President Trump's trade program — if we can even call his semi-random set of tariffs that — is causing serious problems around the country. Farmers in particular are being hit hard, and so the administration has announced a $12 billion farmer bailout package. Essentially, he's trying to buy their votes.
Trump's trade war is absolutely moronic. Yet his political response is worth examining, especially for Democrats. Starting a fight, losing that fight, and then lamely attempting to patch up the damage is stupid. But buying votes with more intelligent handouts and goodies is a perfectly legitimate model of governance, and one well worth emulating.
So what's going on with trade? Tariffs plus increasing demand have created a sudden 40 percent rise in the price of steel, while delivery premiums for aluminum have doubled, and that in turn is wreaking havoc on many domestic manufacturers. GM, Harley-Davidson, Whirlpool, and several other companies are straining to handle the sudden increase in operating costs.
Meanwhile, retaliatory Chinese tariffs — targeted directly at Trump-supporting farm counties — have led to a price collapse and buildup of unsold inventories in several agricultural products, particularly pork and sorghum. Thus the farmer bailout.
All this is giving many liberal economists the vapors. Not only has Trump violated the sacred principles of free trade, now he's treading on the free market by handing out inefficient subsidies to farmers! Paul Samuelson must be spinning in his grave like a jet turbine. What governments should do is subordinate their societies to the world market, and if that causes some hardship here and there, then that's just the price of progress.
That sort of attitude has been internalized by many liberal policymakers. Among the Democratic Party old guard, governing responsibly is all about making "hard choices" and forcing the citizenry to drink their medicine (by cutting the budget deficit, for example). "The standard of living of the average American has to decline," as then-Fed Chair Paul Volcker said when he raised interest rates to economy-strangling heights to bring down inflation.
And sure, sometimes nations really do get stuck in situations (like wars) that do require broad sacrifice. But more often, they have wide latitude to hand out goodies and benefits — and more so as time passes and economic growth keeps trundling along. That has never been more true of the United States. This country not only has enormous capacity to fund new benefits by taxing the rich — who have gobbled up the vast majority of income growth over the last several decades — or cutting the bloated, corruption-riddled military budget, but also a chronic shortage of aggregate demand, meaning new investment programs can be had essentially for free.
Indeed, the way the free trade agenda has been sold is that by making these supposed tough choices, it would lead to greater overall wealth and prosperity. As Zach Carter argues, this has turned out to be not true at all. Neoliberal free trade did not lead to some surge of growth — instead it declined relative to the Bretton-Woods days. And when foreign competition did devastate America's industrial employment, the losers were not compensated. Instead, welfare was cut, and whole cities were left to rot.
However, this sales pitch reflects the obvious fact that the entire point of having a more productive economy is so the citizenry can lead better, healthier lives. That it's not true with respect to neoliberalism doesn't mean that it's not a good idea in general.
So what to do? There are plenty of very straightforward programs that would definitely assist the broad population: income supports like boosting Social Security, social insurance like Medicare for All or paid leave for parents, or wage-boosting policy like sectoral bargaining or minimum wage increases. Trade policy is more complicated, but is also badly in need of an overhaul both to prevent race-to-the-bottom offshoring and to address the unsustainable situation of the U.S. being the world's importer of last resort.
American policymakers must ditch the toxic idea that inflicting pain on their constituents is the appropriate model of wise leadership. On the contrary, lack of goodies is at the root of devastating social problems. America's maternal mortality rate, for instance, was recently found to have increased sharply between 1990 and 2015, from 16.9 deaths per 100,000 live births to 26.4 — in comparison to European countries with a proper welfare state, where rates had fallen across the board. (The U.S rate is now nearly seven times that of Finland.) Simple, universal benefits would be broadly popular — especially compared to fiddly penny-ante schemes like the ObamaCare exchanges — and be responsible governance as well.
Americans are crying out for handouts. Let's give them some.