Friday, August 12, 2016

Presidential race to the bottom continues as Clinton embraces tariffs

Speaking at a rally in Michigan, Hillary Clinton apparently decided her current economic policies weren't sufficiently destructive. To remedy this, she announced that she now supports using "targeted tariffs" against other countries that "have gamed the system."

This position is mistaken and harmful to the average US worker. What politicians mean, in general, when they accuse foreign entities of gaming the system, is that they managed to sell goods at artificially low prices--prices so low that US companies and workers can't compete. The nefarious way in which they achieved this varies, depending on the politician--maybe currency manipulation (which everyone does), maybe paying workers too low of wages, maybe lax regulations, maybe government subsidies, and so on. But the general contours are the same.

To see why blocking trade is wrong, one only needs to consider the extreme case. What if countries were "gaming the system" so much they actually cut their net costs to zero and they just decided to give their product (let's say, cars) away in the US for free. Surely, no US manufacturer of cars could compete with free, and they would shortly go out of business, leaving their former employees unemployed. These people would struggle in the short-run. But meanwhile, consumers in the economy (including the displaced workers) benefit from free cars. At least in the short-run, a small fraction of people face hardship while the great mass of people benefit.

This exact same dynamic plays out with each new groundbreaking innovation as well. Lightbulbs displaced candlemakers, cars destroyed the horse-drawn carriage industry, and Microsoft Word surely displaced secretaries and typewriter manufacturers alike. Each development also dramatically improved worker productivity as well as the standard of living. International trade often seems like a totally separate economic issue, complete with its own set of jargon--trade deficit, "dumping", tariffs (instead of taxes), etc. But on a fundamental level, the same forces are at work.

The question is whether we should sacrifice the long-term interests of the many to the short-term interests of a few. Opposing international trade and supporting tariffs, means answering this question in the affirmative. And the logical extension of this principle is that our country, if the occasion arose, should refuse free goods and also actively block all technological innovation. This position is as close to self-refuting as they come--and now in the 2016 presidential race, it has bipartisan support.

Of course, given that opposition to trade was a core issue for Bernie Sanders, Clinton's new, stronger opposition to trade is not very surprising. It's also another example of how the political debate between the major party candidates continues spiraling downward. Both candidates have innumerable terrible ideas that could be credibly and persuasively exploited, by anyone that was trying. But instead, the candidates usually attack their opponents on the issues where they aren't quite bad enough. It's not framed that way, but that's the essence of what is happening.

Hillary supports a $15 minimum wage. So Trump, instead of explaining that the minimum wage harms the very people it seeks to help, breaks with Republican orthodoxy and supports an increase. Trump, when he's not calling for the US to murder terrorists' family members, occasionally says halfway noninterventionist things on war. So instead of focusing criticism on Trump's most belligerent remarks--a dovish line one assumes would resonate with her party--the Clinton campaign criticizes Trump for not expressing sufficient hostility with Russia. On nearly every issue where candidates differ, there is a race to be worse, first.

Trade policy appears to be just the latest competition. And regardless of which candidate runs faster, one thing is certain--everyone loses.

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