The Dems' 'Better Deal': A Bigger, Faster Version of Trump
The Trump Administration’s protectionist/mercantilist policies, which got underway with killing the Trans Pacific Partnership days after the inauguration, is open to criticism from a political party that understands economic policy and trade. Unfortunately, there doesn’t seem to be one.
If the past six months have proven anything, it is that populism is difficult to implement in office. But Democrats have taken the exact opposite lesson, introducing an economic platform that promises to do many of the things that Donald Trump claimed he would do, just better, faster and bigger. The Democrats call their plan A Better Deal, but truth-in-labeling should have required them to call it The Old Deal. It’s hard to see how the policies are any different from those the party’s congressional wing has largely advocated in the past – or from the notions that propelled Donald Trump to the White House. Both are based on a fundamental misconception of how an economy grows. Rather than try to explain what’s wrong with top-down economic management and protectionist policies, the Democrats are in essence boasting they have a much better brand of snake oil.
The target of The Better Deal is clear: Rust belt voters who knocked the party for a loop when they voted for Trump, delivering long-time blue states like Michigan and Wisconsin. When Senate Minority Leader Charles Schumer unveiled the trade component of the policy last week, he was flanked by four Democratic senators up for re-election next year in rust belt states. We got the message. But have the Democrats? Schumer criticized Trump for failing to move faster with his protectionist agenda, saying he has “talked a good game and done virtually nothing on trade but study it.” If only Schumer saying that made it true. Unfortunately, the Trump Administration has pursued a wide range of anti-trade measures, including inquiries into whether import restrictions on steel and aluminum are justified for national security reasons, a new agreement with Mexico that will drive up the price of sugar and every food product that contains sugar for American consumers, interfering in the marketplace and discouraging investment by trying to bully companies out of investing abroad. Of course the Administration’s anti-trade litany got its start with the cancelling of U.S. involvement in TPP, a move also called for by many Democrats – leaving the United States without the substantial benefits in the agreement and trying to get them back via NAFTA negotiations.
The Better Deal platform calls for a number of measures to protect and hoard jobs. An independent trade prosecutor would be appointed to combat unfair trade practices by other countries, undermining the multilateral WTO which the United States helped found and potentially sparking trade wars. A crackdown would be launched on foreign currency manipulation, a long-time peeve of Schumer who, like Trump, has accused China of driving down the yuan – even though in recent years it has concentrated on pushing it up. Companies would be taxed for outsourcing, undermining many U.S. companies and their American employees. And of course, the Democrats are promising to strengthen Buy America provisions in infrastructure projects, otherwise known as weakening infrastructural renewal.
But the Democratic proposal that got the most attention by far is the promise to create an “American Jobs Security Council” to review and potentially bar foreign purchases of U.S. companies – presumably including friendly takeovers – if they are deemed a major threat to American jobs. This would constitute an unprecedented form of interference with foreign investment, which is currently reviewed only for potential national security concerns. Would foreign investors be barred from purchasing a U.S. company if they planned to introduce efficiencies that eliminate jobs while enhancing competitiveness? That’s a great way to encourage investment – in Mexico and Canada. Would foreign companies be discouraged from transferring job-saving efficiencies, such as advanced robotics? That’s a great way to keep the U.S. economy back while others become more competitive.
The proposal to introduce a jobs test to foreign takeovers looks at corporate buyouts from the wrong end of the microscope. When a company is taken over, it isn’t taken away, it is purchased for a mutually agreed-upon price. The capital doesn’t disappear into the stratosphere, it is transferred to the U.S. company’s current shareholders, most of whom are American institutions and individuals – who generally know the value of their investment better than any government agency can hope to. The investors in turn are able to take the capital they receive and invest it – strengthening other U.S. companies and bolstering start-ups. If the Democrats really want better deals for America, they shouldn’t stand in the way of people who are best able to make them.
The Democrats spelled out their economic thinking when they launched The Better Deal, claiming “the best way to grow the economy is to grow and strengthen the middle class.” But isn’t it the other way around? Don’t we actually grow and strengthen the middle class by growing the economy? We’re not better off because government created jobs, or tried to cling to them, but because investors have created new goods and services that people want and need.
Instead of following the advice of P.T. Barnum, who once said that nobody ever lost a dollar underestimating the intelligence of the people, the Democrats should resist the urge to me-too hucksterism and embrace economic policies that would allow economic growth to flourish.
