Have Democrats Forgotten About American Workers?

tariffs-trade-war

If you had asked Democrats a decade ago what the soul of their party was, most would have said the working class. They don’t say that anymore.

Liberals for years marketed themselves as advocates for the blue-collar worker with a high school education, a union job, and the American dream. Nowadays, the Left has become obsessed with the socialism movement of cultural Marxists and the destruction of capitalism. In essence, the Democrat Party has lost its soul to the radical fringes of its base. And nowhere else is this trend more clearly illustrated than the Democrats’ most recent attack on President Trump’s increased tariff imposition.

For a half-century, America has ignored a growing trade imbalance with almost every international trading partner. Since the 1970’s the US has seen imports trending higher compared to exports except for small trade surpluses in 1998 to 2001. In 2018, our nation’s exports were valued at $2.5 trillion while our imports were valued at over $3.1 trillion, a deficit of over $600 billion. That equates to 3% of our GDP.

Over $400 billion of that deficit is from our trade with China, up from $34 billion in 1990. The bulk of the rest is from the Canada, Mexico, and the EU. Most of these nations’ businesses enjoy government subsidies and low labor costs. All of them levy substantial tariff taxes on most American goods and services while we levy much less or nothing on theirs. Thus, America’s appetite for cheaper foreign goods and services, although satisfying consumers, is taking jobs and higher wages from our workers. The great economy we are currently enjoying would be even more robust without the imbalance in tariffs.

While the Left has been more than happy to ostracize the American worker by ignoring tariffs, the Trump Administration has taken the opposite approach. The president has embraced workers in domestic commerce, defending our nation’s manufacturing from the corrosive policies of our international trade partners. As a professor of economics, I have long advocated free trade on a global scale. However, when other nations establish barriers to free trade, the US must respond in kind to remain competitive. Temporary declines in exports and imports due to our increased tariffs are a short-term price worth paying for an eventual level playing field that benefits both consumers and employees.

Here is one example. In 2018, the president approved relief for the U.S. appliance industry, specifically washing machines. After an independent investigation by the U.S. International Trade Commission (ITC) found that “US producers had been seriously injured by imports,” the president took action. He announced tariffs on foreign-produced washers to protect domestic manufacturers and, in effect, American workers.

Liberals were quick to try to delegitimize the president’s efforts to buttress America’s labor force. Last April, a trio of academics released a study attempting to demonstrate the economic harm caused by the president’s washer tariffs. Unfortunately for academia, the study was full of holes. The authors overlooked many glaring flaws to arrive at their preferred conclusion that the tariffs were harmful. Not only did the authors fail to consider the thousands of manufacturing jobs saved and created by the tariff, but they also failed to account for the more than 15,000 jobs indirectly supported by the president’s action.

President Trump’s administration is succeeding exactly where liberals have failed: in protecting America’s vulnerable blue-collar sector. While Democrats are increasingly content to advocate for socialist policies designed to attract the dependent segment of society, the president has shown his willingness to fight for the jobs of all Americans. It’s clear that Democrats in their push for social experimentation have forgotten about the American workers. Thankfully, President Trump hasn’t.

GDP Growth: Why Should We Care?

The most important current news item is not Cohen’s tape, Putin’s visit, or what the president knew when. The news media is focused on those Trump bashing stories that hardly affect you and me in order to foster their liberal narrative. America’s Gross Domestic Product, or GDP, just increased significantly, and that’s a personal win for us. Of course, the media is playing it down. So what does GDP mean to us exactly?

GDP is the globally recognized measure of a nation’s economy. It is is the market value of all currently produced final goods and services within a country in a year by domestic and foreign-supplied resources. In other words, America’s GDP is every dollar spent on everything purchased by this country’s consumers no matter where it was produced. This includes personal spending by American households, investment spending by businesses, government spending, and net export spending (Americans’ spending on foreign products and services minus foreigners’ spending on our products and services). Last year the U.S. GDP was $19.4 trillion. That is one-fourth of the world’s total economy.

A figure that big is almost meaningless until it is compared to that of other nations. The next highest GDP is China’s at just under $12 trillion. Japan is next at $4.9 trillion followed by Germany at $3.7 trillion. The U.S. GDP is higher than all nations of the European Union combined. By the way, Russia’s GDP is $1.5 trillion.

The more important factor is how we are trending in GDP. Generally, a healthy economy is considered to have an annual growth rate of 4%.  For the last three years, the U.S. has posted percentage increases of 2.9, 1.6, and 2.2 respectively. The last time America enjoyed a 4% annual increase was in 2000, 18 years ago. Annual increases during the entire Obama administration averaged 1.6%. Although GDP is an annual statistic, it is measured quarterly. The quarterly measurement is “annualized” to estimate what the annual result of the quarterly numbers would be. The increase just announced for the second quarter (April through June) was 4.1% annualized. In other words, if the U.S. economy continues to perform at the present pace, we would have a 4.1% increase in GDP for 2018. The last quarterly increase north of 4% was in 2014. Almost all economists, regardless of their political leanings attribute the good news to President Trump’s policies of tax cuts, job creation, regulation reforms, and trade negotiations.

What does this growing economy mean to you personally? It means production increases that bring lower prices, more jobs creating upward mobility in the work force and less government subsistence, more government revenue keeping taxes down, more entrepreneurial opportunity, better infrastructure creation and maintenance, hopefully lower national debt, and a strong dollar keeping import prices down. A healthy, growing economy adds quality to the life of every American.

Of course, many factors are involved in the movement of a national economy. We should celebrate the 4.1%, but watch closely what happens in the next quarter. The Trump tariffs and potential trade wars could bring downward pressure on the GDP as could the status of our sanctions on Russia, Iran, North Korea, etc. External realities can offset a lot of good internal policies in shaping our economy. But, don’t get too caught up in all the liberal hype about losing our allies and putting our economic supremacy at risk. No other country or international trade organization is going to do much to provoke a country that holds a quarter of the world’s financial resources.

In my opinion, though, America desperately needs to turn off the soap opera of news stories that distract our attention away from much more important things like the economy. Let’s take a deep breath and focus on what’s good about America.

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Trump’s Tariffs: Good or Bad for America?

As a teacher of college economics, I am generally a free trade advocate. Tariffs are usually hindrances to free trade. However, the complex issues of a huge international trade deficit and a sharp decline in manufacturing in America warrant consideration of increasing tariffs on some of our most critical imports. Our future economic health requires leveling the playing field between us and our international trading partners.

The subject of international economics is, of course, far too intricate to accommodate in a short blog post. But, we need to understand a few fundamentals in order to make sense of what is at stake in the current controversial tariff decision by the president. A capitalist free market is without question the best overall trade system known to man. In the best of all worlds, open competition driven by profit incentive and unconstrained by government yields the highest quality of life for everyone. Unfortunately, this utopian economic system is always subject to corruption by the selfish, power-seeking participants.

America’s domestic free market is protected from bad players by various anti-trust laws, monopoly restrictions, and price stabilization controls. Buyers and sellers are virtually free to deal according to supply and demand, but within certain parameters that ensure fairness. This free, but guarded, economy has made America the richest nation in the world. Although a few international trade agreements attempt to provide similar protections for world markets, the restraints are minimum. International trade is a different environment occasionally requiring government intervention.

Two realities place America at a disadvantage in trading with other countries. First, our economic advantage has become our economic disadvantage. We have attained a quality of life that requires a level of individual wealth not enjoyed by most other countries. Therefore, Americans are not willing to produce at the lower income levels accepted by foreign workers. That means other countries can produce most goods and services at lower prices than we can. Second, to keep the price gap wide between American and foreign products, other countries often add burdensome tariff taxes or place limiting quotas on products we export to them. Conversely, the U.S. rarely places tariffs or quotas on imports from those countries. These practices make American products more expensive in foreign countries, while foreign products enter our country at prices far less than like products made in America. That results in high demand for foreign products in America, and low demand for American products in other countries.

This situation has caused a serious trade deficit in America in the amount we export versus the amount we import. In 2017, we imported $2.895 trillion in goods and services while exporting only $2.329 trillion. That is a deficit of $566 billion, a serious outflow of America’s wealth (20% gap) to other nations. To sustain a healthy economy, the export-import ratio should be zero–exports equal to imports–or even a net-export surplus. The dilemma is how to level the playing field without hurting our own citizens.

American consumers benefit greatly from lower prices of foreign goods and services due to lower labor costs of the other countries. At the same time, our corporations and employees suffer in sales decreases, job losses, and pay reductions due to export restrictions and lower prices on imports. President Trumps tariff proposals on steel and aluminum are a step toward resolving this dilemma, although there are valid downsides.

Such tariffs would allow American steel and aluminum producers to compete in price with foreign producers, since the higher taxed foreign products would cost more in our country. Of course, higher priced raw materials will drive up the prices of steel- and aluminum-based products for all American consumers. We Americans will have to feel some pain in order to meet our national economic objectives. The reductions in sales of foreign products to America should provide incentive for other countries to lower or withdraw their tariffs on American products as a move toward a more balanced market. Other countries need to get the message that flooding the American market with lower priced imports is no longer an option unless they allow our exports to enter their market without tariff.

Some lawmakers decry the tariffs as provoking an international trade war with other countries banning American products and America banning theirs. We may see some of that, but the risk is worth the reward of ultimately balancing our imports and exports. The bottom line is we can’t continue our increasingly negative trade balance that is so detrimental to our economy.

I hope the Chicken Little reaction from the left and even some conservatives will cease, and we will all give the president’s plan a chance. Let him have the bargaining tools he needs to make America great again.

I encourage your feedback.

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