Suddenly, the widening Republican split over trade and tariffs is all over media. If people had bothered to look, this should come as no surprise. Back in January a year ago we looked at these potential problems, foreseeing Trump’s long-held positions on trade, immigration and the world indicated a less than enthusiastic for US support for classical liberal values. A year ago January we tackled these looming clashes in our posts AND THEN THE REPUBLICANS and Reasons for Hope-or Not. Trump’s first year was spent achieving Republican goals favored by virtually all his primary opponents. Tax cuts, regulatory relief and the appointment of conservative judges were jointly achieved. Healthcare where there was no real Republican or Trump Plan only nicked Obama care rather than ending and/or replacing it. Now we’re at the moment of truth. Will Trump cave and change his long-held view the rest of the world has taken advantage of the US and become a free trader at the risk of losing his base or stay true to the positions that won his following. The recent steel and aluminum tariffs indicate he’s where he always been, a 16th century mercantilist.
What we find amazing is in 2018 a President and a sizeable part of the populace possibly a majority thinks this is a good idea. After all, we are a capitalist country. In the vast majority of instances, we rely on free and open markets to set prices and tell us where to invest for the future. Our government and legal system for the most part set the parameters for these markets to flourish. To date those accepting market based economies have seen an incredible increase in well-being. Those practicing state direction of prices and investment haven’t fared so well. What would you choose, the old Soviet Union, Cuba and Venezuela or the US, Great Britain or the EU? Given the movement of actual people, the answer is quite evident. Free Trade is a bedrock part of Capitalism. As we pointed out in our Series, “The Long story of More,” the increase in material well being is dependent on the twin pillars of trade and innovation. Historically high Tariffs impede trade to the detriment of the affected countries including those imposing them. We can’t blame the Economists. The disastrous 1930 Smoot-Hawley Tariff was opposed by 1,000 leading Economists in a letter to then President Hoover calling for its rejection. Yet, congress passed it and Herbert Hoover signed it. Now the Trump tariffs are opposed by his former economic advisors including Larry Kudlow his soon to be chief economic advisor and across the spectrum of economists to those on the left such as Robert Reich and Alan Blinder.
So how is it so much of our political leadership favors the tariffs? For instance, in the recent Pennsylvania congressional by-election both candidates were solidly in favor of the Trump tariffs. To be sure, this was in old steel country, but even in this district more people are employed by steel and aluminum users or would be hurt by counter tariffs than those employed or might be employed by the steel industry. Capitalism may be all about expanding free trade, but how many people actually know about capitalism? Take our President. According to the record he received a Bachelor of Science in Economics from the Wharton School of the University of Pennsylvania in 1968. This begs the question, what kind of economics did they teach at that prestigious school? We had no idea 16th century Mercantilism was still taught in the Ivy League. Trump is old and his memory may be failing but still Wharton owes us all an explanation. Of course, Trump just might not have been the stellar student he so loudly claims. His transcripts might shed some light. In any case the President is hardly alone in his disdain for free markets. Beyond his Republican protectionists, most Democrats led by Bernie Sanders are all for trade barriers.
In a country where according to the Annenberg Public policy Center only 26% can name the three Branches of our Government, it may be too much to expect our citizenry to have a working knowledge of our economic system. Try this the next time you’re in a conversation about Tariffs and trade. Just mention “comparative advantage” and note the blank stares. We just don’t teach what made this country the envy of the world and this is dangerous at all levels. Demagogues appeal to our emotions. Knowledge and experience are the antidotes.
This is a big reason we have promoted a Personal Benefits Account for every man, woman and child in the country in our series on “Dave’s Healthcare Plan.” It’s amazing how much interest you might have in Capitalism when you personally have your capital at risk. Unfortunately even if we get to stage were we have capital to invest it knowledge of markets comes much later than it should. Having savings from day one should solve that problem. Kids will ask questions especially if it’s about their money. Being brought into our system early on may just improve our overall situation. Broken families, especially single parent families have been held to contribute to a myriad of our problems. A leading cause of couples splitting is money. Learning about savings when we learn everything else just might reduce this problem. After all, as a wise man once said “Rich or Poor it’s good to have money.”