Tuesday, May 14, 2019

thoughts on Trump and trade deficits

Our manufacturing production and productivity are higher than past decades. But as a share of the labor force, manufacturing has dropped quite a bunch. This has been caused *much* more by reduced transaction costs-- transportation and esp. communication costs that have plummeted-- than slightly freer trade policies.

If you want to drop globalization back a bunch, we can try to go back to 1981 when phone calls were $4 per minute from Louisville to Indy-- and before we had the internet and email.

The trade imbalance (in goods and services) is misunderstood and grossly over-rated. And if one is concerned, it should be noted that much of our "investment surplus" (the flip side of a trade deficit in goods and services) is driven by high budget deficits-- a policy that Trump is aggressively pursuing! Bottom line: if you don't like the trade deficit / investment surplus combo, we need to get DC to quit borrowing so much money to finance its profligate ways. So, Trump is not really tackling it; he's pretending to tackle it and actually extending the so-called problem.

Trump is probably better on net than the yahoos the Dems will run. But I'm no fan of his tax *increases*-- on trade and on future generations through more debt today. I just wish we had a lot more "conservatives" today-- who join me in wanting limited govt in economic matters.


Post a Comment

Subscribe to Post Comments [Atom]

<< Home