A relatively small economic news item is worth noting given the amount of attention given by the president. In an article by the AP’s Martin Crutsinger entitled “US trade deficit surges in July to 12-year high,” the US trade deficit “surged in July to $63.6 billion, the highest levrl in 12 years…”
Per the article, “the Commerce department reported…the gap between what America buys and sells to foreigners, was 18.9% higher than the June deficit of $53.5 billion. It was the largest monthly deficit since July 2008 during the 2007 – 2009 recession.” The increase was “driven by a record 10.9% increase in imports” with a corresponding “8.1%” fall in exports.
Let that sink in. We are living in unique times with the pandemic. But, the whole world is exposed, not just the US. There are two points to be made.
First, the president has placed tariffs on major trading partners, who responded in kind. As economists have long noted, no one wins a trade war. Buyers just find less costly sources.
Second, America has so woefully handled the COVID-19 pandemic, the world is aghast. With around 4% of the world’s population, the US has around 22% of the global COVID-19 deaths. And, sadly the deaths continue. This truism runs in direct contrast to what the president touted at the RNC.
With other countries less impacted than we are, they can get closer to normal than we can. But, our folks can still buy from home. So, these numbers are not a surprise. As with any issue, the only way to solve a problem is to admit it exists.
There have been numerous stories on the rise in farm bankruptcies in 2018. Picking one from December 1, 2018 in the Lincoln Journal Star by Matt Olberdin called “As ag economy continues to struggle, farm bankruptcies rise,” through October, bankruptcies in a seven state region including and around Nebraska are up 45% compared to all of 2017.
Trade issues and low crop prices are two main issues driving down farm incomes. Coupled with rising interest rates and property taxes, and it is a tougher road for farmers. Per PBS Newshour, trade issues means tariffs getting in the way of the farmers’ markets.
These farmers use Chapter 12 bankruptcy that makes it easier to file and reorganize. This approach allows a higher debt limit as well. Per The Wall Street Journal, farm bankruptcy filings are the highest they have been in ten years.
As with the shutdown, real people are impacted by ill-conceived decisions by the President. Loyalty to a President becomes tough when you cannot feed your family and may lose your livelihood. With the tariffs blocking markets for the farmers’ products, the buyers must look elsewhere. These farmers will have to dump product or let it go to waste.
This is a key reason economist say trade wars cannot be won. More people lose than win on targeted tariffs. Yet, this does not seem to bother the man in the White House. That is troubling and sad for our country.
While the US President proceeds with tariffs, 11 countries sans the US just signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership that will reduce tariffs among theses countries. This is the infamous TPP that the President pulled out of early in his Presidency.
David Smick, an economic advisor to Presidents Ronald Reagan and Bill Clinton said both Presidents loved global trade. It should be noted that more jobs were created under these two Presidents with Clinton #1 at 22.9 million and Reagan at #3 at 16.1 million (FDR was second). While we need to be mindful of and help employees impacted by job loss, we need to recognize global trade is accretive to the US economy and creates more jobs. We do well when we all do well.
As one global economist said, tariffs and trade wars are how recessions start. So, in protecting some jobs, we will likely be impacting negatively a much greater number.
One of Elton John’s more boisterous songs is the title of this post. It is OK to stand up for the rights of others and yourself, but we need not resort to physical fighting. We must do so with our words that express our ideas. Words that are hurtful or demean are a verbal form of fighting.
I mention this as we must not follow the example of how the President chooses to communicate. We must be civil and listen to each other’s ideas and perspectives. Name calling is a shortcut when the speaker does not have a good argument. When I hear the President or anyone else name call, it makes me pay attention to the opposing side’s argument. The same holds true when he berates people.
The sad truth is people who act like this do so to be tough and bully others into doing things their way. Eventually it wears thin and others won’t want to be around people who act this way. It is one reason the White House has so much turnover. It is reported the latest departure is due to her being constantly berated by her boss. It came to a head when she admitted under oath she told “white lies” on his behalf.
Our issues are complex and deserve rational and reasoned debate. The causes are often multi-faceted and deserve holistic solutions. They do not need to be based on whims or inaccurate information. They do not need to be rashly done without vetting, especially when others need to be aware of and can plan for them. The rash decision by the President to impose tariffs is a good example because it caught the White House staff, members of Congress, our trading partners, investors and business leaders off guard.
This should not be how important decisions are made. We should rationally talk through them and look at their ramifications. We should invite input as complex issues need to be vetted. They need buy-in. This one was not. Tariffs may sound good, but they usually have devastating results. As one global economist said “this is how recessions start.”