the world to sing in perfect harmony” Coke commercial.  Now we see what their sappy good intentions and simple-minded economists have wrought – an America in serious decline and a global economy collapsed by enormous trade imbalances.  Nowhere is a leader to be found with the courage to undo what our 1947 predecessors stumbled into so blindly.  If our founding fathers ever thought it conceivable that our trade policy would be abandoned to a global trade organization bent on pillaging America, they would surely have included in the constitution a requirement for a balance of trade that also made it illegal to join such a global organization.

Never has America been so threatened by neglect of its economy and by a complete failure of leadership.  Never has it so badly needed an amendment to its constitution to mandate the inclusion of common sense in its trade policy.  (See https://petemurphy.wordpress.com/more-good-stuff/28th-amendment-to-the-constitution-of-the-united-states/ )