Trump’s Economic Ignorance

One of the reasons I was a Republican back when that party actually existed was my belief in markets. I certainly understood that there are areas of the economy where markets don’t work–health care, for example–and I also understood the need for an “umpire”–regulations to ensure that competition occurs on that all-important level playing field. But with those caveats, I was–and remain– decidedly pro-market.

So was the GOP that used to be.

Last Thursday, Trump announced that he intends to impose tariffs on imported steel and aluminum; he evidently thinks that such tariffs fulfill his half-baked “America First” approach to trade.

Speaking at the White House, the president said he had decided to levy tariffs of 25 percent on foreign-made steel and 10 percent on aluminum.

The move prompted an immediate slide in the stock market, uniform condemnation by economists (you know, the people who actually understand how these things work–or more accurately–don’t), and threats of retaliation from the EU and Canada, among others.

The Washington Post reported that Trump had ignored warnings from members of his administration:

The president went ahead with the unexpected announcement even after Gary Cohn, his top economic adviser, reportedly threatened to resign. Treasury Secretary Steven Mnuchin told Trump that the stock market gains he loves to boast about would reverse themselves. Defense Secretary James Mattis, who he’s normally inclined to defer to, warned that this would hurt U.S. relationships with allies.

Companies that use steel and aluminum, including automakers, account for vastly more jobs than producers of the metals, and they argued that as many as 200,000 jobs were lost when George W. Bush imposed steel tariffs in 2002 that were later ruled to be illegal by the World Trade Organization.

Trump’s move, under a little-used national security provision of U.S. trade law, is expected to trigger legal challenges by China, the European Union and Brazil at the World Trade Organization. It also prompted predictions that it will backfire on American farmers and other exporters.

“It’s pretty much our worst fears,” said Rufus Yerxa, president of the National Foreign Trade Council, which represents multinationals such as Microsoft and Caterpillar. “This is a pretty clear indication that the Trump administration cares more about the old economy than it does the new economy.”

This wasn’t Trump’s first effort at protectionism; the announcement follows an earlier round of tariffs on solar panels and washing machines. Economic history tells us that all of these moves will lead to higher prices for consumers.  The recent ones will raise costs for manufacturers who use steel and aluminum (automobiles and beer in cans come to mind), and they will pass those increased costs to consumers.

The tariffs will also cost American jobs; the earlier ones have already caused at least one U.S. company that imports solar panels to announce layoffs.

Trump’s anti-competitive moves aren’t the only reason columnist Catherine Rampell now dismisses the GOP’s long-professed support for markets.

Republicans say they favor free markets. They’re not like those pinko-commie Democrats, who prefer “picking winners and losers.”

Oh, come off it already.

Republicans love picking winners and losers, too. They just choose different winners and different losers than Democrats do. In the case of today’s Republican officials, the winners are mostly donors, incumbents, culture-war favorites and cheats.

Rampell points to Trump’s efforts to prop up the coal industry, and the “carve-outs” and other favorable treatment given to donors and Republican governors. And she is especially scathing in her criticism of the Georgia legislature.

Republican officials there vowed to punish Delta Air Lines, one of the state’s largest employers, for canceling discounted prices for National Rifle Association members.

Lt. Gov. Casey Cagle, who is running for governor, gave Delta an ultimatum: restore the NRA discount, or forget the $50 million sales-tax exemption on jet fuel that Republican lawmakers had been considering. In other words, restore our special discount, or we won’t give you your own special discount. Delta didn’t budge, so lawmakers axed the tax break Thursday afternoon.

It takes a funny formulation of free markets to punish a private company for not giving your favored political group a good price.

It is also a perversion of market economics–not to mention a blatant violation of the rule of law–to tip off your advisor and good friend Carl Icahn about your intentions, so that he can unload nearly $31.3 million in a steel-related stock company before the news hits.

The GOP to which I once belonged no longer exists. What goes under that name today is an unholy merger between a cult and the mafia.

37 thoughts on “Trump’s Economic Ignorance

  1. “Winners and losers” is exactly what free markets create. It’s also why Albert Einstein called capitalism, “Evil.”

    His take on markets was more spiritual than scientific. Markets promote the “I” in humans while rejecting the “WE”. Competition breeds this starting in schools. It’s also why he said we needed serious public school reforms because we were enculturating kids with the winner/losers mentality. I think Americans love of violent sports and war movies exemplify his point.

    When you consider many of the modern day Republicans/Libertarians have flocked to Ayn Rand’s objectivism view of the world, it all makes sense. She promotes selfishness and rejects the collective. This is exactly what Einstein observed in the 40’s and 50’s.

    What’s twisted is the religious right falling in line with this sort of thinking. Ayn rejected religions because she rejected collectivism. She called religious people, “weak-minded”.

    I’m not going to blame free markets for all our problems, but it deserves much of the credit. We aren’t evolving toward global citizen. We are retreating into protectionism and isolationism. This is FEAR driven. Fear comes from being driven by “I”.

    We are in the late stages of capitalism…what comes next is authoritarianism or socialism. The problem is both major political parties are aligned with authoritarianism because the Donors of both parties want to keep what’s theirs. Greed drives corruption. The worst human beings rise to the top (Kakistocracy).

    Our systems produce faulty outcomes. We are basically looking at the outcomes or symptoms and wonder how it’s happening. We need to go beyond and look at the causes and conditions.

  2. A Proverb: For Want Of A Nail

    For want of a nail a shoe was lost. For want of a shoe a rider was lost, For want of a rider a message was lost. For want of a message a battle was lost. For want of a battle a kingdom was lost. All for the want of a horseshoe nail.

    Per Wikipedia:
    “The proverb has come down in many variations over the centuries. It describes a situation in which a failure to anticipate or correct some initially small dysfunction leads by successively more critical stages to an egregious outcome. The rhyme’s implied small difference in initial conditions is the lack of a spare horseshoe nail, relative to a condition of its availability.[1] At a more literal level, it expresses the importance of military logistics in warfare.

    Such chains of causality are perceived only in hindsight.”

    Or we could consider “hindsight is 20/20”,or more fitting in this nation today, “Monday morning quarterbacking”. But; as I view the weeks of Trump and his administration (NOT an initially small dysfunction) quickly slipping through our fingers (or like you-know-what slips through that goose), we are viewing the “hindsight” daily as we realize when it happens that this man is destroying our nation with his lack of insight because he has been totally blinded by the power put into his destructive tiny hands. Is Trump’s “horseshoe nail” the loss of Hope Hicks? That, to all outward appearances, is the “straw that broke the came’s back” for him (per some of his own insiders); consider his joking comment regarding his week’s losses…”Who will leave next; Steve Miller or Melania?”

    He seems to have been blocked from declaring his much desired nuclear war so to get even with his enemies (real or imagined) he has declared a “trade war”. The causation of further economic hardship on this nation’s working class will quickly work its way down from the top to our costs for goods and services. My thoughts yesterday, the first Sunday in Indiana where carry-out liquor can be bought took a quick turn to local levels. Will the “good old boys” who still support this Republican party realize the increased cost of those aluminum cans of six-packs of beer they carry out to watch the NFL is due to Trump’s “trade wars”. Declared while he was in a particularly dangerous snit this past week.

    “The tariffs will also cost American jobs; the earlier ones have already caused at least one U.S. company that imports solar panels to announce layoffs.”

    Regarding the solar panel issue; Indianapolis Power & Light is nearing success with their takeover of privately owned solar panels and their stored power on the roofs of homeowners, are other power companies in this country doing the same? Trump’s version of “draining the swamp” has only lowered the water level and put all of us up to our ass in alligators. What all we stand to lose with these tariff increases is yet to be summed up.

  3. Regarding the Delta Airlines $50M jet fuel sales tax exemption – unholy tax exemptions that are given to corporations that are already extremely profitable is a huge part of what is wrong with our economy. This is just one expample of taking from the poor and giving to the rich.

    Obviously, Delta didn’t seem concerned about losing that $50M gift. What does this tell us about the games that are played at both the State and Federal levels? Donate enough money to the campaigns of certain politicians and you will be rewarded many times over.

    Thank you Scalia for Citizens United! What a joke of a name for a SCOTUS case. It should have been called Corporate Theft United.

  4. Todd, “economists… the people who understand how these things work… or don’t.” You, Sir, expanded on that perfectly, and I could not agree with you more.

  5. Todd,

    “Our systems produce faulty outcomes. We are basically looking at the outcomes or SYMPTOMS and wonder how it’s happening. We need to go beyond and look at the causes and conditions.”

    Just like any CANCER. We need to go DEEPER in order to look at the causes and conditions. We continue to refuse to do that because of the NECESSARY PAIN coming from the treatment.

    “No pain, no gain.”

  6. Marv, exactly! It is just like cancer. And just like cancer, we either cure it or die because of it. Putting things into remission only delays the eventual outcome.

  7. Delta Airlines’ hammer drop on the NRA suggests to me an idea: purge my contact list of Representatives and start filling it with CEOs. In terms of getting things done, in terms of power to get results, in terms of citizen leverage, it sure makes more sense to call a few CEOs instead of calling Congresspeople.

  8. These rules are still valid and will not be ignored: Demand – Supply is still true in the market place; Nature abhors a void. In short order we will have the opportunity to once again provide some leadership to our nation and the world. The rules demand it.

  9. Trump stupidity underscored: Raising tariffs on steel will raise the manufacturing cost of guns and thus the retail price of guns. If I owned a huge company and heard promises from Trump that things were going to happen that would benefit my company, I would find some other political player to support, because I know that he is not smart enough to avoid initiating policies that harm the very support groups he promises to help. But then I am not one of his repugnants.

  10. Increasingly I am starting to believe that the entire Trump/Putin relationship is about doing everything possible to dissolve our institutions- legal, economic, political, social and to make the American people so handicapped by the damage that returning to the world stage with credibility will not be achieved during Putin’s lifetime. This is not ignorance, it is not the action of an narcissist, this is the action of an agent of Putin. While I am not generally a person who panics, my fear is that Mueller’s investigation is already too late to save our nation from a very dismal future.

  11. Furthermore, this is not about China cheating. Here in order, are the sources of the top U.S. steel imports. Canada 16%, Brazil 13%, South Korea 10% and Mexico 9%. China is not in the top 10 due, in part, to “selective” economic restrictions Obama had imposed.

    Our Commerce Secretary and President apparently can’t even spell macroeconomics.

  12. Theresa,

    Unlike other viruses that cause cancer, THIS CANCER is man-made. Because it is a BLACK SWAN it continues go UNTREATED. It can only be treated by attacking the CAMOUFLAGED PLATFORM that continues to release the NEW STRAIN OF THE “HITLER” VIRUS. We’ve lost control of the situation. And thus we’ve endangered the world. What we have allowed to occur is more than an epidemic, it is now in its PANDEMIC phase, just like the 30’s.

  13. We haven’t had a capitalist system since Congress passed the oil depletion allowance. What we are operating under is, in effect, a corporatetist system designed to further the interests of large corporations. SCOTUS made that abundantly clear in Citizens United by giving corporations the constitutional rights initially given only to people (actually only given to white males, but that’s beside the point here).

  14. Greed drives corruption? That is like saying cancer kills; it seems plausible. Cancer and greed are neither the origin but rather a symptom of the actual driving force with which we are contending. We will never keep capitalism in its harnesses by trying to stop greed. But if we can curtail the human desire to show off, to brandish, and to raise as a banner a greater and greater DIFFERENCE between him or her and everyone else, greed will subside, as will every other ill that it infects. DIFFERENCE DRIVES CORRUPTION AND CAPITALISM. We don’t know yet what drives cancer.

  15. Yes. The perfect storm for economic collapse in the United States has appeared on the horizon like a “blue norther” coming out of Saskatchewan: Lousy pay, rising prices on everything, dysfunctional government, greedy corporations, rising health care insurance costs.

    In a consumer-driven economy, when the consumer keeps getting screwed they run out of that stuff that allows them to consume. This is so basic, it’s almost embarrassing to have to lay it out. Trump is doing everything he can to be wrong and screw the working person he so fervently seduced into his con game. That’s pure evil.

    Pure evil coupled with abject ignorance is the sign of total failure in leadership. Trump’s never been a leader, only a bully. Big difference. And yet…. And yet, there he still is and nobody is trying to remove him from office before it’s too late.

  16. Dear Ms. Kennedy and all,
    I am a voting Democrat.., but hey! totally pro-market. The markets are what made this economy and it is a world wide market. Had we the market energy we had post-WWII or even in the mid ’50’s we would see a vastly different situation with the US in relation to the rest of the world. But instead it seems to me those that professed that CAPITALISM IS GOOD were the ones who wound up sinking the ship before it sailed. the DREAM was bullshit! It was their back pocket nothing more they sold our American Strength out from under our feet to make money! Why am I now reading that the Chinese buying up real estate in the US?.. the Chinese government in the form of ‘businesses’ and ‘private owners’ all foreign nationals? The Market is one thing – Capitalist(s) another and that is what is being overlooked and screwing us one deal at a time into the dirt!!! Anyone who thought trump had the least wit of sense should join him in Guantanimo’s camp #5 imho. He said “This is for REVENGE!”… revenge of a theif?… and we are letting him have at it. And all the scum that rolls with him… I am left wondering: If we do manage to extricate this POS and his gang.., what are we going to be left with?

  17. Manuel,

    “I am left wondering: If we do manage to extricate this POS and his gang.., what are we going to be left with?”

    Maybe our lives.

  18. The IVY League should kick Penn out for selling a Bachelor of Science degree in Economics to Trump from The Wharton School in 1968.

    He has had a terribly uninformed slant towards economic nationalism for many years. His zero-sum personal and world-view is his only guide – not principles of international trade, not credible advisers, not strategic global alliances, not history, not the rule of law…nothing. Stop squawking about him and get involved in your local US House and Senate 2018 campaigns to exert pressure that ensures he’s removed from office as soon as possible in 2019. And let’s hope Pence is indicted and convicted right along with him and Dems take over the House.

  19. An interesting choir you preach to…NUVO used to be my go to source for what the loons were up to but this blog is a gold mine.

  20. Supply and demand even before Adam Smith was never a perfect measure of trade costs or a foundation for mythical free market theory, but it was perhaps the best we could do coming out of late medieval times into an industrial economy powered by steam, which changed everything. Trouble is, as applied today and in re Trump’s tariffs, and as Joseph E. Stiglitz writes in his books, tariffs distort the economy, one which we had hoped would have a degree of market normalcy in obedience to the theory of supply and demand. Tariffs reward or punish trading partners based on domestic political concerns and supposed unfair treatment by one of the other, and thus corporate efficiency and the law of comparative advantage become secondary to politics and not economics. Result? Higher prices, inflation, unemployment etc.

    Trump had no good reason to invoke Section 232 (empowering him to act as a matter of national security in setting tariffs) since I think all of us can agree that Canada and Mexico (who are badly affected by his proposed tariffs) are not likely to invade the United States. To further destabilize the equity, debt and commodities markets, he is now threatening to withdraw from the WTO (World Trade Organization) if they rule against his tariff-setting. Good luck on the Dow.

    It appears Trump is intent on bullying the world of global trade but this is not 1950, when the rest of the world (notably Europe and Japan) depended upon the United States to rebuild their ruined cities and rescue their war-torn economies. The EU, Japan and now China are stern competitors in their own right in the global marketplace, and, other than a market, are not all that dependent on the United States as they once were. They are in a position to trade among themselves as proven by China and Germany, the two leading countries in the world with hundreds of billions of dollars in trade surpluses annually, while we are by far the leading trade deficit country in the world with trade deficits in the hundreds of billions of dollars annually, including within such number a deficit of over a billion dollars a day to China alone. The promised retaliatory tariffs against our export industries resulting from Trump’s tariffs will increase our already stratospheric deficits certain to enhance unemployment in our export industries far out of proportion to the steel and aluminum jobs his tariffs “save,” hundreds of billions of dollars lost to investors, inflated consumer prices etc. Wake up, Don. This is not 1950.

  21. I forgot to mention for my joke of the day that I took an old economics degree before going to law school, so old, as I tell anybody who will listen, that Adam Smith was one of my professors, who lectured on the merits of East India Tea Company, which enjoyed a royal monopoly on all India trade and which I thought at the time was a poor example of “free trade” theory. Uh. . .

  22. Marv,

    I hope you are right and that a new, Democratic Congress will oust this fool and his resident clown, Mike Pence.

    Leon,

    What the hell are you trying to say? Just lay it right out there.

  23. ay back in the memories in my ancient brain, I see dramatized the collapse of the American steel industry due to obsolete systems, factories and equipment after WW-2. The steel corporate biggies, accustomed to windfall obscene profits without competition, but increasing costs due to successful labor unions and defective products, declined to invest in modernization but effectively turned steel production over to the Japanese and Chinese producers who built new facilities and processes thereby bringing tons of BETTER AND CHEAPER product to the market.
    (Research might reveal that those oriental producers were, in fact, the American biggies who jump-started the industry overseas for uncontested labor rates and produced a re-born industry, better quality and better prices.) Screw the American workers in Pittsburgh, Wheeling, Youngstown, etc.
    Now along comes Trump who thinks he has the answer: tax the imports 25 percent to make our domestic product more competitive. Besides all the backlash from producers of coal, coke, iron, etc., there is the intrinsic problem that a post-WW2 industry can even begin to meet market demand for product due to time-worn mills and systems.
    So, watch and wait for another Trump disaster and remember it in November with the stupid 2018 Congress and with the 2020 bungling Presidential family of amoral guilty pleaders.
    Once more unto the breach dear friends, once more;
    dump all GOP amateur zealots! Elect only tried and true professionals! Down with the GOP in Congress and in the White House!! Remember November! Avert disaster!

  24. Clearly Republicans have earned the derision that appears here daily despite the fact that several of us are recovering Republicans. What happened to them?

    A stab at that brings 3 things to my mind anyway:

    Extremism is no thought politics. It portrays the world in black and white without any shade of nuance or, more importantly, analysis. Extremists know immediately and instinctively what’s right, and importantly, what and who is wrong always. It’s impossible for me to figure anything more out of step with the direction that the world is moving in. I think that many of us have been surprised at the magnitude of collective ignorance that brought this on. It’s impossible to determine whether to see it as a massive failure in our education process or our culture or both. Whatever contribution each made it seems to be centered in people educated around the 80s and 90s but as both education and culture are slow to react to environmental change perhaps the seeds of this dysfunction go back earlier to the 60s and 70s. Something led to a major uptick in people unable to analyze. (Personally I think a major technical contributor was TV. Another thought is that it was caused by a general failure to keep up with the complexity required by our numbers and connectedness.)

    The second thing that I think of is how extremism spread which is through propaganda as a business. We tend to hold advertising (remember Madison Avenue?) as benign but when it became professional it quickly grew into full fledged effective propganda with a huge return on investment. Marketing today can sell anything. Unfortunately one of the easiest groups to sell to are authoritarians. Give them some scapegoats, some extremism served with fear anger and hate and they respond in military parade style becoming not individuals but a well oiled precision unit in lock step.

    The third major contributor to what got us here is the absence of any effective control over campaign financing. Money talks, voting walks. The effectiveness of buying votes from a crowd of extremists by employing massive media professionally prepared propaganda is truly breathtaking.

    We read here daily some whining about the Democrat Party not keeping up. My reaction is that is both true and a tribute to their ethics. Unfortunately in fights the advantage usually goes to the side less inhibited by ethics.

  25. Gerald E. Stinson @ 10:42 am – “this is not 1950, when the rest of the world (notably Europe and Japan) depended upon the United States to rebuild their ruined cities and rescue their war-torn economies”. Good history lesson. As part of the Boomer Generation my first job was in a steel mill in South Chicago in the late 1960’s. I had an occasion to have a conversation with one of the young industrial engineers that worked with me. He said the steel mill was obsolete compared to the new technology available. Our mill was not unique in terms of being behind the times.

    Leon, your link – On Tariffs, Hold the Hysteria
    “President Trump said last week that he intends to use powers granted him by Congress to impose import duties on steel and aluminum. That was all it took for the press to become free traders”.

    The press during the NAFTA and then when we opened the flood gates for trade with China were all gung-ho on “free trade”. Books and articles I read on this transformation of US industry to off shore that were contrary to free trade documented how critics of “free trade” were labeled as Luddites. Among the commonalities of characteristics to countries where factories were moved off shore, was a lack of human rights, corruption, low wages and a lack of environmental laws.

    As far as the Delta smack down by some Georgia Legislators concerning the NRA, the real issue should be why Delta or any other company should benefit from Crony-Capitalism, that is the cherry picking by elected officials of which companies should receive special tax treatment.

  26. If anyone was interested in starting a political career in the last 3 or 4 decades and their prime motivation was wealth they would certainly align with the GOP. In fact that would be a no brainer.

    We need to change that calculus by demonstrating that Republicans are largely unelectable.

  27. Trump remains willfully ignorant of economics, government, statistics and facts. It is interesting to see his hold on even a minority of voters slip away as he does one stupid thing after another and every week brings a new scandal involving his family or his own business dealings. Pence remains silent and attentive to his master, waiting until Trump collapses under the weight of his lies and conflicts of interest and paranoia. One can only imagine what a Pence presidency will be.

  28. Pete @ 2:28 pm – If anyone was interested in starting a political career in the last 3 or 4 decades and their prime motivation was wealth they would certainly align with the GOP. In fact that would be a no brainer.

    The Clinton’s cashed in rather well:
    (CNN) Hillary Clinton and her husband, former President Bill Clinton, combined to earn more than $153 million in paid speeches from 2001 until Hillary Clinton launched her presidential campaign last spring, a CNN analysis shows.

    The two also reported at least $7.7 million for at least 39 speeches to big banks, including Goldman Sachs and UBS, with Hillary Clinton, the Democratic 2016 front-runner, collecting at least $1.8 million for at least eight speeches to big banks.
    https://www.cnn.com/2016/02/05/politics/hillary-clinton-bill-clinton-paid-speeches/

  29. Did you sleep thru the class on evidence? What evidence do you have that Mr. President Trump tipped off his buddy? I don’t think you have anything at all. But, speaking of economic ignorance, as we were, given the prospect of tariffs against steel imports what would you expect to occur with the value of steel company stocks? Would you expect them to go up or to go down? Of course, they could do either, but implemented would tend to increase the number of American Steelworkers. To suggest that, ipso facto, Mr. Ichan made a killing by bailing BEFORE the announcement suggests….”
    Only a simpleton would see things in such cartoonish terms.” Which is a danger of living and working in a loon farm.

  30. ML, if anyone offered you say $100K to make a speech would you refuse?

    That hardly anyone would turn it down to me is completely unrelated to governance. No quid pro quo.

  31. That markets can go up and down ought to be obvious to any pea brain. Then, if the markets go down there is little point in ascribing it to other than market forces. Leaping into stupidity about tariffs leads to abandoning intellect….as our host did above. Early news is always, it seems, full of errors. So, from a Libertarian point of view, Glenn Reynolds, at his blog, Instapundit.com is the following for the minions here to chew upon……”WEIRD, ALL THE BEST PEOPLE ASSURED ME IT WAS ECONOMIC ARMAGEDDON: Dow closes 336 points higher as trade-war worries ease.” While it is hard to be a minion and be among the best people…. take our host’s advice along with a salt mine…

    3

  32. Monotonous – Thanks for the stats but what do you do besides keep records of wrongs?
    And as Pete points out would you turn down a large gift if you would make a desired speech to anyone who would listen? Jealousy of the Clintons’ speaking ability, education and political success is boring old hat. How are you going to vote? That’s my question. Are you one of the screw-ups at the polls in 2016? Will you recreate the fiasco in 2018 and 2020?
    On your answer depends if this reader is going to read your iconoclastic posts any more. Try to consider how important it is for you to oppose the GOP until they begin to care more about our country like much of our American citizenry does.
    What about the mega gifts politicians are receiving from the NRA?
    What about the mega gifts politicians are receiving for gobbledegook and the tax cuts?
    What about all the lemming-like ship-jumpers? How are the Orange Ogre and his left-hand Purity Priest doing? How are our country and its leaders perceived on the world stage?

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