Sunday, August 8, 2010

Democrats Give Us a Very Good Reason to Doubt Them on Trade

Last week the Washington Post ran a front page story on the Democratic Party's big strategy for winning (or, more accurately, losing less badly) in this November's midterm elections, and you'll never guess the focal point of their big plan.  Yep, rampant protectionism:
President Obama and congressional Democrats -- out of options for another quick shot of stimulus spending to revive the sluggish economy -- are shifting toward a longer-term strategy that promises to tackle persistently high unemployment by engineering a renaissance in American manufacturing.

That approach, heralded by Obama last week in Detroit and sketched out in a memo to House Democrats as they headed home for the August break, is still evolving and so far focuses primarily on raising taxes on multinational corporations that Democrats accuse of shipping jobs overseas.
Sigh.  Now, I've repeatedly discussed just how wrongheaded this plan is, and several good folks stepped up last week to do the same.  And for those of you who don't remember, here's a good summary from a recent blog post of mine:
As I've noted here (and here and here and here), this standard trope is complete drivel for (at least) four basic reasons: (i) the idea that hordes of American jobs are being outsourced to Mexico or China or India is a complete economic fiction; (ii) those evil "tax breaks" for US multinational corporations actually increase American jobs; (iii) raising these taxes on American companies would be devastating for the US economy (great WSJ op-ed here on this point); and (iv) the candidates' proposed "solution" - ending tax breaks for companies that ship jobs overseas - is utterly unworkable.  In sum: this is hackneyed political demagoguery and little more.
And as Hot Air's Ed Morrissey helpfully reminds us, the Democrats' "strategy" is hardly novel:
Obama and the Democrats plan to take a page out of John Kerry’s playbook from 2004. Remember “Benedict Arnold CEOs,” the companies that moved out of US jurisdiction to save money on taxes and regulation? Even though Kerry did much the same thing with his yacht (and took money from the very same CEOs in that election), he railed against the companies when it was the taxes and regulation that created the situation.
So given that these plans are recycled nonsense that I (and many others) have repeatedly dismantled, why am I talking about it now?  Why not just ignore the story and move on?  Well, as the Post story makes clear, even Democrats themselves are now acknowledging that their plan is, well, hackneyed political demagoguery and nothing more:
Republicans mock the endeavor, dubbed "Make It in America," as blatantly political, designed primarily to save the jobs of endangered Rust Belt Democrats whose races could determine the balance of power in the November congressional elections. Senior Democrats acknowledge that the strategy emerged after the issue of off-shoring jobs figured prominently in a Pennsylvania special election earlier this year and a recent poll.

Some independent analysts are also skeptical. U.S. manufacturing jobs have been disappearing since 1979, in part because of the heightened productivity of American workers but also because of cheaper labor abroad. During the past decade, the sector lost a third of its workers, falling to 11.7 million last year from 17.3 million people in 1999, according to the most recent figures from the Bureau of Labor Statistics.

Many of the ideas being promoted by Democrats to stop the slide are hardly new. House Republican Whip Eric Cantor (Va.) called the strategy "more meaningless than harmful" after voting for one Democratic proposal, a resolution to encourage packers of domestic fruits and vegetables to display the American flag on their labels....

The seeds of the "Make It in America" campaign were planted earlier this year, when Rep. Mark Critz (D-Pa.) won an unexpectedly large special-election victory by campaigning against tax breaks for companies that move jobs offshore. Then in late June, House Democrats were briefed on a poll conducted this spring for the Alliance for American Manufacturing, which found that voters are anxious about the nation's mounting debt to China. Key voting blocs -- including independents and older people with no college education -- named the loss of manufacturing jobs as a top worry, the survey found.

The poll "crystallized" Democratic thinking, said Rep. Chris Van Hollen (D-Md.), who leads the political committee in charge of electing Democrats to Congress.
In short, Democrats are pursuing these old, bad trade policies not because they'll actually help the struggling US economy, expand our manufacturing sector or lower the unemployment rate, but instead because they poll well.  Awesome, huh?  (Obvious aside: too bad the Democrats didn't look at the polls when they forced healthcare "reform" down our throats.)  But hey, that's just the politicos.  I'm sure that liberal bloggers, journalists and wonks are totally on board with the Dems' trade plans, right?  Right?

Umm, not so much.

As part of their ongoing (and juicy!) series on the liberal email listserv "JournoList," the Daily Caller released emails documenting a dialog between the White House and JournoList members which clearly demonstrates that most of the Democrats' own supporters oppose their protectionist plans and recognize them as a dishonest political stunt:
Two of the administration’s chief economic advisors, Jared Bernstein, the vice president’s top economist, and Jason Furman, deputy director of the National Economic Council, were members of Journolist until they began working officially for Obama.

Even after the campaign ended, and he had joined the Obama administration, Bernstein continued his contact with the group. In May of 2009, Bernstein contacted Ezra Klein to pass a message along to list members.

“Calling all Journos,” Bernstein wrote in a message relayed by Klein. “I thought we got too little love from progressive types re our tax changes targeted at businesses with overseas operations. We’re maybe going for another bite at the apple this Monday,” he wrote. Bernstein invited members of the list to join him on a conference call on the issue a few days later.

Not everyone was sold. A couple of members on the list, including Greg Anrig of the Century Foundation and Bloomberg’s Ryan Donmoyer, panned the administration’s plan to crack down on offshore tax havens as a misleading political stunt.

Dean Baker, at the time a blogger at the American Prospect, agreed the policy was dishonest, but defended it anyway. “Sure, some of the things they are saying are not true (the jobs story first and foremost),” he wrote, “but the industry groups have this town blanketed with lobbyists and own a large portion of Congress outright. … There has to be some counterforce to the industry groups and that is the populist rabble. It might not be pretty, but that’s Washington.”

In the end, 14 journalists expressed interest in the conference call with Bernstein, including Donmoyer and Washington Post reporter Alec MacGillis. The effort appeared to be wasted on Donmoyer, who in the coming weeks wrote a couple of stories for Bloomberg expressing skepticism about the idea.

Bernstein’s effort did appear to bear fruit elsewhere, however. “I’ve heard that there’s some disappointment in the administration that they haven’t gotten the level of progressive love they feel they deserve for their ambitious proposals to curb abusive corporate tax loopholes,” wrote influential liberal blogger Matt Yglesias the next day. Yglesias went on to attack opponents of the plan, noting “how absurd some of the abuses the administration is trying to curb are.”
Bernstein, as you may know, worked for the union-backed-and-run Economic Policy Institute, a think tank with, ahem, a less-than-stellar track record on trade.  And when he approached his fellow travelers seeking support for the administration's "new" protectionist plans, they mostly blew him off and criticized the plans.  Good for them, and shame on the White House and congressional Democrats for pursuing trade policies that are, in Dean Baker's own words, based on lies.

Such dishonesty and overt political pandering also raise broader questions about all Democrat trade policies, not just those on multinational taxation.  In short: after seeing this, why on earth should we trust anything Democrats say on trade?  As I've repeatedly noted, lots of polls show that a majority of Americans are uncertain about (or downright hostile to) free trade.  And if polls - rather than economics or a desire to, you know, actually increase American jobs - motivate the Dems' dishonest  "Make It in America" plan, then what, pray tell, motivates their opposition to US FTAs with Colombia, Panama and South Korea or their breathless demands about China's currency policies?   Those same polls?  Or are we to believe that their dishonesty only extends to the tax policies, and that the Dems' other trade policies are as pure as the driven snow?

I don't know about you, but I'm finding the latter option to be increasingly hard to believe.

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