To Sustain the Boom, Let's Avoid Harming Ourselves
The U.S. economy is firing on all cylinders. Unemployment is at an 18-year low, with employers adding jobs so fast there are more openings than unemployed Americans to fill them. Retail sales have been up nearly 5 percent year-over-year over the past three months and are expected to be up by 4 percent for the year. Consumer confidence reached its highest level in nearly two decades earlier this year. And with tax reform working, second-quarter gross domestic product is expected to have grown at a 3 percent annualized rate.
This is all great news. But if we want to sustain our momentum, we need to avoid self-inflicted policy mistakes that could derail the economy. Two of the biggest mistakes are the growing trade war with China and other countries coupled with long-standing gridlock on immigration reform.
There is no question the United States needs to address China’s abusive trade practices. And some say a strong economy could withstand the bumps that come with a trade war. But the gamble is too great – look what happened when the Smoot-Hawley Tariff Act was passed in an attempt to avoid the Great Depression. The truth is that now is a terrible time to risk a trade war with China or any of our trading partners. Nonetheless, the White House has already imposed tariffs on steel and aluminum from a number of countries, and is moving ahead with separate tariffs on $50 billion worth of other goods from China.
While the list of items affected has changed somewhat, a study conducted this spring found the China tariffs would lead to the net loss of 134,000 U.S. jobs and reduce GDP by nearly $3 billion. The administration initially said it was also considering tariffs on an additional $100 billion of Chinese products, and the same study said doing so would bring the impact to 455,000 lost jobs and a $49 billion reduction in GDP — four jobs lost for every job gained. Since then, the administration has threatened tariffs on $200 billion in imports — double the earlier figure — if China follows through on announced retaliation. This is clearly a path fraught with peril.
Rather than tariffs, we need a more effective solution, one that uses a variety of bilateral and multilateral mechanisms to foster economic stability and enduring reform. We should be working in a global coalition with our allies, rather than hitting them with tariffs that will only dissuade them from working with us.
A good starting point is pending bipartisan legislation that would require congressional approval of “Section 232” tariffs like those imposed on steel and aluminum in the name of supposed national security concerns. Ideally, Congress should restore its authority over trade; at the very least the administration needs to be in direct consultation with Congress on policies that could cause significant job losses in districts back home
Avoiding a trade war is just one part of the sensible, far-sighted policymaking needed to navigate the challenges ahead.
Another component is immigration reform. That’s because the flip side to historic job numbers is that employers are scrambling to find talent to fill jobs and fuel further growth.
As of the end of April, there were 6.7 million job openings, according to the Labor Department. But there were only 6.3 million unemployed Americans looking for work. That was the first time available jobs exceeded available workers since the government began keeping records on job openings in 2000.
Clearly, if businesses continue adding over 200,000 jobs a month the economy will soon run out of road. Businesses can’t grow if they can’t find enough workers to fill orders or provide services. And if there are more jobs available than workers, the argument that immigration takes jobs away from Americans is no longer valid.
If we want to stay on our current economic trajectory, we need comprehensive, practical immigration reform. Yes, we should secure our borders and safeguard our rule of law; but we should also provide legal avenues to allow both high-skilled and lower-skilled workers to enter our workforce. Such a commonsense reform would give employers the workers they need to take advantage of continued economic expansion. It should be a bipartisan issue, but a deep partisan divide continues to outweigh prudence.
Congress must act. A few simple, sensible policy changes could remove the most significant threats to continued prosperity, ending the threat of a trade war and loosening the labor market.
Our economy is thriving. But lawmakers must decide whether today is as good as it gets — or the gateway to sustained economic expansion that will take us even further. Let’s make sure American businesses and workers keep breaking records for years to come.