March 11, 2019

Trade Deficit Surges

Editor's note: We couldn’t be more proud of one of our teammates, Isaac Rose-Berman, who penned his first op-ed this week in USA Today: “How college students can bridge American divides: 'Study abroad' in Alabama or New York.” Please give it a read, and share far and wide!

“The Commerce Department said on Wednesday that a 12.4 percent jump in the goods deficit in December had contributed to the record $891.3 billion goods trade shortfall last year. The overall trade deficit surged 12.5 percent to $621.0 billion in 2018, the largest since 2008.” Reuters

Many on both sides agree that the increased trade deficit is not a sign of economic malaise, and, combined with other trends, is in fact an indicator that the economy is generally doing well:

“Imports grew faster than exports as the U.S. economy accelerated and much of the world slowed. The dollar grew stronger as capital flowed into the U.S., and the trade deficit grew to offset the larger capital inflows as it must by definition under the national income accounts… a larger trade deficit is a benign byproduct of a healthier American economy.”
Editorial Board, Wall Street Journal

“True, at times of high unemployment deficits can cost us jobs. But in normal times they don’t reduce overall employment, nor do they make us poorer. On the contrary, other countries are sending us valuable goods and services, which we’re paying for with pieces of paper — paper that pays very low interest rates.”
Paul Krugman, New York Times

See past issues

From the Left

The left criticizes Trump for focusing on reducing trade deficits, and his overall approach to trade.

“Not only did the trade deficit increase, it increased exactly where Trump said it wouldn’t… [But] the problem here is not really with Trump’s administration. The president can have some effect on international trade, but most of it is driven by the massive U.S. economy: Who buys what, from where. The problem was really that Trump made campaign trail promises he would always have had a challenge in fulfilling.”
Philip Bump, Washington Post

“[Trump] has picked trade wars the world over, with friends and foes alike… These actions and threats have led to some predictable consequences. One is that U.S. companies have stocked up on some imported goods to beat the tariffs, which increases imports in the short run. Higher imports = bigger trade deficit. Another is that other countries have levied their own retaliatory tariffs on our own products — most famously, red-state goods such as soybeans and bourbon. So there has been less demand for U.S. exports. Lower exports also = bigger trade deficit.”
Catherine Rampell, Washington Post

“The administration hoped that threatening our trade partners with tariffs would force them to negotiate new pacts that gave the U.S. a leg up in global commerce. But the results have been underwhelming. The new-and-sort-of-improved NAFTA makes some important changes around the edges of the agreement, including key ones to international dispute settlement, but is widely regarded as little more than a rebranding effort…

“The agreement shaping up between China and the U.S. is looking like even more of a disappointment. In return for lowering tariffs, China would buy more U.S. agricultural goods and lower some barriers that keep U.S. companies from operating there. It would do nothing regarding issues like intellectual property theft that are of much greater concern to U.S. corporations. Trump started an unprecedented trade war, and all we’re gonna get are some lousy soybean sales.”
Jordan Weissmann, Slate

Some note that, “Had the United States taken a different approach to industrial (and antitrust) policy over the past four decades, the dollar might be weaker; our manufacturing base stronger; the financial industry smaller; investment less concentrated in large urban centers; and many ordinary Americans better off. And a sufficiently committed ruling party — which is to say, one willing to embrace aggressive state intervention, and to run roughshod over entrenched interests — could conceivably bend our economy back in that direction… [But Trump’s] populist producerism was never a serious economic doctrine. It was a PR strategy.”
Eric Levitz, New York Magazine

Others note that “[Warren] has provided more detail on Medicare financing than Sanders has. She has also provided more overall policy detail, including on the taxes she would raise, than Joe Biden or Pete Buttigieg. And her Medicare plan comes much, much closer to paying for itself than various Republican tax cuts. I wish the conservatives complaining about her plan applied the same rigor to their own ideas… The biggest weakness of Warren’s approach is that it tries to bulldoze through the sizable public anxiety about radical changes to the health care system. Warren would not let people opt into Medicare, a wildly popular idea. She would force them to join… she needs to come up with a reassuring transition plan soon.”
David Leonhardt, New York Times

“Trump’s defenders will say this evidence is all circumstantial. But circumstantial evidence is not weak evidence: it’s simply evidence based on the circumstances in which an act of wrongdoing is committed — such as the license plate of a car that speeds away from a bank just after that bank is robbed. Criminals are convicted on such evidence all the time. They will also say that there’s no explicit quid pro quo proposal here. But… ‘even when a corrupt deal is struck implicitly, the government can still prosecute extortion on a quid pro quo basis. Circumstantial evidence can be enough to prove a criminal exchange.’…

“In the absence of an explicit quid pro quo over restarting aid, the context and circumstances are what will become the focus of the investigation. There is enough here to support impeachment. Whether it is also enough to convince Republicans and lead to removal is another matter.”
Noah Feldman, Bloomberg

Rep. Jim Jordan (R-OH) “insisted the president couldn’t possibly have done anything wrong because, in the end, Ukraine got its money without committing to any investigations. This point of view has radical implications for America’s system of justice and overcrowded prisons, if Mr. Jordan in fact truly believes that all inmates convicted of attempted crimes are innocent of wrongdoing… Perhaps the most telling remark was offered by a Republican staff lawyer, Stephen Castor, who suggested that while the president’s behavior may have been highly irregular, ‘it’s not as outlandish as it could be.’ Here’s a tip: When ‘not as outlandish as itcould be’ is your strongest defense, it’s time to rethink your position.”
Editorial Board, New York Times

From the Right

The right praises Trump’s policies for creating a strong economy.

From the Right

The right praises Trump’s policies for creating a strong economy.

“In 2018, the US imported about $2.6 billion in goods produced in other countries and we exported only about $1.7 billion of US goods produced here… That ‘unfavorable trade imbalance’ as the media frequently describes it, was actually a ‘favorable trade balance’ for the US viewed differently, since we benefited from a ‘net inflow of goods’ of nearly $1 trillion.”
Mark Perry, American Enterprise Institute

“The current growth in the U.S. trade deficit is simply due to Americans buying and selling more… [Moreover] America actually has a capital surplus, meaning companies and individuals around the world invest more money in the U.S. than we do abroad… When individuals have the freedom to buy and sell with the world—free of government intervention—businesses are forced to compete and innovate more, resulting in more choices in the marketplace…

“Rather than focusing on the trade deficit, Congress, the Trump administration, and even the media should focus more on the barriers imposed by governments (including the U.S.’) to limit trade freedom, what the real-life effects of those barriers are, and how we can fix them.”
Tori Whiting, Daily Signal

“President Trump promised to bring down the trade deficit, but it hit a 10-year high last year. But, given that we don't subscribe to the president's zero-sum approach to trade, our reaction to the news is to raise a glass to the Trump economy…

“Trump is right to care about the manufacturing industry. Manufacturing jobs from World War II until recent decades were excellent sources of wealth and stability for the middle class and working class… But manufacturing isn’t going away. As a share of the economy, manufacturing is stable. Last year saw a big uptick in our manufacturing and exports. The Federal Reserve reported Wednesday ‘slight-to-moderate’ manufacturing growth in almost all of the country… America’s $2.5 trillion in exports represents a 6.3 percent increase from 2017… We hope President Trump does not get tired of this winning.”
Editorial Board, Washington Examiner

Some argue that “a trade deficit reducing tariff would have to be much higher, perhaps even exceeding the 25 percent that was supposed to apply two months ago… The 10 percent [tariff] was not a tariff designed to reduce the trade deficit. It was the tariff designed to get China’s attention. Which it did, forcing China to cease its threats of retaliation in favor of negotiating with the U.S… Wednesday’s trade deficit figures strengthen the Trump administration’s hand because they demonstrate that China has much more at stake than the U.S. in keeping tariffs from escalating.”
John Carney, Breitbart

It’s worth noting that “conservative ideas were much more popular when not associated with the Republican party. In Washington State, voters narrowly rejected bringing affirmative action back to state contracting and university admissions…

“In Seattle, the self-proclaimed socialist city-council member appears to have lost her seat to a pro-business challenger. In Colorado, voters gave fiscal conservatives a big win by rejecting letting the state keep any tax revenues above the state spending cap, money that the state Taxpayer’s Bill of Rights currently guarantees as refunds to taxpayers. In Sussex County, N.J., voters approved, by a 2-to-1 margin, a referendum directing the local freeholder board to cooperate with U.S. Immigration and Customs Enforcement. (Washington, Colorado, New Jersey — notice these are places where Republican candidates have had no luck lately.)”
Jim Geraghty, National Review

“If a dozen drones or missiles can do the kind of damage to the world economy as did those fired on Saturday—shutting down about 6 percent of world oil production—imagine what a U.S.-Iran-Saudi war would do to the world economy. In recent decades, the U.S. has sold the Saudis hundreds of billions of dollars of military equipment. Did our weapons sales carry a guarantee that we will also come and fight alongside the kingdom if it gets into a war with its neighbors?… the nation does not want another war. How we avoid it, however, is becoming difficult to see. John Bolton may be gone from the West Wing, but his soul is marching on.”
Patrick Buchanan, The American Conservative

Others note, “I’d hate to be a Democratic member of Congress trying to convince Joe Sixpack that this is a whole new ballgame. The transcript shows Trump being Trump and Ukrainian president Volodymyr Zelensky trying to ingratiate himself with the big dog by, for instance, mentioning that he stays at Trump hotels. Trump’s conversation is typically scattershot, wandering all over the field, leaving a reasonable listener puzzled about what the takeaways are supposed to be…

“I think Joe Sixpack’s response is going to be a hearty shrug. After all that has emerged about Trump so far, his approval rating is closely tracking Obama’s approval at the same point in his presidency. To get Mr. Sixpack’s attention you are going to have to do better than this.”
Kyle Smith, National Review

President Trump should be happy. As much as Warren is articulate, obviously intelligent, and energetically supported by Democrats, she would also be far easier to defeat than Joe Biden… Considering Trump's economy, the president is well placed to defeat Warren.”
Tom Rogan, Washington Examiner

A libertarian's take

“After adding in the ultra-millionaire’s tax and factoring in the other capital taxes Warren wants to levy — on financial transactions, on unrealized capital gains, on corporations — we’d be asking every billionaire to hand over more than two-thirds of their total wealth over a 10-year period. If the government actually managed to collect it, their fortunes would rapidly erode — and so would tax collections. The plan might be a good way to smash wealth, but it’s a terrible way to fund the nation’s health-care system…

“If Warren makes it to the White House, and tries to pass a plan, the Congressional Budget Office will eventually attach more reasonable numbers, with more defensible assumptions, sparking an even more spectacular political blowback than the one that greeted Friday’s announcement. Outside of the progressive Twitterati, there isn’t necessarily an enormous constituency for spending $20.5 trillion to herd every American into a national health insurance program; there would be even less support for spending what Warren’s plan would actually cost.”
Megan McArdle, Washington Post

On the bright side...

Mooove over, LTE: 'Me+Moo' uses 5G to connect you to real-life cow.
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