Globalization

Support for Open Trade Remains Robust in Recent Polling. Trump’s Tariffs Still Remarkably Unpopular.

This is the fifth article in a series produced by NDN challenging Trump’s tariffs.

Given the conventional wisdom about how Trump won the Presidency in 2016, one would expect to find broad support for his protectionist trade policies and his tariffs in particular. A review of recent polling, however, suggests the American people are far more supportive of open trade policies and less supportive of tariffs than many would have expected. In fact, by some measures, Trump’s tariffs are among the least popular policy initiatives of his Presidency.

Using the Polling Report site as reference, let’s look at some data. The August NBC/WSJ poll asked “In general, do you think that free trade between the United States and foreign countries has helped the United States, has hurt the United States, or has not made much of a difference either way?” 50% said helped, only 23% said hurt. A July version of that poll asked about Trump’s tariffs — 25% said they would help the economy, 49% said hurt. An April Pew poll found similar numbers with 56% saying free trade was a good thing for the US and only 30% saying it was bad. A June Monmouth poll found 52% believing free trade agreements between the US and other countries were good for the US, only 14% disagreed. A March edition of the NBC/WSJ poll asked the question a slightly different way: “What do you think foreign trade means for America? Do you see foreign trade more as an opportunity for economic growth through increased U.S. exports, or a threat to the economy from foreign imports?” 66% said opportunity for growth, only 20% said threat.

Summer polls from Pew and Quinnipiac found slightly better but still net negative spreads for Trump on tariffs and free trade (39/50, 40/49). The new ABC/Washington Post poll out this week found a similar 41/50 split on Trump’s tariffs. In the Quinnipiac poll, however, a whopping 73% said a trade war would be bad for the US economy. Only 17% said good. A June Suffolk poll found only 35% support for the NAFTA renegotiation, and a June CBS poll found support for tariffs on Canada to be only 27% (62% disapprove). In a June CNN poll, 63% said it was better for the US to maintain relations with our close allies rather than impose tariffs. Only 25% said tariffs were better.

In polls which broke out the numbers by party, an overwhelming majority of Democrats come out in favor of free trade and against tariffs. Two examples. In the spring Pew poll, 67% of Democrats said free trade was a good thing, just 19% said bad. 63% opposed the tariffs, just 22% supported. In the new ABC/Washington Post poll, which found support of Trump’s tariffs to be at 41% support/50% opposed, Democrats opposed them 75% to 18%.

Recent state polls have similar findings. A series of Marist/NBC polls found support of the tariffs to be 23/42 in IL, 29/41 in MO, 28/46 in PA and 33/40 in Texas (links here and here). A recent Suffolk University poll (pp 22–23) of Wisconsin found support for the tariffs on China to be 39/47, and on “EU, Canada and Mexico” 31/57. That the popularity of a major Trump policy initiative is under 33% in states like Missouri, Pennsylvania and Texas is pretty remarkable.

While trade is obviously a complicated and tough issue, the idea that there is broad support in the US for protectionist policies, and tariffs in particular, just can’t be supported given this data. Trump has failed to persuade the American people to get behind his trade wars, and in fact, the Pew data suggests more people today are supporting the basic notion that free trade is good than a year ago. Early in his Presidency, Trump’s trade policies have generated more of a backlash than a groundswell of support.

As we’ve written elsewhere, Democrats would be smart to study this data and do some polling and market research of their own. Putting it all together suggests that an extended campaign by Democrats calling on Trump to rescind his tariffs — like the one NDN has been calling for — would not only be smart policy and good for the US economy, but smart politics too.

Update, 9/6/18 — new poll from Chicago Council found even higher levels of support for trade and NAFTA. A summary of its key findings:

  • The highest percentages ever registered in this survey (since 2004) say that trade is good for the US economy (82%), good for consumers like you (85%), and good for creating jobs in the U.S. (67%).
  • Support for NAFTA is also at its highest level yet (63%), and a majority (61%) supports US participation in the revised Pacific trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
  • Democrats express the most favorable views of these two trade agreements, while majorities of Independents now also support them. Although Republicans as a group tend to oppose them, a majority of non-Trump Republicans — those with only a somewhat favorable or an unfavorable view of the president — support them, demonstrating splits within the party faithful.
  • Seven in ten are concerned that a trade war with China will hurt their local economy; while just over half are concerned about the impact of a trade war with Mexico. In both cases, trade wars are a greater concern for Democrats.

Whatever Happens With Mexico, Trump’s Trade Policies Are Harmful And Need To Be More Aggressively Challenged

(This is the fourth essay in a series challenging Trump’s tariffs)

Trump’s trade policy has been centered on a simple trade-off for American workers – experience some hardship in the short-term in return for expanded opportunity in the long-term. So far, the President has kept his promise on the first of those items, as American farmers and manufacturers have been hit hard by retaliatory tariffs, increasingly costly production inputs, and weaker investment into the country. The promised long-term benefits, however, appear as elusive as ever. The three major trade negotiations with the EU, Canada/Mexico, and China have delivered little in the way of solid agreements, and actually serve as a retreat from the more ambitious trade liberalization of the TPP and TTIP talks. Furthermore, American workers are likely to permanently lose many of their foreign consumer bases if the trade policy remains in place, regardless of the results of the trade negotiations. While American workers are struggling today, they are likely to become internationally uncompetitive in the future if Congress doesn’t act to reject Trump’s trade policy.

Trade negotiations have produced little of consequence

Trump’s trade negotiations on three fronts have led to minimal, if any, steps towards increased trade liberalization and US access to foreign export markets. Of the three trade deals, the Trump administration has made the most “progress” in the NAFTA re-negotiations with Mexico and Canada, but even here a binding deal has not been made and the future of the preliminary agreement between Mexico and the US announced earlier this week seems in doubt. This is because Canada, despite the statements from the President, needs to ratify any deal for it to have a chance of success. First, Mexico has stated that they want Canadian involvement for any new deal to go through, and indeed, the optics of the current Mexican president (whose PRI party undoubtedly wants to remain politically competitive after he leaves office) bowing to Trump’s bullying while Canada resists would be politically devastating in a country heavily opposed to Trump. Second, a bilateral deal excluding Canada would almost certainly fail in Congress, as it would represent a significant imposition of tariffs on America’s closest ally and trade partner and would destroy millions of American jobs. As a result, the fact that Canada has not been part of the negotiations since July 1st, and would need to ratify all changes by this Friday in order to pass a deal before the December 1st inauguration of Mexico’s new president, puts a re-negotiation in doubt. Furthermore, significant differences on revisions to the trade deal still exist between Canada and the US, such as an American demand to loosen rules for enacting anti-dumping subsidies and strengthened intellectual property protections. This, combined with enormous Canadian public opposition to Trump, makes a quick concession by Canada this week unlikely, putting the entire negotiations at risk.

Even if a deal were to pass in the spirit of the Mexico-US preliminary deal, however, the long-term gains would be less than those of the TPP (which included Canada, Mexico, and the US) that Trump dismantled when he entered office. In terms of tariff liberalization, the TPP eliminated tariffs on 18,000 products worth $90 billion in US exports, whereas the Mexico-US deal does little to change tariff policy. Furthermore, the environmental, labor, and IP protections of the TPP all are stronger than those in this NAFTA deal. Indeed, the major change in the new deal from the original NAFTA agreement is a revision to the Rules of Origin provision, which under the new deal would require imported goods to have a greater amount of North American-produced content. Importantly, this provision isn’t liberalization at all, but instead acts to increase the cost of imported goods in an identical way as a tariff would. Furthermore, this provision would impose significant costs onto foreign producers, who would likely exit the NAFTA import rules and simply accept a 2.5% MFN import tariff instead. Finally, it is unclear how impactful this change in auto rules would even be for the US economy. One Bloomberg report argues that only 3 car models out of the 40 currently exported from Mexico to the US would be affected by the increase in North American content requirement, and less than one-third of cars exported from Mexico to the US would be affected by changes to wage requirements. What does this new deal, that has a questionable chance of being ratified in the first place, actually do then? It enacts liberalization that is far less ambitious than the TPP, and its major revision actually imposes additional barriers on foreign trade with the US. Further, some reports suggest that the US is requesting use of Section 232 (national security) tariffs on Mexican autos if they don’t meet the new requirements, rather than the existing 2.5% MFN rate. This arbitrary, illegal use of Presidential power would further weaken the global trading system, and our relations with Mexico, and must be knocked out as negotiations proceed.

Negotiations on NAFTA have been slow and likely counterproductive to trade liberalization, but those with the EU have been even more stagnant. After meeting with European Commission President Juncker on July 25, Trump was quick to announce that the EU had made major trade concessions and that a deal was imminent. Instead, it turned out that the EU had simply agreed to begin talks on tariff reduction, something that had already begun under the TTIP framework that Trump dismantled when he took office. Furthermore, the very next day, the EU clarified that agricultural protection would be off the table, stymieing a major goal of the negotiations. While discussions between the EU and US on trade have been intermittent since, talks have not begun and no European concessions have been made. In addition, the significant unpopularity of Trump in Europe has reduced the political capital available to European leaders to accept a deal with the US, further harming the likelihood of an agreement being enacted.

Finally, trade negotiations with China have been largely non-existent since the trade wars began. Instead, there has been a continuing tit-for-tat of increased US tariffs leading to larger Chinese retaliation over the past month, with Trump on August 2nd discussing the idea of increasing tariffs on $200 billion of Chinese goods to 25%. Furthermore, the Chinese yuan has depreciated almost 6% against the dollar in 2018 as a result of trade war fears and increasing interest rates in the US, making Chinese imports to the US even more competitive against US produced goods. For real negotiations to even begin, this escalation must stop, but both sides don’t seem willing to back down. Further, China is unlikely to take steps to either appreciate their currency or reduce domestic protection, because both steps would risk creating dangerous imbalances in the Chinese economy (for example, the depreciation of the yuan is largely a market-based reaction to tightening US interest rates rather than Chinese government intervention) and would demonstrate international political weakness unacceptable to the Chinese government.

More than two months after Trump implemented his tariffs as leverage to revise trade deals, each of his negotiations has barely begun, if at all. Indeed, for the EU, Canada, and Mexico, Trump’s negotiations have accomplished less ambitious liberalization than the TPP and TTIP that he dismantled upon coming into office. The promised long-term benefits, therefore, have failed to materialize for American farmers and manufacturers. Indeed, they face harmful long term headwinds that threaten their international competitiveness over the long term.

Damage to the economy will be long term

First, Trump’s trade policy has put the foreign consumer bases of American exporters at risk. Many US industries rely on exports to foreign markets as a key source of demand for their products. Over 36% of US agricultural revenue comes from exports, for example, and Canada, China, and Mexico are the top 3 export markets for American farmers, representing over $60 billion in US production. Maintaining access to these markets, therefore, is critical to the long term success of American workers. However, Trump’s tariffs have put this success at risk. When competing for foreign consumers, existing producers have large incumbent advantages, because the trading infrastructure is already in place and is costly to change even if other low-cost alternatives exist. The US was in a good position before the tariffs, therefore, because switching to other farmers (e.g. Canada or Brazil) had certain large start-up costs.

Trump’s trade actions have significantly changed this, however, because American supply has been cut off to their foreign consumer bases by the retaliatory tariffs, forcing foreign consumers to go to other producers and giving them incumbent advantages over American farmers. Furthermore, US trade policy has been fundamentally delegitimized, because the US President supported by Congress and the Republican Party have themselves to be willing to implement broad-based tariffs at will. As a result, foreign consumers aren’t willing to risk an export disruption from US tariffs in the future, and instead will go to other producers even if more expensive. As a result, many foreign consumers of US products have said that they will not return to US producers, even after the trade war has ended.

Second, the Trump’s trade policy threatens to significantly weaken the efficacy of the World Trade Organization, which has been a critical actor in encouraging global trade liberalization. Since Trump enacted tariffs on steel and aluminum imports, seven countries including the EU, Canada, Mexico, and India have filed challenges at the WTO to the tariffs. They claim that the US tariffs are being used as “industry safeguard restrictions”, which were ruled in 2002 (against the Bush steel tariffs) to be an illegal use of trade policy. The Trump administration has countered that the tariffs are justified under national security grounds, but this is a laughable justification that can be quickly disproved. Furthermore, the primary precedent for WTO-approved national security tariffs involved those by the EU, US, and Canada against Argentina during the Falklands War. While those involved restrictions against an authoritarian military junta at war with the UK, Trump’s tariffs are against liberal democracies closely allied with the US. As a result, it is likely that many of those challenges to Trump’s tariffs will succeed at the WTO, putting Trump on a collision course with that institution.

While Bush quickly backed down in the face of WTO sanction in 2002 and rescinded his steel tariffs, Trump is likely to not back down, and indeed creating an excuse to exit the WTO may have been a goal of these tariffs in the first place. This type of action would have grievous long-term consequences for the US economy. Firstly, the inability of the WTO to oppose US protectionism would significantly weaken its efficacy with other member states, who would use the precedent to themselves not reduce their trade barriers. The WTO has been extremely good for the US in that it has encouraged countries to reduce their import tariffs to US goods, among others, and indeed the reduction in China’s average import tariff from 32% in 1992 to 4% today was largely due to the conditions required for Chinese WTO entry. Furthermore, if the US refused to accept a WTO ruling, it would likely lead to the WTO-backed imposition of considerable retaliatory tariffs by all WTO members. Chinese retaliation has affected $34 billion in US exports so far and has already caused a significant decline in US farmer and manufacturer revenue. As a result, if each WTO member were to impose retaliation, US exports could fall by hundreds of billions of dollars, with severe impacts on the US economy.

Trump’s trade policy threatens the long-term competitiveness of US workers and the global trading system as a whole, in addition to significant short-term costs to the US economy. And what has been achieved in return – no meaningful trade agreements with Canada, Mexico, the EU, or China, let alone major liberalizing concessions. Indeed, if Trump had simply continued to negotiate the TPP and TTIP treaties that he dismantled when he took office, the US would have made more progress on trade liberalization, without any of the costs to US workers. Congress must act to reject this failed trade policy this fall, before the damage done to American farmers and manufacturers, as well as the global trading order, is made permanent.

Challenging Trump's Tariffs - An Ongoing Series

In a new series challenging Trump's tariffs, we argue that the President's trade policy is illegally justified, based upon reckless ignorance, and will cause significant harm to the US economy. Congress must step up and rescind the tariffs this fall.

Support for Open Trade Remains Robust in Recent Polling. Trump's Tariffs Still Remarkably Unpopular - 9/4/18 - In a new essay, Simon reviews a variety of recent polls which show broad public support for open trade policies and a rejection of Trump’s tariffs. This suggests that a campaign to rescind the President’s tariffs could not only be good policy, but good politics as well.

Whatever Happens With Mexico, Trump’s Trade Policies Are Harmful And Need To Be More Aggressively Challenged - 8/29/18 - In a detailed new analysis, NDN's Chris Taylor explains why Trump's trade policies are harming the US, and need to be more aggressively challenged.

Trump's Tariffs Will Do Lasting Economic Damage If Not Opposed - 8/14/18 - Trump's trade policy is enacting large costs onto average American workers that will be felt for generations. Congress must act to rescind these tariffs, before US manufacturers and farmers permanently lose out on much of global consumer demand. 

On Tariffs, Trump's Reckless Ignorance Can No Longer Go Unchallenged - 8/8/18 - To a shocking degree, Trump doesn't understand how trade and tariffs work - and they are illegal to boot. Congress should rescind them this fall.

Trump's Tariffs Are Illegal, And Should Be Rescinded - 8/3/18 - Trump’s trade war uses the false pretense of “national security” to sidestep the checks and balances of the legislative branch. Independent of their ideological position on trade, Congress must stand up to this creeping authoritarianism.

Related readings:

Democrats Need To Have A Big Conversation About Trade - 5/16/18 - Recent Pew polls show Democratic voters are overwhelmingly supportive of free trade. Simon takes a look at what this means for the Party.

Trump's Iran Deal Withdrawal is an Arrogant Rejection of the Postwar System America Built - 5/10/18 - In a new column, Simon says Congress must begin debating Trump’s sustained effort to undermine the post WWII order. 

An Enduring Legacy: The Democratic Party and Free and Open Trade - 1/21/14 - The global system created by Presidents FDR and Truman has done more to create opportunity, reduce poverty and advance democracy than perhaps any other policies in history. 

Trump’s Tariffs Will Do Lasting Economic Damage If Not Opposed

(This is the third essay in a series challenging Trump’s tariffs)

By: Chris Taylor

Much of Trump’s trade policy has been centered on his idea that trade wars are easy to win and will lead to quick re-negotiations of trade agreements. In his mind, therefore, the use of false justifications to sidestep Congressional oversight and a refusal to engage in real economic analysis would not be a problem, because the tariffs would be quickly and painlessly rescinded once the trade agreements were revised. Two months into the trade war, however, the opposite has come true. Our trading partners have not come to the table, but instead have imposed painful retaliatory tariffs on US industries already reeling from higher import prices. With no end in sight, Trump’s tariffs have done significant damage to the economic health of the country, and they threaten to permanently harm the competitiveness of American workers.

First, Trump’s tariffs have harmed industries that rely on imported products, predominately steel and aluminum, as inputs for their own products. Heavy manufacturing companies, such as equipment producers Caterpillar and John Deere, have reported a drop in earnings of almost 10% since the tariffs took effect, as steel is the industries’ largest raw material cost and Trump’s tariffs have increased its price by 25%. Small manufacturing businesses have felt the largest negative impact, because they don’t have the economies of scale to cushion a significant increase in costs. Lawn equipment producers in Indiana have been forced to cut 40% of their workers, nail manufacturers in Missouri have axed 15% of their workforce, and television-manufacturers in South Carolina have closed their plants. The construction industry, which employs over 7 million mostly blue collar workers, has in particular been harmed by Trump’s trade wars. Tariffs on steel and aluminum alone are estimated to cause the loss of 28,000 construction jobs as the raw materials and heavy equipment used in the construction process have become significantly more expensive. All told, the non-partisan Trade Partnership group estimates that Trump’s $22 billion in steel and aluminum tariffs alone will cause a loss of 179,000 jobs in manufacturing and services, far outpacing the estimated 33,000 job increase in steel and aluminum production.   

Second, Trump’s tariffs have led to the imposition of retaliatory tariffs on US exports by China, Canada, and the European Union. The agricultural industry, whose exports are heavily affected by Chinese demand, has been hit particularly hard, with the prices received by American farmers for soybeans falling over 16% to decade-long lows and prices for hogs and corn falling by 15%. In Iowa alone, farmers could lose $630 million as a result of losing export access to foreign markets if Trump’s tariffs stay in place. Trump himself has conceded that his tariffs are harming agriculture, which led him to provide a $12 billion bailout to struggling farmers. Even this significant amount (over $14 for every $100 of imports affected by the tariffs) isn’t enough to stop the damage from reciprocal tariffs, however. The US Chamber of Commerce estimates that bailouts to cover losses from retaliatory tariffs for all US industries would require an additional $27.2 billion in funding, of which $7.6 billion would affect automobile manufacturers and $9.6 billion other manufacturing industries. Rather than save US manufacturing, the trade wars are destroying jobs and creating bailout-dependent industries.

Finally, Trump’s tariffs are having a significant impact in an area often missed in the political discourse: business investment. For investors at home and abroad trying to invest their capital, the loss of export access for US industries and the extremely volatile policy environment in Washington has acted as a severe roadblock to investment in new factories and infrastructure. Net foreign direct investment (the level of investment coming into the country minus the level leaving the country) fell by 37% from the first quarter of 2017 to the first quarter of 2018. From January to May 2018, Chinese net investment in the US was actually negative $7.8 billion, meaning that more investment funds left the US than entered, in the midst of a 90% drop in Chinese investment into the US in 2018.

It is abundantly clear that Trump’s tariffs have been damaging for the US economy: fewer jobs, struggling companies that require government bailouts, and an exodus of investment spending. This lack of economic success mirrors the difficulty that the Trump administration has had in keeping its promises of an economic “revival” for the economy as a whole. In the 18 months since Trump became President, 300,000 fewer jobs were created than in President Obama’s last 18 months in office. Even worse, real average wages declined by 0.2% from July 2017 to July 2018, weakening Trump’s claim that his $1.9 trillion tax cut would help the middle class.

In particular, President Trump was elected to office on a message of creating economic opportunities for those left behind by this new age of globalization. By most metrics, however, he has failed to meaningfully improve the living standards of these “forgotten Americans”. In fact, from July 2017 to July 2018, 35.4% of counties that voted for Trump in 2016 actually lost jobs on net, compared to only 19.2% of counties that voted for Clinton. Trump’s tariffs have further harmed the economic opportunities of these people who most supported the president. In the Rust Belt, manufacturers from the auto to the household appliance industries have lost significant consumer bases and earnings, forcing them to lay off thousands of workers, while farmers across the Midwest are seeing their profit margins turn negative as prices for their crops plummet. The hardest hit groups haven’t been white-collar workers in coastal cities, but instead manufacturing, construction, and agricultural workers in states that voted for Trump.

Furthermore, the effects of the trade wars won’t go away anytime soon, even if the tariffs are rescinded. Domestic manufacturers and farmers have seen their export consumer bases eroded by cheaper foreign competition as a result of the tariffs (for example, Brazilian and Canadian soy bean exports to China that aren’t subject to reciprocal tariffs). These consumer bases take decades to build up, and their loss means that even when the tariffs are rescinded, US workers will have less access to foreign export markets for years to come, if at all. Indeed, Chinese officials have begun to say that American agricultural exports will be fully replaced by other countries’ exports, even after the tariffs are rescinded.

The first and second essays in this series argued that Trump’s tariffs were illegal and based upon utter ignorance by the President. Beyond that, the tariffs are enacting large costs onto average American workers, particularly those that were promised better economic opportunities by Trump during the 2016 election.  Congress must act to rescind these tariffs, before US manufacturers and farmers permanently lose out on the 86% of global demand that is outside of the United States.

A Department of Jobs, Skills and Economic Development

This essay was originally published on Medium.

Much of the structure of the government of the United States was designed and built in the middle part of the last century. The creation of the Department of Homeland Security in the aftermath of 9/11 was the last big structural change. In a time of rising global competition and technological change, it is time to fashion a new government department focused solely on creating good jobs for Americans, and helping American succeed in a new world of work that requires very different skills. Let’s call it the Department of Jobs, Skills and Economic Development.

It is remarkable to consider that the executive branch of our government has no one person or department truly responsible for creating good jobs for the American people, and ensuring our workers have the skills to succeed in a changing world. These responsibilities are scattered throughout the federal government, residing in the Departments of Commerce, Labor, Treasury, Housing and Urban Development, Education and Agriculture, the United States Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, the Small Business Administration and throughout the White House itself. A new Department of Jobs, Skills and Economic Development would consolidate these many disparate activities and programs in a single place, allowing for greater efficiency but also far greater strategic focus and coordination. The process of building the Department would force a debate about all the programs it would inherit, and whether they are working or can be improved. Redundant or under-performing programs could be eliminated, freeing up resources for higher priority projects. It would be a powerful department, but also should by design be a modern and skinny one — lean and mean.

 

Congress and the White House would ultimately decide what would end up in this new department and what would remain in other places, but certainly one could imagine some of these other departments and agencies getting subsumed entirely into this new mission. This new department (DJSED) would work closely with the economic development agencies and other agencies of the states, and learn from their best practices. Policymakers can also study how other nations tackle these challenges, and draw from their experience. The balkanization of these responsibilities in Congress would also end, and allow far greater strategic focus from our elected representatives.

One of the things this new Department can focus on is what I call a “safety net of skills and knowledge.” In the industrial age we created a safety net for our people, one that included health care and income support. It is also now time we committed to create a true system of lifetime learning, one that anticipates our citizens will need the acquisition of new skills to become routine and persistent throughout their lives. There are many ways this new 21st century safety net can get constructed and built, many pieces of it already exist, and it will evolve and mature over time. But it is something that our emerging Millennial politicians should put their minds to and help build over the coming decades. Like the Department itself, this new digital age safety net would be about taking things that are already getting done and organizing them in a way that makes them far more focused and effective.

The Department could also expand the small Economic Development Administration currently in the Commerce Department, and give it a more expansive mission that could even include national infrastructure and transportation planning and travel, tourism and trade promotion. It would work closely with the fifty states, supporting their ongoing locally driven initiatives. All fifty states have an economic development agency focused on creating growth and good jobs for their communities for a reason. It works. It is long past time the federal government and the nation had one too.

Perhaps the most important reason to create this new Department is that in my mind the only way we can respond to both the enormity of the task in front of us, and its urgency. We simply have to do more than we are doing today to help the American people succeed. And whatever we do needs to be dramatic, something real and tangible, not something that is nibbling around the edges of what is perhaps the most important challenge America faces today. We need to let the American people know we hear them, and are changing the way we do business here in Washington to make their lives better. There may be other ways of attacking this problem but creating a super-sized but lean and mean Department would be an important first step that will give us a chance of coming up with approaches commensurate to the size of the problem itself.

And the problem is real. With billions of people today contributing to the advancement of knowledge every day, our already fast world will continue to speed up. Skills and knowledge acquired in high and school and college will be far more likely to become obsolete in one’s lifetime in the 21st century, and we need ways to make continuous learning more than a slogan. Additionally, with nations across the world rising and growing modern companies, global competition for our businesses and workers is likely to get more far more intense. The time when America stood like a conquering giant above the economies of the world is long in the past, and a new age of competition and progress is with us. Our government must help its own institutions become as fast and innovative as the global economy itself, and to do far more to effectively support good, deserving Americans who work hard and play by the rules and expect more from all of us.

Perhaps this project is the Kennedy Moonshot of our time, something we know we have to do but are not quite sure how to get there. Creating a new Department with a new mission and lots of capacity and focus is a good way to start. Perhaps it is old Washington think — a reorganization! — but am open to better ideas on how we can get this done in the years ahead. Whatever you think let the debate begin. The good people of the United States deserve more from all of us in Washington as they look to compete and prosper in a far more challenging 21st century global economy.

Backgrounder: Budgets, Health Care and Trump's Great Betrayal

With attention returning to budgets and the US economy, NDN has assembled some of our work on these matters over the past few months.  We hope you find these analyses helpful.  

Trump's Tax Plan is Aimed at the 2018 and 2020 Elections, Not U.S. Competitiveness, Rob Shapiro, NDN.org, 4/26/17. Trump's claims that damage from higher deficits will be minor compared to the benefits for US competitiveness, economic efficiency, and tax fairness are nonsense, and the real agenda here is the 2018 and 2020 elections.

Release: Still no 2017 budget from GOP, or proposal from White House, Simon Rosenberg, NDN.org, 4/26/17. While the President’s revenue outline today is a late but welcome development, it cannot be given serious consideration outside the eventual full budget proposal that is usually submitted to Congress in February.

Trump puts foreign investors first by supporting the Republican tax plan, Rob Shapiro, The Hill, 3/28/17. Rob weighs in on the very real problems of the House GOP's proposed border adjustment tax.  

Trump's Great Betrayal, Simon Rosenberg, NDN.org, 3/23/17. President Trump is pursuing policies deeply at odds w/his pledge to help every day Americans. It should become known as "The Great Betrayal."

Column: 5 Ways Trump Could Stop Obama's Expansion, Simon Rosenberg, US News & World Report, 3/23/17. There just isn't a lot of justification for the market's optimism that Trump's economic policies - Maralagonomics - will keep the Obama expansion going.

Memo: In A New Global Age, Democrats Have Been Far Better for the US Economy, Deficits, and Incomes, Chris Murphy and Simon Rosenberg, NDN.org, 2/21/17. In a new memo NDN finds that over the past generation of American politics Democrats have been far better for the economy, deficits and incomes. 

Steve Bannon, Meet Russell Pearce, Simon Rosenberg, US News & World Report, 2/21/17. If history is a guide, Trump's efforts to institutionalize xenophobia and ramp up immigration enforcement could disrupt businesses, hurt the US economy and tear apart families. The blowback could be significant and cause lasting damage to his Presidency.

If you would like to read more of Rob's other recent work, be sure to review our backgrounder, "Rob Shapiro on the Economy."

Trump’s Tax Plan Is Aimed At the 2018 and 2020 Elections, Not U.S. Competitiveness

President Trump wants to cut the tax rate for all American businesses to 15 percent, and damn the deficit. If you believe him, any damage from higher deficits will be minor compared to the benefits for US competitiveness, economic efficiency, and tax fairness. The truth is, those claims are nonsense; and the real agenda here is the 2018 and 2020 elections. Without substantial new stimulus, the GOP will likely face voters in 2018 with a very weak economy – and tax cuts, especially for business, are the only form of stimulus most Republicans will tolerate. Moreover, if everything falls into place, just right, deep tax cuts for businesses could spur enough additional capital spending to help Trump survive the 2020 election.

Let’s review the economic case for major tax relief for American companies. It’s undeniable that the current corporate tax is inefficient – but does it actually make U.S. businesses less competitive? The truth is, there’s no evidence of any such effects. In fact, the post-tax returns on business investments are higher in the United States than in any advanced country except Australia, and the productivity of businesses is also higher here than in any advanced country except Norway and Luxembourg.

The critics are right that the 35 percent marginal tax rate on corporate profits is higher than in most countries. But as the data on comparative post-tax returns suggest, that marginal tax rate has less impact on investment and jobs than the “effective tax rate,” which is the actual percentage of net profits that businesses pay. On that score, the GAO reports that U.S. businesses pay an average effective tax rate of just 14 percent, which tells us that U.S. businesses get to use special provisions that protect 60 percent of their profits from tax (14 percent = 40 percent of 35 percent).

Tax experts are certainly correct that a corporate tax plan that closed special provisions and used the additional revenues to lower the 35 percent tax rate would make the overall economy a little more efficient. But lowering the rate alone while leaving most of those provisions in place would have almost no impact on the economy’s efficiency – and the political point of Trump’s plan depends on not paying to lower the tax rate.

Finally, would a 15 percent tax rate on hundreds of billions of dollars in business profits help most Americans, as the White House insists, since 52 percent of us own stock in U.S. corporations directly or through mutual funds? The data show that most shareholders would gain very little, because with 91 percent of all U.S. stock held by the top 10 percent, most shareholders own very little stock.

Moreover, the proposed 15 percent tax rate would cover not only public corporations but also all privately-held businesses whose profits are currently taxed at the personal tax rate of their owners. So, Trump’s plan would slash taxes not only for public corporations from Goldman Sachs to McDonald’s, but also for every partnership of doctors or lawyers, every hedge fund and private equity fund, and every huge family business from Koch Industries and Bechtel, to the Trump Organization.

There is no doubt that the President’s tax plan would provide enormous windfalls for the richest people in the country. Beyond that, it may or may not sustain growth through the next two elections, since even the best conservative economists commonly overstate the benefits of cutting tax rates. But the truth is, there aren’t many other options that a Republican Congress would accept.

This post was originally published on Dr. Shapiro's blog.

 

Memo: In A New Global Age, Democrats Have Been Far Better for the US Economy, Deficits and Incomes (Updated)

Overview – With the debate in Washington soon to turn to budget and economic matters, we have updated and are releasing a memo we first produced in 2016. This short memo looks at the economic performance of the two American political parties when in the White House since the end of the Cold War.

We use 1989 as a starting point for comparison because when it comes to the American and global economies, the collapse of Communism and the non-aligned movement ushered in a new, truly global economic era, one very different from the one that came before. It is thus fair to see how the two parties have adapted to the enormous changes this new era has offered, and whether their policies have helped America prosper or struggle as we and the world changed.

As you will see from the following analysis, the contrast between the performance of the Democrats and Republicans in this new economic era is stark: 2 GOP Presidencies brought recessions, job loss, higher annual deficits, and struggle for workers; the 2 Democratic Presidencies brought recovery and growth, job and income gains, and lower annual deficits.

Based on these findings it is fair to assert that over the past generation the Democratic Party has been far more effective at crafting effective responses to a new economic era than the Republican Party. This case is bolstered, of course, when recalling the GOP’s spirited predictions of economic calamity when opposing both the 1993 Clinton economic plan and budget and the 2009/2010 Obama stimulus and “job-killing” Affordable Care Act. The Republicans have gotten it wrong now in four consecutive Presidencies.

While it will not be the subject of this short memo, our findings raise questions about whether the characterizations of the US economy as one not producing income and wage gains either over 40 years or over the past 15 years are accurate. It would appear that a more accurate description of the US economy in recent years is that with smart policies, Americans can prosper even in a more challenging and competitive global age.

We hope that commentators and policy makers keep the findings of this memo in mind as the Republicans roll out their budget and economic plans in the coming weeks. The Party’s track record on economic matters in this new age of globalization is not something that should inspire confidence in voters looking for plans that create jobs, raise wages and lower the annual deficit. It has been the other Party that has done that.

Our Post-Brexit, Post-Comey Politics

“Monday Musings” is a new column looking at the 2016 elections published most Mondays. You can find previous editions here.

2016 Overview – Yesterday, we saw several different countervailing dynamics at work which will do much to shape the Presidential race in the coming weeks. First, the very rough Comey press conference. While it appears now that no legal action will be taken against Secretary Clinton, the findings of the FBI investigation have created new and significant challenges for her campaign. You can find good summaries of these new challenges here and here. Second, we saw President Obama on the stump for the first time, marking another step forward in the Democratic Party’s coming together around their new nominee after a contentious primary process. Third, Donald Trump continues to say and do outrageous and truly crazy things (more praise for murderous dictators!) that will make it very hard for the American people (and it appears many Republicans) to ever vote for him.

The FBI’s report on Clinton’s emails has injected a new dynamic into the race at a consequential time. Over the next three weeks the two candidates will pick their Vice Presidential candidate and hold their conventions. As we enter into this intense period of politics in the US, let’s look at where things stand. Clinton has lost a little ground in our favored polling aggregate, dropping from a 6.8 to 5 point lead. Most of the polls taken in the past week have the race at 4-6 points, with a few showing much wider leads. Possible her post-nomination bump has begun to dissipate, as Trump’s did. To me this is still more noise than signal, and she and the Democrats enter this new period in far better shape than Trump and the Rs in overall image, head to head polling, party unity, fundraising and organization. In my mind it remains a year of opportunity for Democrats.

It is significant that the Clinton campaign choose North Carolina as the first state for a joint event with President Obama. Obama didn’t win North Carolina in 2012, and it isn’t necessary for Clinton in 2016. But it is a sign that Democrats view this year as one where they can expand the map, and not just win the Presidency but make significant gains in Congress to help Sec. Clinton govern next year.

Importantly, for discussions of our politics post-Brexit, there just isn’t a lot of evidence that the American electorate is as rebellious, or as angry at globalization or at Democrats/Obama as some say. We went in depth on some of this data last week, finding broad satisfaction with Obama, Democrats and current economic policies that have brought lower deficits while offering many Americans new jobs, better health insurance and rising incomes. This week we add to that data Pew’s recent look at American attitudes toward trade. Asking simply if trade is a good or bad thing, Americans choose “good” by 51% to 39%. Democrats choose “good” by 60% to 30%, while Rs choose “bad” 52% to 40%. 18-29 year olds were the most pro trade age cohort, choosing “good” 67% to 25%. Hispanics were the most pro trade demographic, with 72% saying trade was “good.” Importantly for the coming debate inside the Democratic Party, Bernie Sanders supporters said trade was good by 55% to 38%. This stat, coupled with young people’s significant support of trade, suggest there are limits to the power of Sanders’s anti-globalization/trade argument even among his own supporters; and that it was other issues other than this one that drove people to him in the primaries.

Brexit Raises the Stakes In The US Election – Last week Donald Trump gave an extraordinary speech, one which has no real analog in recent American political history. In his speech Trump essentially called for the break-up of the West as a political idea, suggesting, rather remarkably, that US policies over the past several generations had made America weaker and poorer. During his campaign, Trump has now gone on the record for ripping up the global trade system, praising Brexit, ending the North American project, pulling out of the Paris climate accords, questioning the propriety of NATO, abandoning America’s historic commitment to religious liberty, forcibly removing 11m people from the US and aggressive global censorship of the Internet. Given current trends in Europe, Trump’s election here in the US could signal a radical break from a body of thought that has animated the US and Europe since the end of World War II.

It is important to note that leaders like Trump and the UK’s Nigel Farage are not offering a corrective to the modern West, they are only offering its dissolution with no imagined alternative to replace it. The Isolationist/Nationalist vision advanced by Trump last week had remarkable echoes of language from the 1930s, an era where rising tariffs and reactionary politics brought us a global depression and history’s most horrible war. The current global system criticized by Trump (and far too often by Bernie Sanders) was designed in response to the economic and human wreckage in a time when Trumpian style policies prevailed.

And while not perfect, the Four Freedoms-inspired Post WW II era has brought about perhaps the greatest period of productivity and innovation in all of human history, with rising standards of living across the world; dramatic advancements in life expectancy, literacy, and overall health; far less grievous conflict and far more living under democracies; and of course historic technological advances that altered and improved the human condition in ways unimaginable in the mid 20th century.

Whatever issues Hillary Clinton thought she would debating this fall, it is now clear that the entire Western post WW II project is on the ballot here in the US this year. A win for Trump could deal this project a potentially lethal blow. A win for Clinton will do much to slow nationalism’s progress in the West, and help preserve the global system we have today. History is calling Hillary Clinton now, and has given her a truly vital mission – the preservation of a global system, while not perfect, that has done so much for so many while advancing American interests along the way.

In this campaign, Democrats, as current stewards of the American political party who imagined and built this global system, have to raise their sights a bit higher than they have them today. We need to far more purposefully take on the responsibility of preserving the post WW II project for future generations. The construction of this global system over the past 70 years has arguably been the Democratic Party’s greatest achievement in its proud history. But history is calling us too, and we need to take the steps here at home and abroad that prevents the extraordinary work of previous generations to crumble on our watch.

I will talk a bit more about what Democrats should be doing to modernize and reform our global system, and companion steps we should be taking at home to bring the American people along in coming columns. But I end with a link to the very first paper this organization published back in the spring of 2005, “Meeting the Challenges of the 21st Century: Crafting A Better CAFTA,” which argued then that after years of no wage and income growth in the US policy makers should only expect continued support for globalization among the American people if their own personal economic conditions improved. The core of our work over these past 11 years has been an extended effort to both preserve the openness characteristic of the West today, while advancing policies that would make sure more Americans prospered in a new and different economic age. While things are undeniable better for the American people than they were eight years ago, we still have a lot of work to do.

Update: In a new, very strong piece, Frank Foer offers his take Putin and Trump and the end of the West. 

Report: Income Growth/Decline Under Recent U.S. Presidents

The condition of most American households, and of the country as a whole, is set largely by people’s income – both the levels, and the income progress that people make as they age from their 20’s to their 30’s, 40’s and 50’s.  For generations, most Americans have believed that if they work hard, they’ll have real opportunities to earn steadily rising incomes.  Such broad based upward mobility is one of the reasons that Americans have been generally optimistic and willing to extend opportunity to successive minority groups.  But is that the way America really works?  One common view argues that wages have stagnated and most Americans have made, at best, modest income progress since the 1970s.  This view is based on a time series of a single statistic, “aggregate median household income.”  In fact, the true picture is more complex.

Today, the Brookings Institution issues a new report which I worked on for the past year.  Using new Census Bureau data, I analyze household incomes by age cohort – say, people age 25 in 1980 or in 1990 –and then follow those age cohorts as they age.  The results revise what we thought we knew about incomes.  The data show that broad, strong income gains were hallmarks of the 1980s and 1990s.  Moreover, the steady progress of the Reagan and Clinton years covered just about everybody -- households headed by men and by women; by whites, blacks and Hispanics; and by those with college degrees, high school diplomas, and no degrees at all.  This broad upward mobility, however, simply stopped under Bush and has not recovered under Obama. Moreover, this dramatic turnaround, including declining incomes from 2002 to 2013 for a majority of American households, affects every demographic group.

I’ll be writing more about what’s really happened to income, why, and what we can do about in coming weeks and months.  If you want to read the report for yourself, click here.

This post was originally published on Dr. Shapiro's blog.

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