Many have a renewed interest in the shrinking of manufacturing and other traditional blue-collar jobs since Donald Trump won the 2016 presidential election. White working class voters in several large Midwestern states that Democrats had previously carrie

Mark WeisbrotThe Huffington Post, 11 janvier, 2017

There are an awful lot of things to really dislike about Donald Trump and his conduct as president to date, but that doesn’t mean everything his administration does is wrong. In particular, there is considerable truth to what he has said about trade costing a large number of good paying manufacturing jobs and hurting the living standards of the middle class.

Unfortunately, rather than acknowledging this point, the media show the same determination as global warming denialists in saying that trade cannot be a problem. We got two examples of this sort of denialism in recent days.

The first was a piece in the Washington Post criticizing Trump adviser Peter Navarro’s view of trade and the trade deficit. While Navarro makes many questionable arguments in pushing his views on trade, his point that the trade deficit can reduce growth and employment is absolutely correct.

Ever since the crash in 2008 the bulk of economics profession has agreed that we faced a situation of “secular stagnation,” where the economy faced a persistent shortfall of demand. In this context, anything that boosts demand, such as an increase in government spending, private consumption, or a reduction in the trade deficit, leads to more output and employment.

In this context, the piece’s comment, taken from Harvard University economics professor N. Gregory Mankiw, “that a smaller trade deficit means lower investment along with possibly higher interest rates and less consumption” is completely wrong. If the economy is operating below full employment, as it certainly has been through most of the period from 2008 then reducing the trade deficit certainly can be a net addition to growth. As Mankiw says, “even a freshman at the end of ec 10 knows that.”

In this context, Navarro’s claim that a lower trade deficit could bring in $1.74 trillion in tax revenue over the course of a decade cannot be so easily dismissed even though the Post tells us:

“Hooey, say economists across the political spectrum.”

The key question here is whether the economy is now at potential GDP and whether it is likely to be over the next decade, even with a trade deficit that is close to 3.0 percent of GDP ($538 billion in the most recent quarter). On this question, the Congressional Budget Office (CBO) might be on the side of Navarro.

Dean Baker
Truthout, February 20, 2017

Dean Baker
The Populist Buzz, February 18, 2017

Pedro da Costa tells us in Business Insider that the Republican tax proposal, with its border adjustment, is going to be really bad news because it will lead to a spike in inflation. The story is that the 20 percent tax imposed on imports will lead to a one-time jump in the core inflation rate of between 1.4 and 2.1 percentage points.

The implication is that the tax will be almost fully passed on to consumers. With imports at 15 percent of GDP, these numbers would be plausible.

While this is not an impossible scenario, it is worth thinking back to what Neil Irwin told us in the New York Times last week. He warned that the tax would lead to a 25 percent rise in the dollar, which could lead to a financial crisis as a result of the increase in the size of the dollar denominated debt held by developing countries. This is also a plausible scenario, although the prospect of a 25 percent increase in the value of the dollar seems a bit out of line, as I noted at the time.

Anyhow, it is worth stepping back for a moment and thinking this one through. Both Pedro da Costa and Neil Irwin are very good reporters. Neither is just making things up, but they are telling us completely opposite stories about the impact of the Republican tax proposal. In da Costa's version, the dollar moves little, with almost all the adjustment being in price. (It's worth noting that this would lead to a large reduction in the trade deficit.) In the Irwin version, the dollar fully adjusts leaving import prices essentially unchanged for people living in the United States.

My guess is that the Irwin version is closer to reality (not the crisis part), but the more fundamental point is that we actually have very little idea what will happen if this tax is implemented. It seems that many folks are prepared to shoot at this tax because they don't like the people pushing it.

I'm not terribly fond of them either, but this does seem like a serious proposal, which deserves a serious look. For the record, it did not originate with either Trump or Republicans in Congress, but rather Alan Auerbach, a Berkeley professor who I have always taken to be a serious economist. (I don't know his political leanings.)

Mark Weisbrot The Huffington Post México, 17 de febrero, 2017

Mark WeisbrotThe Huffington Post, 17 de febrero, 2017

Mark WeisbrotThe Hill, February 16, 2017

February 2017, Alan Barber and Cherrie Bucknor

Alexander MainNocaute, 8 de fevereiro, 2017

Millionaires are getting a late valentine from Social Security in 2017. The taxes that support the program — which provides retirement, disability, and survivor benefits to millions of Americans —only apply to the first $127,200 that someone makes at thei

February 15, 2017 (Prices Byte)