Protectionism Without Tariffs and Trade Wars? Easy-Peasy

Looks like Trump's asinine trade war (not just with China, but also our own allies as well) has now begun in earnest.  And that does not bode well at all for our economy OR theirs, since no one really wins a trade war.  Smoot and Hawley must both be spinning in their graves right now, as any history buff will note.

You may remember that one of our previous posts outlines the TSAP's rather nuanced position on tariffs and trade, but we should also elaborate more on how it is possible to have an intelligent and rational kind of protectionism that does NOT depend on tariffs, quotas, or any other beggar-thy-neighbor policies.  For example, since our federal government is Monetarily Sovereign, they can easily afford to do the following to actually protect important domestic industries, as the ever-insightful Rodger Malcolm Mitchell notes:

• Federal government purchases from domestic suppliers, even at higher than import prices.
• Federal tax breaks for selected industries
• Direct federal cash infusions (i.e. direct subsidies) to the selected companies.

And that is true because, as he also notes, a Monetarily Sovereign government like ours literally has the unlimited ability to create and spend its own sovereign currency.  All federal government spending, without exception, involves the ad hoc creation of brand new dollars every time, arcane and archaic rules notwithstanding.  No need to bring the proverbial coals (i.e. tax/tariff dollars) to Newcastle only to effectively destroy them.  And unlike tariffs and quotas, these measures result in a positive-sum game rather than a zero or negative-sum game. 

Of course, all of these things are proverbial carrots, so what about the sticks, you ask?  Even then, most tariffs (and quotas) are far too blunt an instrument, are prone to backfiring, and should be narrowly tailored and used only as a last resort (i.e. to enforce specific trade and other agreements that are being blatantly flouted, and/or for strictly Pigouvian reasons), if even at all.  If outsourcing/offshoring of American jobs is the real concern, it would be far better to start by closing the ludicrous loopholes in the corporate tax code that encourage outsourcing/offshoring of such jobs in the first place.  The latter tactic is the basis for Bernie Sanders' Outsourcing Prevention Act, which would also end or claw back subsidies for American corporations that send jobs overseas.  And his other big idea, the Rebuild America Act, would create additional jobs rebuilding America's obsolete, neglected, and/or crumbling infrastructure as well.  

Note that Trump had clearly stolen, bastardized, and ran with several of Bernie's ideas while combining it all with empty rhetoric and beggar-thy-neighbor policies.  That is, when Trump's ideas are anything even close to coherent, as opposed to the usual incoherent verbal defecation that he is famous for.

But make no mistake.  Our nation's once-great manufacturing base has been hollowed out for decades, and much of it is currently rotting and rusting thanks to the neoliberal "free trade" scam brought to us by Reagan (and Thatcher in the UK) and embraced by both corporate parties ever since.  We ignore it at our own peril.  And the genuine political left would truly do well to abandon this highly toxic and corrosive ideology yesterday.

Our Position on Tariffs and Trade

With Donald Trump essentially starting a trade war with his latest import tariffs (25% on steel, 10% on aluminum), the TSAP must clarify our often ambiguous position on tariffs and trade.  Unlike both corporate political parties, we have always rejected the so-called "free trade" scam as the neoliberals typically define it (we aren't called the True Spirit of America Party for nothing, you know), but have nonetheless gone back and forth over the years on the question of just how protectionist we ought to be.

We believe that protectionism is indeed a razor-sharp, double-edged sword, and can backfire if done excessively or improperly, but if done wisely and properly (unlike Trump's bass-ackwards version) it can work well.  No one really wins a trade war, so trade policy must be based on more than beggar-thy-neighbor policies.  Thom Hartmann wrote an excellent article on how properly implemented tariffs can, in conjuction with subsidies and other important measures, contribute to the goal of protecting vital American industries and the jobs that go with them.

While we are not against tariffs, protective or otherwise, any tariffs should be carefully targeted to those essential goods and countries for which we have a significant trade deficit today.  Unlike Trump's rash and hamhanded version of protectionism that is prone to backfiring, tariffs should not be applied to raw materials that American industry uses to make finished goods, nor should they apply indiscriminately to unnecessarily include our allies as well.  They should apply primarily to situations where workers in other countries are grossly underpaid to make the good in question and/or environmental standards are more lax than ours.  And they should never be done in isolation, but rather other measures should be done along with it, such as subsidies for crucial domestic industries, "Buy American" clauses in government stimulus packages, and even more importantly, closing the ludicrous loopholes in the corporate tax code that encourage outsourcing and offshoring of American jobs.  The latter tactic is the basis for Bernie Sanders' Outsourcing Prevention Act, which would also end or claw back subsidies for American corporations that send jobs overseas.  Note that Bernie was not against tariffs, and even advocated for some level of protective tariffs in 2016 before Trump cribbed his idea, bastardized it, and successfully stole his thunder as a result.

Alternatively, or in addition to the above, the TSAP also supports the Buffett Plan.  In 2003, the legendary Warren Buffett came up with a simple and very clever idea to close America's yawning trade gap by issuing tradeable Import Certificates (IC) to American exporters equal to the dollar value of exports.  And anyone holding these tradeable certificates would be allowed to import the same dollar amount of these certificates, thus being a similar idea to cap-and-trade.  The inevitable result would be trade balance, as every dollar worth of imports would have to be offset by a dollar worth of exports.  While the downside is that prices will inevitably go up somewhat as a result, the upside is that jobs will return to America and workers' wages would also go up as well, so the net effect would be beneficial overall.  And if tariffs still exist and/or ICs are auctioned by the government, the revenue could be directly refunded to the people to further help offset the price hikes for any affected goods and services.

But make no mistake.  Our nation's once-great manufacturing base has been hollowed out for decades, and much of it is currently rotting and rusting thanks to the neoliberal "free trade" scam brought to us by Reagan (and Thatcher in the UK) and embraced by both corporate parties ever since.  We ignore it at our own peril.  And the left would do well to abandon this highly corrosive ideology yesterday.

Flush the TPP Now!

The latest news on the diabolical machinations masquerading as a "free trade" deal known as the Trans-Pacific Partnership (TPP) is that "fast-track" legislation has now been introduced to Congress.  We have previously noted how the TPP is a very, very bad deal for everyone but the elites and mega-corporations.  In a nutshell, it would basically remove all obstacles to complete corporate control over all of us.  From worker rights to environmental protection to food safety to Internet freedom and much more, We the People would lose a massive amount of power to our global corporate masters as a result of this Faustian bargain.  The fact that the TPP will most certainly destroy countless jobs in this country (like NAFTA did) is merely an afterthought compared to the rest of its pernicious effects upon our nation (and any other nations foolish enough to sign it).  And fast-tracking this deal would allow it to easily bypass the usual safeguards that would otherwise kill it before it even has a chance of passing.

So tell your representatives in Congress:  Do NOT allow it to be fast-tracked.  Flush the TPP now, before it's too late!

Just Say No to the TPP!

The latest so-called "free trade" agreement being proposed, known as the Trans-Pacific Partnership, is basically NAFTA on steroids.  We all know what NAFTA did to American jobs as well as workers in all three countries involved, and it wasn't good at all.  We can clearly expect such terrible trends to only accelerate should the TPP come to pass.  That alone is reason enough to vote "no", since we all should know better than to fall for something like this again. 

But what makes the TPP particularly scary is what it actually does to the rights of We the People.  At least under current law, from local communities all the way up to the federal government, there still remains some power that we have to regulate the behavior of American corporations.  We understand the need for checks and balances against corporate excesses, after learning the hard way time and again.  But the TPP would essentially subordinate any such power to the "international standards" that the corporations involved in the partnership have agreed to, and practically forbid any local standards that are stricter.  Thus, our government would be forced to relax any standards that could be considered a "trade barrier" as a result of the cleverly-written trade rules.  In fact, the bulk of the agreement deals more with these arcane rules rather than with traditional trade matters.  So it should be obvious what the TPP really is:  a corporate coup in disguise, that will allow corporations to run amok even more so that they do now.  And if we weren't a full-blown corporate plutocracy before, we sure will be after it comes to pass.

Just a few examples of some of the more shocking features of the TPP include:  a prohibition on financial transactions taxes (including the kind that the TSAP proposes), no limits allowed on the size of banks, increased monopoly pricing on Big Pharma's drugs, the worst parts of SOPA, increased fracking, and less regulation of public services.  And if these are the "features," we'd really hate to see what the "bugs" are!

The TSAP unequivocally condemns the Trans-Pacific Partnership and any attempt to pass it.  There is really nothing good that will come of this Faustian bargain, except for the elites and mega-corporations who are fighting like hell to get it passed.  And we must fight equally hard to ensure that it does NOT pass, ever.  The alternative is permanent corporate rule over all of us.