Tag Archives: political economy

A Thought on Tariffs

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The tariffs as used by President Donald Trump are viewed by many as having no impact on our overall trade deficit, and much is made of Trump’s disdain for trade deficits.

Thirty months into the Trump Presidency, the US economy continues to import more than it exports. This isn’t a problem, since the trade deficit is of no great consequence as an economic measure.  But in President Trump’s telling this is a clear and present danger….

Suppose something else, though.

Mr Trump has imposed 25% tariffs on $200 billion of Chinese goods, and he’s threatened a duty on another $300 billion. This has narrowed the US-China bilateral goods trade gap in recent months, but the total US trade deficit reached a record high in 2018. … Producers are leaving China, but not for America.
While Chinese goods exports to the US fell 12.3% year-over-year from January through May, Vietnam saw a 36.4% increase, according to US Census data. Taiwan had a nearly 22.5% year-over-year increase in the same five months, more than triple the increase from 2017-18. South Korean exports to the US increased 12.4% over the period.

Recall one of Trump’s other reasons for disdaining the trade deficit: the People’s Republic of China declines to play by international trade rules, and it steals or extorts other nations’ (ours in particular as one of the, if not the, leader in) technology and intellectual property, along with merely proprietary materials.

If the PRC doesn’t want to play by the same rules as the rest of us, it doesn’t need to trade with the rest of us.

Thus: if the tariffs aren’t realizing their first secondary purpose, moving production back to the US, they are gaining their primary purpose: moving production, and associated export, out of the PRC.

That’s not all bad.

Progressive-Democrats’ Minimum Wage Push

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Progressive-Democrats want to raise the national minimum wage to $15/hr.  Here are some back of the envelope numbers that could result.

The CBO says that the new minimum would cost 1.3 million Americans their jobs (in the optimistic scenario; their more pessimistic scenario had 3.7 million Americans put out of work): their current wage would go from $10.10/hr (CBO’s 2014 minimum wage which formed the core of their that-year outcome analysis) to $0.00/hr. The CBO also says that the $15/hr minimum wage would lift 1.3 million American workers out of poverty.

So, 1.3 million, or many more, Americans would lose their jobs so 1.3 million, at best, could get above poverty.

There’s more to it than that, though.

Based on that same $10.10/hr prior minimum that the Progressive-Democrats tried for just five years ago, the currently proposed job losses would result in a bit over $26.25 billion dollars lost to our economy per year through lost wages.  That’s based on only 1.3 million American workers being fired, mind you.  Balancing that would be that $4.9/hr raise (because, by CBO assumption, $15/hr is a non-poverty wage) for the lucky 1.3 million, or a skosh under $12.75 billion inserted into our economy each year.  That’s a net loss to our economy of some $13.5 billion per year.

If we adjust all of that for the actually extant minimum wage of $7.25/hr, the numbers shift to $19.5 billion per year lost to our economy in lost wages from those 1.3 million being fired, and a gain for the lucky ones of $20.2 billion per year.

That makes the Progressive-Democrats’ latest proposal a wash on wages in our economy.  Tell that wash business to the fired workers, though, and hear what they think of break-even.  Oh, and what was that, again, about “livable wages?”

Economic Misunderstanding

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The broad Keynesian misunderstanding regarding government spending is continuing.

Spending by consumers and businesses are the most important drivers of economic growth, but in recent years, government outlays have played a bigger role in supporting the economy.
The level of the federal component of GDP in the first quarter of 2019 was $78 billion, or 0.4%, lower than what forecasters expected it would be following the February 2018 budget deal….
The government is spending much less on disaster relief than it did in fiscal 2017, and a partial shutdown temporarily stalled outlays in January. Those factors explain about one-third of the missing stimulus, Mr [Ernie, an Evercore ISI economist] Tedeschi said.

No, that lack explains nothing at all about any “missing stimulus” except in the narrowest, purely statistical sense of a correlation having been found between two factors.  Correlations don’t even prove a relationship, only seeming relationships: all, or nearly all, nickels have two sides—a head and a tails.  All, or nearly all, pennies have two sides—oddly enough, also a head and a tails.  That correlation shows nothing at all substantive about a relationship between nickels and pennies.

Beyond that bit of statistical trivium, it’s necessary to recall the real-world nature of government spending: every dollar that government spends must first be taken from someone else, and then carrying costs—middle man costs—must be deducted before passing it on. There is nothing at all stimulative about government spending, as even John Maynard Keynes understood: in his government-spending-as-stimulus theory, it was the sharp rise in government spending that he held to be stimulative, not its steady state.  And beyond that, his “stimulus” was a purely price-inflationary stimulus, his spike being intended to come inside the ability of production to answer that spike in demand.

Indeed, if only because of those government middleman costs, steady state government spending is a net drag on the economy.  An additional contribution to the drag is associated government borrowing, which competition for lendable dollars drives up the cost of money for private enterprises and private citizens.  A third drag is the simple existence of Government spending: this crowds out private enterprises and private citizens by consuming resources that those citizens and enterprises would otherwise have consumed—while driving up the costs in the private economy of the remaining resources.

Starbucks Fail

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A Starbucks in Tempe, AZ, had one of its baristas ask five police officers who were having a pre-shift coffee either go sit somewhere else or leave altogether because one customer felt “threatened” over their being where the customer could see them.

In the hoo-raw ensuing, Starbucks spokesman Reggie Borges said

We have a deep respect for the Tempe Police and their service to the community.

That’s plainly not true. If Starbucks really cared, if it had any actual respect for the police—much less a shred of self-respect—it would have had a better-trained crew of baristas who wouldn’t knee-jerk insult cops over a snowflake’s made-up beef.

A day after the story broke, Rossann Williams, Executive Vice President and President, US Retail for Starbucks said this:

On behalf of Starbucks, I want to sincerely apologize to you all for the experience that six of your officers had in our store on July 4. When those officers entered the store and a customer raised a concern over their presence, they should have been welcomed and treated with dignity and the utmost respect by our partners (employees). Instead they were made to feel unwelcome and disrespected, which is completely unacceptable.

These are empty words, whether sincerely offered or just marketing damage control. What’s necessary is actual, visible changed behavior over a sustained period of time.

It’s also sad that no one else spoke up and told this barista to seat the cops with him.

Aside from the simple courtesy of such a gesture, it might also be the case that other patrons wouldn’t feel safe without the cops around. Especially with someone possessed of so little respect for law and order so close by.

The Cost of a Celebration

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President Donald Trump held America’s Independence Day celebration with a Salute to America, centered at the Lincoln Memorial.

Together, we are part of one of the greatest stories ever told—the story of America.  Today, just as it did 243 years ago, the future of American Freedom rests on the shoulders of men and women willing to defend it.

Just to pick out a couple of things: The Wall Street Journal cited “Democrats” complaining about

the use of military hardware for a traditionally nonpartisan celebration.

Because defending our nation’s existence and celebrating those who do that defense isn’t nonpartisan.  Sure.

And this one:

The Pentagon has said it wouldn’t have cost estimates until next week at the earliest.

I have some estimates now—not on the costs of the military units’ performances, but on those costs unique to their participation in the Salute to America celebration.

The aircraft—and their pilots—used consisted of

B-2 stealth bomber
F-35 Joint Strike Fighter
F-22 Raptor
F/A-18 Hornet
Air Force One
Marine One

Their cost that’s unique to the celebration is a good approximation of zero.  Those sorties flown—every single one of them—count as nav currency sorties and formation-keeping currency sorties, and they are a direct substitute for sorties that otherwise would have to be flown as part of any pilot’s currency training.  Furthermore, the fuel and maintenance resulting from the sorties also are already accounted for in those required currency sorties.

M1 Abrams tanks
M2 Bradley Fighting Vehicles

Here, the costs will be somewhat incremental, but some—the transport part—will count for existing currency requirements, similarly to the aircraft costs.

The incremental costs just aren’t that great.