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Tuesday, March 08, 2016

If free trade is so good, why is our economy stuck?

Conservatives love this quote from P.J. O'Rourke from 1993:
If you think health care is expensive now, wait until you see what it costs when it's free.
Could not the same thing be said about free trade?

I know that is blasphemy, but I must bring it up. If free trade is so good for the economy, then why is our economy sucking harder than Monica Lewinsky?

Rick Newman of Yahoo News recently mocked Trump for proposing we punish countries that take unfair advantage of our free trade agreements. He noted that our trade deficits with China, Japan and Mexico total only a half trillion dollars a year.

"Those numbers might seem high, but in an $18 trillion economy, they don't really worry economists. What does worry economists is Trump's plan to slap tariffs of 35% to 45% on imports from China and Mexico, a tax that would be passed along almost entirely to consumers. Trump's logic seems to be this: Low-wage countries where workers get paid a fraction of U.S. wages are basically undercutting American workers, and therefore ought to be punished. But his tariffs would punish Americans too, especially lower-income consumers who benefit most from cheap imports. Most economists decry the kind of protectionism Trump is calling for, because it props up inefficient firms, reduces the incentive to innovate and depresses living standards over time," Newman wrote.

Besides, he said, we are adding jobs so free trade must be working, right?

"If Trump's tariffs and other protectionist measures ever went into effect, they would harm most workers before helping them, if they helped at all. The logic might work if applied selectively in a rousing campaign speech, but in the real world, it fails." Newman wrote.

Yes, what would a billionaire know about real world economics.


Readers left more than 7,000 comments on Newman's post. He followed it up with another post. His defense:
Economist Alan Tonelson also weighed in to argue the soaring trade deficit since 2009 has cut economic growth by about 9%.
There’s no doubt growth has been slower since the last recession ended in 2009 than it was before the recession. There are many causes, however, and it’s not as easy to establish cause-and-effect relationships in a complex economy as Trump makes it sound. He does know how to rally angry voters, however, and a lot of them let us know how they feel. Keep it coming.
Which is nonsense. His first post was to fact-check Trump. His second post said you cannot fact-check free trade.

You know, maybe the public is smarter than the reporter on this one. Maybe they know about the real world.

We need to discuss this. If free trade is so good for America, why are we the ones posting the trade deficits in all these agreements?


  1. T says:

    There are about 170,000 pages in the U.S. Code of Law which regulate virtually everything. A discussion of "free" trade, or "unfettered" capitalism in the U.S. is absurd.

    1. Amen. Let them start talking about freedom when there are no restrictions.

  2. Smoot-Hawley, go look it up. High tariffs are disastrous. With the fragile economy right now, it would really sink us. Please think twice on this one.

  3. "Those numbers might seem high, but in an $18 trillion economy, they don't really worry economists." Isn't our National Debt $18Trillion?

    "There’s no doubt growth has been slower since the last recession ended in 2009 than it was before the recession." 2009? Really? Remember, folks, it's time for the EIGHTH Annual Tour of The Summer Of Recovery!

  4. "If free trade is so good for America, why are the ones posting the trade deficits in all these agreements?"

    Don, should that be "who" are the ones posting...? Or did something else get left out?

  5. I think what Trump wants is lower barriers to our trading with countries like China. The threat of tarrifs is a negotiating tool. His political enemies here just want cheap labor no matter where it is utilized .He knows over regulation of American industries, especially small business, drives up labor costs and is a problem tarrifs wont fix but he is betting their fear of losing our markets will help us get us better access to theirs. That is his wager.

  6. "Free trade" is a scam. It's a con job. The pitch is that free trade benefits everyone by breaking down trade barriers. The con is that what they are actually selling you is a trade bill several thousand pages long and written by corporate lobbyists to benefit the corporations at the expense of the individual American. Read Dinesh D'Souza's "Stealing America" and you'll understand the scam.

    The fifty states of the U.S. are a free trade zone. It did not take a trade bill several thousand pages in length to create and it works really well.

  7. If you wonder why the economy is "stuck," you might start with the policies of the Federal Reserve, you know, the guys who control the nation's interest rates and who just print money whenever the urge arises. Then you might start looking at the myriad of banking regulations that have introduced greater inelasticity in the economy. Whether free trade is a net plus or minus is yet another matter.

  8. Jim Geraghty gave one example of how it works in today's NRO:

  9. Is "free trade" just another way of redistributing wealth? Is it fair that America is rich and the rest of the world is poor.