The Politex Report #1193


"That a tax shift away from work and toward consumption lowers the living standards of many people isn't a bug in the program. It's integral to closing the trade deficit.

A lower trade deficit necessarily means that the ratio of "stuff consumed in the United States" to "stuff made in the United States" must fall, meaning that America as a whole needs to be working more for less. Since modern advanced economies include many people who don't work, reducing their standard of living is the main means through which trade deficits can be closed.

This is how the various austerity programs in Europe are supposed to work. By cutting social services you push more people into the workforce, reducing consumption and lowering wages in a way that should create a more favorable balance of trade. It's also how currency devaluations work: you increase the competitiveness of your domestic industries at the expensive of lowering the real living standards of people who don't have jobs in tradable sectors.

And if tariffs did work, this is how they would work. Retirees, [for] example, would face higher prices for things they buy with no offsetting benefit in terms of improved labor market opportunities.

--How to use taxes to close the trade deficit: More doubt that protective tariffs work. Vox


What the coming Trump trade war will cause a lot of disruption. Today's world economy is built around "value chains" that spread across borders: your car or your smartphone contain components manufactured in many countries, then assembled or modified in many more. A trade war would force a drastic shortening of those chains, and quite a few U.S. manufacturing operations would end up being big losers, just as happened when global trade surged in the past.

An old joke tells of a motorist who runs over a pedestrian, then tries to fix the damage by backing up - and runs over the victim a second time. Well, the effects of the Trumpist trade war on U.S. workers will be a lot like that.

--Trump Trade War Comes, His Workers Suffer: He's the model for that age-old definition of insanity. Krugman


Austerity "the result of right-wing opportunism, exploiting instinctive popular concern about rising government debt in order to reduce the size of the state."

--Austerity: The result of right-wing order to reduce the size of the state.


Trump team floats a 10% tariff on imports - CNN


Trump Trade War Comes, His Workers Suffer: He's the model for that age-old definition of insanity. Krugman

The China Shock and the Trump Shock: Feeding blue-collar anger for the benefit of the 1%. Krugman

The China Shock: Labor-Market Adjustment.


Austerity Arithmetic Implies Decades of Working Class Sacrifice For Elite Benefit. Krugman

"The attempt to reduce debt by slashing spending actually raises the ratio of debt to GDP, not just in the short run, but indefinitely." Krugman


Trump recruits China hater and billionaire industrialist Ross /Navarro to help shape administration's trade, regulatory strategy WP

Donald Trump's Ross/Navarro trade team has based their analysis on a remarkably silly mistake: higher tariffs equal higher wages.

Trump's economic advisers Ross/Navarro see another conspiracy - far from the campaign trail: Other economists. WP


Trump's Wolves of Wall Street: Ross and Mnuchin, Trickle-Down Bankers. of the Swamp. NY


China warns of 'showdown' with US after Trump taps 'Death by China' Navarro as trade advisor

China says Trump's pick of hostile trade adviser Navarro is 'no laughing matter'


Trump being handed a great economy. What happens when it goes south? (The cycle continues: GOP will kill it again.)