Category Archives: Economics

Miscellaneous economy stuff

Tariffs and Reindustrialization

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This seems to be my day for letter-writers. Another writer in The Wall Street Journal‘s Sunday Letters section wrote about the current lack of effectivity of (protectionist) tariffs in stimulating moves toward reindustrialization in our economy.

Through initiatives such as Operation Warp Speed and strategic invocation of the Defense Production Act, the government took risk out of domestic production through substantial direct investment, guaranteed purchase agreements, prioritized allocation of critical materials and equipment, and streamlined regulatory processes.

He then proposed a similar program to spur reindustrialization.

He’s right as far as he went, but it’s too one-sided, lacking as it does any requirement for the targeted industries to do their part. Aside from the addictive nature of protectionist tariffs, it’s far too often the case that the “protected” industry companies merely take advantage of the increased prices of tariffed imports to raise their own prices accordingly, collect the increased revenue, and do nothing to improve their own competitiveness.

What’s also needed, as a part of these tariffs, is a requirement that the “protected” industry companies use the large majority (60%-75%, say, just to have a starting point for discussion) of the increased revenues accruing from the increased sales at their immediately pre-tariff prices to achieve the following:

• increase market share via their largely unchanged price
• increase spending on innovation
• increase spending on capital plant maintenance, improvement, and expansion
• increase spending on line worker wages
• increase spending on line worker hiring

And one more fillip: a hard expiration date of the protectionist tariff, in the range of 5-10 years, that cannot be extended except by Congressionally enacted statute.

That’s the route to actually reindustrializing: doing concrete things to achieve concrete goals.

Tariffs and Economic Growth

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The good editors at The Wall Street Journal spent a lot of ink and pixels decrying President Donald Trump’s (R) tariff moves. They saved the money bit for the end, though maybe not in the way they intended.

The best response to the warning from the first-quarter GDP decline would be for Mr Trump to call the whole tariff thing off. Short of that, settle for 10% across the board and call it a day. If that’s too much of a come-down, Republicans will need to pass a pro-growth tax cut and accelerate their deregulatory push as their best chance to liberate the economy from its tariff kidnapping.

Those first two sentences are irrelevant, whatever one might think of Trump’s tariff moves. Republicans need to pass a pro-growth tax cut and accelerate their deregulatory push—and pass serious spending cuts—independently of any tariff moves.

A Good Start

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President Donald Trump (R) has signed an Executive Order that sets up a mechanism for the US to mine and harvest minerals and metals from the ocean floor under international waters. It’s for more than just international waters, but this is the part of importance to me.

Environmentalists and legalists don’t like it, the former because they don’t want the pristine sea floors disturbed at all. It seems unimportant to them that the metals and minerals are critical to our nation’s economy and our defense establishment and that without them, we’d be unable to provide any sort of environment within which environmentalists could environmental.

The latter don’t like it because there’s no international law that regulates or even permits such mining. It’s apparently lost on these that the lack of regulation or permission means that the mining and harvesting is entirely legitimate to do.

At least one mining enterprise, The Metals Co, a Canadian firm that’s still interested in doing business with the US, has said that given the EO and a 40-ish year old American law, the Deep Sea Hard Mineral Resources Act, it can start mining in a year or so.

Given that, the first mines should be set up in the Gulf of America, and done so promptly. The second mines should be set up in the South China Sea, and done so just as promptly.

What’s Missing?

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A Wall Street Journal news writer wrote about the accumulation of additional wealth by the already wealthiest in the United States.

New data suggest $1 trillion of wealth was created for the 19 richest American households alone in 2024. …
It took four decades for the top 0.00001% of Americans share of total US household wealth to grow from 0.1% in 1982—when 11 households made up that rarefied group—to 1.2% in 2023, according to an analysis by Gabriel Zucman, an economist at the University of California, Berkeley and the Paris School of Economics.

What’s missing is any discussion of economic mobility, which always has been at the center of our nation’s economic development and overall wealth increase. Who are these households, and who were they?

Those in Zucman’s research on the top 0.00001% in the US are worth at least $45 billion per household and include Elon Musk, Jeff Bezos, Mark Zuckerberg, Bill Gates, Warren Buffett, and private-equity investor Stephen Schwarzman.

All of these, with the possible exception of Buffett, are Johnny-come-latelies to this tier—that’s upward mobility, and part of that eight household increase.

JPMorgan Chase’s private bank estimates US billionaires numbered nearly 2,000 last year, up from about 1,400 in 2021, when it began tracking billionaires. Wealth-data firm Altrata, meanwhile, estimates the figure at 1,050 billionaires in 2023, the most recent year for which it has data, up from 975 in 2021.

There’s a hint there. General wealth is increasing and individual folks and households move up the economic ladder. With mathematical certainty, others move down: even with a growing population—and ours is only barely growing—0.00001%, 0.01%, 50% of our population are finite numbers, and while more are rising than falling, some still must be moving down.

That’s economic mobility. And this: even as wealth is getting concentrated, it’s getting concentrated in an ever-increasing number of households.

It’s good to be rich. It’s even better to live in a free market economy where any of us can get there. After all, it’s not the concentration of wealth that matters so much, it’s the ability of any of us to accumulate that wealth and move up the economic ladder in the first place that’s important.

Bargaining Chips

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The People’s Republic of China is avidly intent on keeping its bargaining chips, of which two truly important ones are its TikTok app and its port businesses at each end of the Panama Canal.

What gets lost, even ignored, in this, though, is that bargaining chips have only the value the bargainee assigns to them, not what the holder of the chips claims to be their value. Not a red sou more than that.

TikTok, for instance, can be viewed as utterly without value as a chip to be played: current US law requires it to be shut down entirely and banned from the US unless and until it is sold in toto to an entity not under the control of the PRC. The only thing standing in the way of that way is the law’s provision that the deadline for sale can be moved back if our Federal government deems negotiations for the sale to be making sufficient progress. That’s where things stand under President Donald Trump, and that confers exactly zero value to the app as a PRC chip.

So it is, nearly, with those PRC businesses that are Panama Canal bookends. A BlackRock-led group has concluded a deal to purchase those two port businesses along with a number of others around the world from CK Hutchison Holdings, a PRC-domiciled (Hong Kong) company. The PRC is actively interfering to delay and potentially prevent that deal from coming to fruition. The appropriate response here is for the US to restrict, even block as far as may be, the ability of those two ports to get any business from the US or any other nations. That would deny those ports any value as PRC chips.