Since as a winning candidate Donald Trump made a powerful symbol of the impending 1,000 lost jobs at Carrier Air Conditioning, it was inevitable that he would intervene in that business. It would have been politically foolish not to — and as the many savvy professionals whom he crushed in 2016 now should realize, Trump is nobody’s fool. So we learned this week that he has indeed used the many levers at an incoming president’s disposal to strong-arm/sweet-talk the company into saving those jobs for Americans, and denying them to Mexicans.
My first book was on the merits of the free market and free trade, but when I watched the footage of Carrier workers learning last year that their jobs were on the chopping block, I got teary-eyed myself and found my heart saying (despite my head) that Trump should indeed violate economic logic and engage in big government meddling, to “do something” for those workers — as Ronald Reagan once intervened against his principles to use a tariff to “save” Harley-Davidson from Japanese competitors.
Protectionism: Patriotic But Self-Defeating
There’s a strong rational case against protectionism — especially of the kind Trump engaged in here. The most benign form of protectionism, as free market economist Wilhelm Röpke explained, is a simple tariff. A small or medium tariff indeed distorts the market and imposes some inefficiency, but not necessarily more than any other form of tax. If imposed with advance notice and kept at predictable levels, businessmen and investors can simply figure it in to the cost of doing business — as they currently do the cost of environmental regulations.
What Trump did with Carrier is an order of magnitude worse: He singled out a particular company, and got the federal government down into the nuts and bolts of how it does business, threatening its corporate parent with lost federal contracts unless it made a specific decision — namely, avoid opening a factory in Mexico, and keep one open in the U.S. That is more than “leveling the playing field” against supposedly unfair foreign competition. It is picking winners and losers, like a umpire who has been bribed.
If the president gets in the business of directly trying to decide how every major manufacturing company in America makes such decisions, he is abandoning the free market altogether. Like Franklin Roosevelt, he is making himself effectively a board member of each of those companies. That starts a vicious cycle. Soon companies catch on that by threatening to move their factories abroad, they can provoke a presidential reaction — that pretty soon, the feds will move in and start offering tax breaks and other incentives, maybe extra federal contracts if they stay on American soil. Think of the squalid hog-slopping that happens when cities bid for the Olympics, or the bidding wars provoked by movie producers hungry for subsidies, and sports franchises who want new stadiums at taxpayer expense.
Making America Like the Post Office or Amtrak
All of this political meddling is profoundly wasteful, as the rotting hulks of Olympic complexes (and massive resulting deficits) testify all around the world. Such crony capitalism tends to benefit not productive and innovative companies, but those which are skilled at lobbying and greasing politicians’ palms. The more any business relies on federal help, the closer it becomes not to Southwest Airlines or Fedex, but to Amtrak and the Post Office. Is that really the way to make our companies profitable and high-paying? One of the most compelling reasons why the British voted for Brexit was to escape the micromanagement of the economy imposed by the wannabe federal government of the European Union.
Add up all those objections to protectionism, and then factor in how it raises the prices of ordinary goods for ordinary consumers, and you see why conservatives generally oppose it.
And yet, we need to look out for hard-pressed ordinary workers — the kind of people whose businesses don’t get bailed out by the U.S. federal government, as enormous Wall Street banks were after their reckless run of irresponsible investments in shaky mortgages, which crashed in 2008. Steve Bannon is right to observe that this bailout — conducted almost at gunpoint, under the threat of a “Great Depression” — was a corrupt transfer of wealth from the little guy to the “1 percenters,” which violated every tenet of free market economics and simple justice.
It is healthy that we feel some solidarity with blue collar workers simply because they’re fellow Americans — whose ancestors fought in our wars, and who still disproportionately enlist in our country’s armed services. (Long gone are the days when young men from elite schools routinely signed up for at least four years — though some Southerners still do.) The impulse to choose to “buy American” stems from the virtue of patriotism.
A Real Pro-Worker Agenda
We can be patriotic but smart. We can look out for U.S. workers without turning them into postal workers. (My dad was a mailman; as he told it, when two windows are open in a post office with a long line waiting, that means five workers sit idle, flipping through copies of Playboy they’ve stolen from the mail.) Here is a list of measures which a President Trump could take instead of Putin-style palm-greasing and browbeating to interfere with companies’ rational economic decisions. These steps would be populist in the positive sense, since they benefit the people.
Secure our country’s borders and workplaces by building a wall and making E-Verify mandatory for every business with more than five workers. Americans shouldn’t have to compete with unregulated, exploited laborers who can be threatened with deportation by their employers.
Drastically cut low-skill legal immigration, and the resettlement of refugees from distant countries. Some jobs are simply doomed to migrate overseas. But there’s no reason to fill the entry-level and low-skill jobs that can’t be outsourced with recent arrivals from other countries. Fixing immigration by itself would reduce most of the pressure on less-skilled American workers’ wages.
Cut our corporate tax rates, which are currently among the highest in the world. Stop granting tax breaks to individual companies (like Carrier) and grant them to … every company doing business in the U.S.
Greatly increase the per-child tax deduction for families, who are struggling under the regressive Social Security tax.
Promote school choice not by creating vouchers, which would give federal bureaucrats control over even private, Christian schools. Instead, create large and refundable tax credits which parents could use for tuition at any school — including home schools.
In one “grand bargain” piece of legislation, dismantle the labyrinth of regulations imposed after 2008 on banks to prevent them from failing, and use anti-trust laws to break up enormous banks that can threaten the whole economy with their reckless investments. Any bank that’s “too big to fail” is too big to exist — and the proliferation of such banks offers a perfect excuse for massive government meddling in that sector of the economy.
Reverse Richard Nixon’s massive blunder, and as George Gilder recommends, recouple U.S. currency to the price of gold. America’s post-war boom took place on a modified gold standard, and 1970s stagflation resulted when we abandoned it. Some link to an external commodity in limited supply in the real world would stop the Federal Reserve from massively inflating the money supply every time an incumbent president wanted to win an election — and sparking a mindless “boom” of wasteful investments in pointless dotcom startups and dodgy real estate boondoggles.
Each of these ideas is Constitutional, populist and economically sound. A Trump administration could stick up for blue-collar workers and middle-class families without descending intp cronyism and corporatism. It just takes imagination and political courage. (For more from the author of “What Donald Trump Could Really Do for America’s Working Class” please click HERE)