Wednesday, December 05, 2007

Protectionism is Free!

NPR had a debate in Iowa for Democratic candidates, and there were a couple of instances of candidates running away from economic reality. The first involved whether we should be willing to pay higher prices for goods we consume in order to “fix” our trade balance with China:

NORRIS: It's the holiday season and many Americans are heading to the stores, and many of the products that they're going to find on the shelves have a "Made in China" label. We've talked to Iowans about China, and there's one listener in particular, whose name is Don Frommelt, he said that consumers and politicians both have a somewhat schizophrenic relationship when it comes to China. Let's listen to what he had to say.

MR. DON FROMMELT: (From tape.) You can't have it both ways. And I think we need candidates who are willing to bite the bullet. And if you're going to say our balance of trade is upside down with China, there's one way to fix it; put on some kind of a tariff and prevent the American people from buying $300 TVs instead of $600 TVs.

NORRIS: Senator Biden, how would — would you actually restrict trade with China? And given the WTO guidelines, could you actually do that?

SEN. BIDEN: With the WTO guidelines, we could stop these products coming in now. This president doesn't act. We have much more leverage on China than they have on us.
Let's get something straight here. We're making them into 10 feet tall. It took them 30 years to get 20 percent of their population out of poverty. They've got 800 million people in poverty. They're in real distress.

The idea that a country with 800 million people in poverty has greater leverage over us is preposterous. What it is: We've yielded to corporate America. We've yielded to this president's notion of what constitutes trade, and we've refused to enforce the laws that exist.

As an aside, when Ms Norris says “schizophrenic,” what she probably means is “split personality;” this particular error has always irritated me. But getting beyond that, it is striking how no candidate is willing to confront the basic economics of this situation, which is that Americans buy a lot of stuff because they find what the Chinese are offering attractive. But rather than just tell listeners straight up that a consequence of limiting these options is a lower standard of living for Americans, there is a lot of blather about “enforcing the laws.” Barack Obama goes on and does the same:

NORRIS: My colleague Steve has a question. But first, before we get there, I just want to follow up on something that Mr. Frommelt also said. He said he wants a president who's going to level the playing field.

Senator Obama, what would you do in order to give the U.S. more leverage, to be able to deal with China at least as an equal partner? And are you willing to do that despite the consequences, even if it means that consumers have to kiss those $300 televisions goodbye?

SEN. OBAMA: Well, look, I mean, I think Chris and Joe made a good point, which is, we have laws on the books now that aren't being enforced. This is what I mean in terms of us negotiating more effectively with them.

Part of the problem is, is that the relationship has shifted over time. Joe's absolutely right that they were much impoverished 10, 20 years ago, and so our general attitude was, you know what, whatever they send in, it doesn't really impact us that much, and they're a poor country.

So again the “problem,” that American consumers have options they didn’t have before, is to “enforce laws.” Any "leverage" will thus have American consumers as the fulcrum. To his credit, Sen. Obama does go on to at least acknowledge the tradeoff:

Now, could there potentially be some higher costs in the front end? Probably. But I guarantee you I don't meet a single worker in Iowa who's been laid off who says, "I wouldn't rather pay a little bit more for sneakers at Wal-Mart but still have a job."

But of course “workers” (whatever that means; is an associate lawyer looking to make partner who puts in 80 hours a week a “worker”?) in Iowa are not the sum total of the economy. The problem is not that “workers” in Iowa buy Chinese stuff, the problem (such as it is) is that everyone else wants to, as is their right.

But as usual, John Edwards is at the head of the class with regard to economic illiteracy:

NORRIS: But we also know that China can easily get around that. They can sometimes use the "Made in Hong Kong" label instead of the "Made in China" label.

SEN. EDWARDS: But the starting place is to actually enforce the laws that exist here in the United States and their obligation to the WTO, neither of which are being done. They're not being done because corporate America drives so much of what happens in Washington, whether it's trade policy that costs Americans millions of jobs — NAFTA, CAFTA, et cetera; whether it is these dangerous Chinese toys coming into the United States of America; whether it is country-of-origin labeling. Why is the president of the United States not saying to the American people, to local communities, "Buy local"? It is good for the local economy. It is good for farmers. It is good on the issue of global warming. Because everything that comes from China carries an enormous carbon footprint with it.

I am not sure what the “local economy” is, nor why I should systematically favor it. I know that when I need my car fixed I don’t ask my brother to do it just so money stays in the family, nor do I get my furniture from my accountant neighbor just because I like him more than the unknown people (dastardly Chinese people, perhaps) who make the furniture I see at the store. I know also that Chinese people possess the same moral right to try to earn a living as any other person, and that Americans have a moral right to buy without having to overcome nationalistic discrimination encoded in the law. But in Sen. Edwards’ world, apparently, consumers are not part of the economy, in defiance of every economic class he ever had the opportunity to take. (Sen. Edwards later goes on to deny, in the teeth of all the evidence, that textile manufacturing is what poor countries do, and if we do it here that makes us poorer.)

Finally, illegal immigration. Everybody’s against it, it seems, but none of the Democrats, evidently, want to be against the immigrants themselves. A moderator asks Sen. Clinton about another economically inescapable dilemma, that cracking down on employers who hire workers is in effect damaging the workers themselves (which would anger Democratic pressure groups), and this is what she says:

INSKEEP: Now, let's dive right back in with Senator Clinton, who had her hand up before. And I do want to ask about a very similar topic, Senator.

You said in a debate on Saturday night that you support people who are, as you put it, "Yes, undocumented, but also working hard, trying to support their families. That's why they're here." In the same answer, you said you want to crack down on employers. Is there a contradiction there? If you crack down on employers, doesn't that mean you're telling employers to put these hardworking people, as you define them, out of work?

SEN. CLINTON: No, there is no contradiction.

You know, comprehensive immigration reform means five things. You have to have tough border security plus a system of knowing who's here and what they're doing. Secondly, you've got to crack down on employers, because people wouldn't come if there weren't a job waiting for them. Third, you've got to provide more help to local communities to be able to bear the costs, because they don't set immigration policy. Fourth, you do have to do what Chris Dodd is talking about, and that is try to create some economic activity by working with the countries to our south. But fifth, you've got to have a path toward legalization.

This is an answer for idiots. Employers are bad, so penalize them, but run away rhetoricaly from the whole conundrum that for every labor buyer there is a labor seller, and that making it more costly to hire the latter damages them. Then dredge up the talking points you prepared with your advisers and try to escape the whole mess.

Several points to note overall. First, I suspect most of the candidates really are aware of the notion of tradeoffs, but are unwilling to concede that voters are. Second, kudos to NPR reporters for asking at least some economically literate questions. Finally, I was pleasantly surprised that Barack Obama occasionally gives straight answers to questions, acknowledges that tradeoffs exists, and simply says that we should make them. If he took an economics class, he paid attention. He is certainly not my idea of a good president, but neither is he as irretrievably weaselly and evasive as Sens. Clinton and Edwards. Sen. Edwards in particular may be the most economically ignorant presidential candidate in my lifetime.



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