Paul, you make way too much sense--at least for the morons advising the President on economic matters. I'm guessing those morons (and, of course, our illiterate President) never read you.
2
The logic of Trump's trade war is the same logic of everything Trump does - make it look like he's doing what he promised to his base while fact doing nothing that will make any real difference.
I support Trump trade war with China because it hurts Trump supporters. They deserve it and some.
But Paul, Trump voters still believe as Reagan voters did several decades ago and still do.
The thing about religion is that it is based on blind faith, not facts. Trump is leading a cult, and his worshipers will not be dissuaded by mere facts. It's like those sects that predict a doomsday, and the day comes and goes without an apocalypse. The cult leader simply revises prophecy and the believers are never the least bit bothered by the fact these prophecies never seem to come true.
So it is with Trump's religion and his policies. If the tax cut doesn't deliver, and if the trade war doesn't deliver, his cultists will just shrug and wait for Trump's next prophecy.
1
The tariffs have always been less about economics than about jingoism. It's about Trump being seen to fight back against not just China, but all those sinister foreigners. It's about making those foreigners sorry for taking advantage of America. Never mind that trade generates wealth and imports create jobs, the politics of spite and resentment is rarely rational. The focus has always been more about hurting some tofu-maker in Tianjin than benefiting some soy farmer in Iowa.
And the base will believe him.
The oldster Democrats are too low-energy to protest, they need their entitled naps. Anyway, if they did say something, they might get a Tweet.
We really are entitled to better than this.
1. Krugman needs to remove his green eyeshades. He is myopically focused on the immediate impacts of Trump's tariffs. But there is a bigger point: Tariffs are not policies, they are bargaining tactics. Every fool knows that they will hurt us. The point is whether they will hurt the other guys more, so that he will cry uncle. Are they guaranteed to work? No.
If Krugman thinks our present trade relations are hunky dory, then the tariffs are clearly foolish. But he has never defended that position, and he would be wrong if he did. So why is he wasting our time?
2. Just as insufferable are Krugman's soundbites about share buybacks and dividends. As usual, they are meant to anger readers rather than inform them. Until Krugman can tell us what shareholders are doing with the proceeds, then no conclusion can be drawn about whether or not (1) buybacks/dividends recycle dollars into more productive investments or (2) get hidden under mattresses or spent on fripperies and ephemera.
1
what is sometimes lost is that the stock BuyBacks result in increased income and bonuses for the same executives that got a large tax decrease.
and then there are the mergers and acquisitions which do much the same.
the decrease in stock shares causes the stock market to go up, up and away...far beyond the underlying corporate value. another bubble in the making?
all while the President will say that HE is responsible for the stock market performance. which I suppose he is in a perverse way.
1
"it is a hidden tax and I wonder why Grover Norquist is not yelling, well, because of hypocracy."
Whether on raw goods, parts, or finished goods, tariffs often get passed onto the consumer. Functionally, they turn into a sales tax on imported goods. If people like Grover Norquist like any kind of tax, it's a sales tax. Sales taxes are fundamentally flat taxes, and tend to hit poorer people harder because a bigger slice of their income will have to go to paying for it.
1
The real problem is the economic effects of the tax cuts and tariffs won't happen in time for this fall's elections and for all intents and purposes, trump supporters still believe. I doubt the economic pain will be around in November 2018 but by 2020, even the most ardent Trump supporter might start feeling the pain through their rose colored glasses.
Whether praise for Tax Cut is faint or raucous - IS in the ear of the beholder.
And every beholder of stock WHO HAS REMAINED complacent to Trump's dangerous dismantling of US trade, foreign, environmental, and humanitarian policies WILL REMAIN in Camp Trump.
We do need to track the actual growth against the "breakeven" growth as Mr Krugman provided .. because Architect of Tax Cut, Kevin Brady has already made noises about A SECOND!
The worker whose future income taxes will pay the $1.5T price tag, will also pay for THE SECOND!
That is the micro-micro-economics lesson that must be learned many, many times before 6 November.
3
It is distressing to realize that the tax cut achieved nothing but transferring more wealth to corporations and their shareholders. Long term the effects will lead to huge deficits, decreased government spending in needed infrastructure, research and development, environmental and climate needs, education and health care. I also feel that it will be used to drastically cut the earned credits and safety net programs of social security, Medicare and Medicaid. The net result will be a
lower standard of living for the average American and greater income and social inequality.
It was an unjustified tax plan rushed through Congress without bipartisan input and Congressional committee
open public hearings for deeper reflection.
I believe this plan will have dire effects on our future prosperity and quality of life.
7
One has the feeling that the good Doctor finds strong short-term growth to be noise, but weak, not so much.
just saying.
I dunno. I don't think the economics profession has a clue about how trade works and what the impact of Trump's actions are likely to be. There are so many distortions in the system, notably on the currency side, that theory is useless in making quantitative judgments. While there will be notable winners and losers, unless NAFTA collapses, the macro impacts likely will be quite muted.
The Professor is saying, "Sell, Sell, Sell!"
1
Economically, you want flat growth, because you believe that politically, it would lead to redistribution.
One question is whether the economy will overheat in the long run, due to the tax cuts and the tariffs and the interest rate increases. The second question is when.
Most people can't answer those questions with any great accuracy. The fact is that we have a very long expansion and what goes up eventually comes down. That will probably happen sooner or later with Mr. Trump and his ineffective tariffs, tax cuts and other nonse.
3
Trump has two constituencies. The 'base' whose political philosophy can be summed up in 4 words "Republican good, Democrat bad") and the corporate/wealth elite who see him as a useful idiot.
The first group doesn't care what he does or says no matter how much it hurts them because he has applied the Republican decal to his lapel after leading a life which has been anything but a manifestation of the very things they say they believe in.
The second group has largely gotten what they wanted. A huge tax cut and financial deregulation. They largely don't care about the things the first group cares about They realize that issues like abortion, homosexuality, etc . don't have any direct impact on them and their extreme wealth insulates them from most of it.
The impending lopsided supreme court will now give each more of what they want.
But it's hard not to see as many have noted here how this whole ill conceived, trickle down, disproved over and over again (what's the matter Kansas tax cuts didn't work?) house of cards can continue ad infinitum. It's been propagated with wedge issue diversion tactics and band aided over with world wide creation of money out of thin air (quantitative easing) low interest rates, etc. But when it comes crashing down, and it's hard to see how it can't in the long run, you get the feeling it's going to make the 1930's look like a picnic.
Return your tray tables and seat backs to their upright and locked positions.
10
"Short-term growth is noise, signifying nothing."
If only you could convince corporate America about that little pearl of wisdom. If I hear one more business dweeb say something along the lines of, "The next 90 days are the most important in the history of the company", I think I will be sick.
The next 90 days are important to fat-cat bonuses.
3
"Thanks to the looming trade war, U.S. soybean prices have plummeted, and the farmers of Iowa are facing a rude awakening."
Who knew elections had consequences? Everyone that can recognize a con man when they see one!
7
Perhaps companies would be more inclined to invest $ if they could rely on tariffs and trade policy to not change (or at least be predictable). Our President's whimsical trade policy changes make it that much more difficult for companies to calculate what investments to make. In other words, Trump's trade policies are undermining the potential benefits from the GOP's beloved tax cuts. Of course the GOP nor Trump will ever acknowledge that, but instead will say the Dems are somehow the ones at fault.
6
So, the soybean farmers are losing income. Isn't the accepted wisdom when it comes to macroeconomics that in economic policy there are winners, and there are losers? Surely, mitigating the losses of those who grow soybeans has to be less costly than supporting the legions of those who have suffered job losses and declining income from the outsourcing of American manufacturing jobs.
2
How is a trade war going to bring those jobs back? Only by corporations paying American workers Chinese wages. Companies couldn't afford to pay first world wages because Americans would not be able to afford the products. Doesn't Trump realize this?
1
"No, they are not stupid or ignorant."
Oh yes they are. Not for watching Fox but for believing it.
Yep, that little bit more in my paycheck from those tax breaks has been all eaten up by rising gas prices.
Us schmucks just can't win.
5
With the 2018 election looming the high growth number in the second quarter will boost the Republicans. The tax cut was poorly written and rushed through as an unsubtly demanded pay off from the Republicans big business fat cat supporters. Populism is still promoted by the news media as reflected in Trump's campaign bombast. Somehow Trump's bellicose trade war rhetoric is portrayed as caused by voter anger. Everybody was eating the USs lunch. The Populist mov't was founded in the late 19th century promoted by farmers and workers directed at exploitative behavior by the railroads and corporations. What people now call populism is actually xenophobia. A person like Trump would never be involved in mov't that was solely to redress the exploitation in the economy by capitalists.
4
Maybe we would be better off if we are our own soybeans. Paul do you think Trump came from a long line of farmers in the Bronx? (He did by the way). Do you think he knows anything about global ag-business? Has he ever seen a farm? Trump only knows how to produce noise his base thinks will help him. He thinks Harley-Davidson is an important US industry. He will try to convince his base that his tarriffs will be good for them while in reality they are hurting them.
4
3.146 million (2017) population of all of iowa, wow! And they have TWO (2) senators too!
4
there is a new trump tune that goes like this:
beans, beans, the musical fruit, the more you sell, the more to toot (or tout, in his case) about economic prowess. the farmers have BEAN (sic) had and so it is SOYONARA (sic) to this year's income. and GOOD FOR THEM --stupid votes get you a stupid president.
The other thing is that "you can take a trump supporter to the library, but you can't make them think" so they just have to get what's coming to them--in this case, an empty wallet.
AGAIN, the KORRUPT KONGRESS could fix this in a week, but they are" party and money" (and RUSSIA) BEFORE they work for the people and the nation so VOTE in NOVEMBER. Crocodile tears don't begin to describe my feelings about IOWA farmers.
6
Nothing that takes more than two sentences to explain will have any effect on the president's supporters. No, they are not stupid or ignorant. But the programs they watch and social media they read can give reasons why the president is right that are two sentences or less. Why look any further?
5
Trump’s supporters are LAZY, hence willfully ignorant. As Pogo said, “We have met the enemy, and he is us.”
1
Yes, propaganda was the basis of Hitler's rise to power - he even wrote his book, Mein Kamp, on it - and DJT is the latest example of the methodology. Human's are such easy marks. Down the slippery slope.
Sorry to hear this, Iowa farmers, but you largely have it coming.
A fool and his money were lucky enough to get together in the first place, and bad things tend to happen to people who intentionally misinform themselves.
Please, though, let's listen some more to your complaints about Benghazi....
8
The economic analysis of Dr. Krugman is full of holes, which is by design, as he is catering to an audience that wants to hear how horrible our President's policies are, while in fact they are extremely well-thought out and executed, and are bearing excellence results.
What are the holes?
8
The ones in his head. What are the excellent results?
While you explain to Dismal what those holes are, you can also explain what those "policies" are that are "extremely well-thought out and executed, and are bearing excellent results." YOUR president has DONE NOTHING, but ride a wave that was well in motion long before his current side show. How "thought out" can "policy" be when his entire "presidency" is to reverse everything implemented before him by Executive decree in a pathetically feeble-minded and rich-boy tantrum? His predecessor was just a little too intelligent and a little too black for for that to stand.
1
Trump's Trickle Down Tax Cuts. Has a familiar ring to it.
Instead of Trickle Down Tax Cuts America could have had a tax cut that actually helped workers take home more money and made American made products and services more affordable. A payroll tax cut.
Payroll tax cuts go straight into the paychecks of workers and straight to the bottom line of P&L statements. Payroll tax cuts wouldn't have to have been laundered through corporate executives and corporate shareholders with the HOPE that some of that money would somehow find its way to higher wages and cheaper products.
6
"Why am I telling you this story? Partly as a reminder of the unintended consequences of Donald Trump’s trade war, which is going to hurt a lot of people, like Iowa farmers, who supported him in 2016."
Can it still be considered an "unintended consequence" if the consequences in question were immediately visible to anyone who was willing to look _before_ the actions that precipitated them were taken? At this stage, it more looks like the actions were, at best, plain boneheaded, and at worst, malicious.
8
As for the recent federal tax cut's failure so far to spur any meaningful spurt in business investment, why is anybody surprised? As the pre-passage tax debate raged, business leaders themselves signaled clearly that they had no intention of ramping up capital investment as a result of corporate and rich individual tax cuts. And business has been true to its word.
Dr. K writes that "it’s not even clear what [the trade tariffs] supposed to achieve." Actually, it's very clear. They were supposed to hurt people. President Trump and his benighted GOP troupe of invertebrates are all about destruction, of people's economic security, of their health, of their right to make personal care decisions, of their very right to freedom from random gunfire, of their right to drive while black.
While the GOP, with control of all the levers of governance, gets through with damaging its own voters, they will also turn their attention to Europe and developing countries that dare to encourage infant breast-feeding. It's hardly just Trump; the entire public face of our misgoverned country is mean, vile and dangerous to human life.
Too many of this are proud of this, even as we ourselves are hurt.
5
Except for periods in the 1950s and 1960s and possibly the 1990’s when tax rates on the rich just happened to be high enough to prevent overinvestment, the economy has generally suffered from periodic overinvestment cycles.
It is not just a coincidence that tax cuts for the rich have preceded both the 1929 and 2007 depressions. The Revenue acts of 1926 and 1928 worked exactly as the Republican Congresses that pushed them through promised. The dramatic reductions in taxes on the upper income brackets and estates of the wealthy did indeed result in increases in savings and investment. However, overinvestment (by 1929 there were over 600 automobile manufacturing companies in the USA) caused the depression that made the rich, and most everyone else, ultimately much poorer.
Since 1969 there has been a tremendous shift in the tax burdens away from the rich on onto the middle class. Corporate income tax receipts, whose incidence falls entirely on the owners of corporations, were 4% of GDP then and are now less than 1%. During that same period, payroll tax rates as percent of GDP have increased dramatically. The overinvestment problem caused by the reduction in taxes on the wealthy is exacerbated by the increased tax burden on the middle class. While overinvestment creates more factories, housing and shopping centers; higher payroll taxes reduces the purchasing power of middle-class consumers. ..."
http://seekingalpha.com/article/1543642
4
China already bought up huge supplies of soybeans to the tune of several billion dollars, in anticipation of the Trump tariffs. Agriculture is a lot about futures and soy futures are down. But farmers' pockets are full, so they can afford to wait and see.
Donald Trump is like a diagnosis of cancer. We're all waiting, some in anger, some in resignation, but the odds are not good.
3
New Rule:
1) All schools mandate civics classes. Well, at least in my 5th grade class we have elections. Why? Not voting has consequences. I teach reading, writing and math, but I am also heavy on voting when they turn 18. We will overcome this.
2
"Short-term growth is noise, signifying nothing."
But if seemingly favorable growth figures for the current quarter come out in October, they will likely have an impact on the November elections.
1
In the short run the demand for soy beans will be the same and it is just an issue of who is purchasing from who. So China will take delivery from places that do not get a 25% import tax and those who otherwise received that soy will instead get it from US (provided they didn't institute a 25% import tax). Just a big game of musical chairs that will hurt US farmers this summer as markets panic.
In the long run China will get what they wanted out of this; a domestic push to reduce their reliance on foreign soy beans. US farmers will find themselves less competitive in the world markets as no country or company will want to have supply lines that are dependent on an unstable and irrational political system.
12
Perhaps when and IF enough trump supporters lose income, health coverage, jobs, etc., that will awaken their anger where it ought to be directed TO republicans controlling Congress AND conman trump.
Then hopefully sufficient numbers of fence sitters will vote for democrats thus helping US Democrats gain control of the House AND Senate.
9
The thing Trump and the GOP know about the tax cut -- and Democrats are slow to figure out -- is that it doesn't matter if they're benefiting working Americans. What matters is uneducated Americans are told they're working, and they believe it to a fare-thee-well.
14
Well, ok, but that short term noise may have a real political impact in November. In fact, if the third quarter is as noisy as the second, the blue wave Democrats are counting on may not materialize. More generally, it may be quite a while before the economic damage of the Trump presidency becomes apparent to enough people to convince them of their mistake. I am convinced that this damage is the only solution to the problem of Trump.
10
Reality will strike the fan when millions find their customary withholding tax refund is gone when they file their 2018 tax returns.
3
For the average Joe, so far, we will pay more for credit, we will pay more for gasoline .we will pay more or our children will pay more on student loans, we will pay more for electricity from coal. That's the only trickle down I see.
19
Short term fluctuations in the performance of the economy may be meaningless but if the economy is still seems strong come November they will be very important and much trumpeted - with a capital T.
3
Can't wait for the coverage of the workers in
the MAGA caps at the unemployment office
or the farmers In bankruptcy court
they bought the con. boo hoo
4
Paul, this is not 1945. We have not just won the war. We are not that rich country, that can subsidize the world. At some point, we, the US, does have to force the rest of the world to be more "fair". Equitable and even tariffs would be a start.
How can we achieve that, in your humble opinion? Or, to you, that is not an issue. We should keep subsidizing the rest of the world, at our expense?
"If so, Trump will trumpet the news as proof that his economic policies are working — and some gullible journalists may go along with his claim."---Just curious. Perhaps, it is you who is the gullible one. You are so biased against this administration. You have blinders on!
You are not willing to accept that the rest of the world is taking advantage of us? Trump is no bargain. However, at least he realizes that the US cannot subsidize the rest of the world. It seems, all he wants is "a level playing field".
(I know. Another comment the NYT's will not print. It goes against everything you stand for! What is that again that you stand for?)
4
Well your comment is posted. But the issue is that tariffs doesn’t address the big elephant in the room. The giants of Asia with 1/3 of all humanity have joined the global trade. The US with only 5% of world market(while enjoying a disproportionate 25% of world wealth) absolutely needs the Asian and European(basically ROW) market to thrive and grow. Or do you think we will do well by forcing our corporations to sell only within the US?
So bottom line is we no longer can dictate terms of world trade because we are not the largest market. Infact China is the largest market for many US companies including Boeing, GM, Caterpillar etc. Europe is the largest market for many US companies. China is the largest exporter, trading nation and largest economy. So we are smart to form trade blocks such as TPP to take on the might of China. But Trump withdrew from TPP and threatens to withdraw from NAFTA. So instead of isolating China we are isolating ourselves. How is that gonna help us?
15
Bsb: your diatribe against dr krugman would sound good at a trump rally— being all bluster but no facts. If you have any contrary facts feel free to share them. I suspect however I’ll be enjoying the sounds of silence.
4
In sports all the teams play by the same rules to avoid unfair advantages. The same principle applies in the domestic economy. This is NOT the case in global trade. The result has been a decline of working class living standards in the developed world, with a corresponding political destabilization in democratically organized societies.
Kansas for Everyone. And don't dare say you weren't warned, Bigly.
18
"American Workers Pay Up to Benefit Foreign Stockholders"
There is the headline for the NY Times.
You can go ahead and use it.
For Free.
I don't mind.
Please.
For the Harley-Davidson workers.
13
When we run out of stock to sell to foreigners, we'll sell federal land.
2
As I understand it, not only Brazil wil benefit from American farmers being frozen out of the Chinese soybean market. Russia is also selling soybeans to China for much-needed hard currency. So Trump's trade war with China is also helping Putin alleviate the pain of U.S. sanctions. If he's not a Manchurian Candidate, he's certainly a useful idiot for the Kremlin.
16
Soon the logging of Siberia will rival that of the Amazon jungle.
It depends, doesn't it? Are you measuring the tax cuts based on what Republicans said they were intending to do or what they intended to do? I never heard any convincing argument about how tax cuts were designed to help the American worker. They were a handout to the wealthy investor class with petty compensation to anyone in the bottom three quartiles. By this standard, the tax cuts are actually quite successful. They were designed to screw the middle and lower classes. That's exactly what they are doing.
As for trade, we're heading for deep trouble in a hurry. We still have time to reel-in Trump's mistake but don't expect to find a fish on the other end of the line. This is going to hurt. I'm going to predict the next effect of trade and taxes is negative. We've lost trillions in revenue and hurt suppliers. Again, you have to suspect the damage is intentional.
10
Precious irony from an Economist who declared 2% growth, “the new normal”.
And by the way, $30 billion in tariffs equals .0015 of the US economy. Get a grip Krugman.
2
Yes, and the margin of voters that tipped the election to Trump in Wi, Mi and Penn equals just about .0006 of total voters in the 2016 election... Easily gained, easily lost...
2
Trump is a graduate of the Wharton School of Business. Trump is ignorant of the elementary tit-for-tat mechanics of trade and tariffs. Does Wharton not expect its graduates to have a basic understanding of economics, or was Mr. Trump's diploma simply and strictly a function of daddy's money?
12
The fix is already in Paul. MSM is constantly talking about the Trump economy as if it is unheard of growth.
Kudlow claims deficits are falling with minimal pushback. Normal average job growth is touted as amazing.
Macro is not well understood by the media or the public. The media wants access so they allow lying and massive exaggeration.
The result is a massively narcisstic idiot is allowed to lie continuously with the aid of his party and our media. Not a good combination for good public policy.
6
"Short-term growth is noise, signifying nothing," but full of Trump's sound and fury; with apologies to the Bard.
1
The real goal: Looting the Treasury. Then cut entitlements. Fool the public that votes for Republicans by demonizing the "other."
11
Just doing some research for a podcast I'm working on exploring the idea of "America First." Woodrow Wilson, ironically, used the phrase in 1916 along with "he kept us out of war." But in 1912 he argued that farmers were being hurt by a tariffs, and a steel tariff in particular: "One of the greatest impositions upon the farmers of this country that has ever been devised is the present tariff legislation of the United States. . . . When the United States was the granary of the world, the farmers were not looking for protection. And while they were not looking, everything else had duties put upon it, and the cost of everything they had to use was raised upon them. . . . While you were feeding the world, Congress was feeding the trusts."
Pretty interesting. You can listen here: https://archive.org/details/woodwils1912
3
Harken back to US history when the Confederacy was sure withholding cotton would bring England and France to their knees in support of the Confederacy. For an apex of stupidity the Confederacy even ratcheted down cotton exports during the first year when the Union blockade was not tight. End result, Egypt and India could also grow cotton, the Confederacy got clobbered. Lesson for President, to dumb it down, other countries can grow soybeans.
4
“The headline number is probably going to look good, possibly over 4 percent growth.”
Really, what good is 4 percent growth when it produces less in tax revenue and spending was dramatically increased to achieve it? Oh, and as mentioned, the growth is subject to quarterly fluctuations.
Here are the headline line numbers that really matter:
$1 trillion dollars plus – approaching annual deficits;
$1.2 trillion - deficits since Trump took office;
$21.2 trillion – current national debt – 105% of GDP;
$32.5 trillion – forecasted national debt in 10 years;
$80 trillion – estimate of future unfunded liabilities
We must find a way to hold self-interested Politicians, government officials, and their staffers, from both parties, personally liable, responsible and accountable for the lies they have told US, their gross mismanagement of our county, our $20.5 T and growing national debt (105% of GDP), and our $80 T in future, unfunded liabilities they forced on US jeopardizing our economic and national security, while benefiting themselves, their staffers, their party and special interest donors.
http://www.USDebtForum.com
6
Members of Congress/Senators should also have to get health insurance like the rest of us do, as opposed to their tax payer funded gold plated lifetime coverage. That reality would be a decisive education on the failings of our healthcare system.
3
"Short-term growth is noise, signifying nothing."
Except to trumpism adherents, who regard him as a god to whom all credit for good outcomes belong, but never blame for bad outcomes.
3
Soon, there will be no place to run, no place to hide—for Krugman, the pied piper of phony progressive economics. He can’t dismiss or explain away good economic news forever. It just so happens, this column is more full of “beans” than usual.
Somehow, he has convinced himself (and many of his followers here), that the socialistic, governo-centric, central planning model of economics works best—and that the ship that brought us here (capitalism), needs to be abandoned. Somehow, he manages to ignore all of the following:
—the record low unemployment numbers, including those for African Americans, Hispanics and Women. Also ignored, the manufacturing jobs being created which Krugman said could never happen.
—the record high measures of consumer and business sentiment.
—the billions of dollars being invested and repatriated.
—the rise in the stock market—which after a seasonal pause, has begun rising again—despite Trump’s valiant attempt to wrangle concessions from our trading partners—and rein in the abuses of China.
Remember—that it was Krugman who made the hysterical election night prediction—that the stock market would crash—and never recover. Well soon, we’ll be able to lay all of his other predictions right next to that one.
Look for Krugman to get “progressively” more hysterical, as Trump’s policies supercharge our economy. After all, the tax cuts have only been in place for a very short time—much too soon to call them a failure. Beans indeed.
5
Maybe you can explain how US farmers will get China back as a buyer of soybeans. Once the demand is lost
, will it ever come back to what it was?
4
I guess you also believe that Bush/Cheney's Iraq "extravaganza" was a massive success and the six trillion plus dollars it cost and hundreds of thousands of lives have all magically been erased. Republicans got US into that mess. The economy tanked.
Obama and Democrats had more to do with turning the economy around. Trump was GIVEN a growing economy. His policies will end up doing far more harm than good. Big gains for corporations and the wealthiest Americans though.
4
@Howard Beale....class warfare and envy, soak the rich, income redistribution, confiscatory tax rates and ruinous regulations. That's what Obama gave us--for 8 year as the economy fizzled along. What else ya got?
My investment advisor once told me that when you are watching a man with a yoyo walk up a hill, measure progress against the hill Don’t watch the yoyo.
4
People do not have enough money to buy stuff. We have just have 2 studies that showed if the typical American family had a real emergency & had to come up with some money, they couldn't do it. One said about half the people couldn't come up with $400 & the other that 2/3rds couldn't find $1,000. Trump's tax cuts to the Rich and Corps are not going to help this.
Now businesses are not going to investto produce stuff people can't buy. So they have to keep prices low, & they can't pay workers well & still keep the big profits they have become used to. If wages were higher, people would have the money to buy stuff, but that's a chicken & egg problem.
BUT we have a way to break out of this circle. Its called the federal government. It can create as much money as it needs out of thin air. It can then get the money to the people who need it & will spend it by simply doing stuff that needs to be done, e.g. fixing roads and bridges, helping with education, research of all kinds, a new power grid, efficient transportation, etc., etc., etc. Thus we can break the circle & improve our lives at the same time.
What about inflation? Prices are proportional to the amount of money in the economy (times its velocity), but INVERSELY proportional to the dollar value of the stuff we can produce. So if the money is spent doing good things, it will produce enough stuff to soak up the money. Excessive inflation is caused by something that prevents us from producing stuff, like shortages.
6
Hey Paul - for what it's worth: (as you know) American economic policy since WWII has largely been a political football. The war established a bad precedent. So, bizarre macro maneuvers, banking regulation mis-steps, interest rate knee-jerks, etc., all designed to make the party in power look good. The LAST thing anyone thought about (as you imply) was long term health of the economy. So it goes . . . but it won't last on forever. Fun while it lasted."The Bell Tolls," etc. Good article, thanks.
2
The question to which I want an answer, to which we should all very much want an answer, is how much Trump personally (he and his family) are going to make out of the trade war. Is not this his standard operating procedure? Set people up, use their money, go bankrupt, and take a bundle home? Figure out this riddle and we will have him dead to rights.
9
You talk about investment here in the US. I ask why would anybody invest here as long as trump is in charge, our congress is in forever grid lock mode and our government is being run by vastly unqualified people?
12
"Trump’s main policy achievement to date, last year’s tax cut, is basically delivering none of what its backers promised."
NOT TRUE! The already wealthy have even greater wealth! Some of that may trickle down!
4
"While the logic of the Trump trade war is completely muddled — the drafters of the tax bill did have a theory... Lower taxes on corporations would lead to a huge surge of investment...productivity...passed on...in higher wages."
Theory? Sounds more like scribbles on the back of a napkin jotted down by an erstwhile economist whose name phonetically and cogently describes his "theory": Laffer, Arthur.
Better known as Supply Side, it was a nonsense answer in search of a real economic question, which Reagan obliged with tax cuts and war on social spending, presaging Trump by evoking the fictitious Cadillac-driving welfare queen to stigmatize welfare as handouts to undeserving Blacks when most of welfare benefits white children. (Reagan coded Black as "Cadillac-driving.")
They reclassified ketch-up as a "vegetable" to meet nutrition guidelines after slashing school lunch subsidies but didn't even get that right as tomatoes are fruit.
Reagan matched welfare cuts with more defense spending, which blew up the deficit and led to Congressional hearings on $500 toilet seats, $1,000 coffee pots and other gold-plated defense spending, which continues. (Budget for military air conditioning in Iraq and Afghanistan is $20 billion + a year.)
GOP's record on the economy is catastrophic, albeit in slow motion so they appear blameless.
Trump's trade wars is voodoo economics redux, Trickle Down 2.0, and the inevitable "Read My Lips" reversal when the bill comes due.
11
"Against that background, how much should we care about whatever headlines are generated by the next set of growth numbers?"
I wonder if Dr. Krugman has been to the circus lately. Trump's approval rating among his base, from pork producers to soybean farmers, from Alt-right haters to Catholic zealots, is holding steady above 90%.
If the meaningless (in real measure of the economy) numbers are even mildly positive, the carnival barker in the White House will create a media event such as last night's Rose Ceremony that turned a Supreme Court nomination into a reality TV-worthy coronation that heaped praise on its orange host.
He tells them that they're winning and the numbers just don't matter, except on the Supreme Court. Trade Wars are still "easy," and "the Mexicans" are still building the wall.
Fox News will chirp the Good News of economic indicators, which, as Krugman predicted years ago, no longer include anything about a wholly unnecessary fiscal deficit explosion, as he cheerleads his way into the midterms.
It's going to take an economic catastrophe to get their attention. And then they'll all agree it was Hillary and Barack that did it.
7
I'm sure the Democrat's mega-donors are extremely upset about their Trump tax-cut windfall. Now they can plow some of that money back into the DNC to concentrate even more on immigration, LGBT rights and identity politics, while smothering any truly progressive economic agenda. It'll be 2016 redux. Hooray!
Does anyone know what the Democrats stand for? If it were not for a few rogue candidates who haven't gotten the memo that economics is verboten, there would be no such discussion at all. Well, at least Schumer and Pelosi, as the plutocrat's toadies, are earning their pay.
1
So how is the economy doing?
1. Job creation in Obama's last 17 months was 3.54 million, versus 3.22 million in Trump's first 17 months.
2. Trump has increased the debt trajectory over the 2018-2027 period by $4.3 trillion, from $9.4 trillion under Obama law to $13.7 trillion (CBO April 2018 alternate baseline). That's about $34,000 per family. Rest assured, the middle class will be paying that back with higher taxes or fewer benefits some day. For scale, this is 5x the stimulus that Obama ran, when we actually needed stimulus. O Tea Party, Where Art Thou? Did I tell you that Europe is reducing its debt to GDP ratio while ours is expected to jump?
3. Trump has increased the number of uninsured by about 3-4 million already. CBO forecast that by 2026, we'd have 35 million uninsured instead of 28 million under the Obama baseline, a 25% increase.
So...job creation slower, debt way up, uninsured way up. So much winning!
P.S. Trump would like us to believe the economy suddenly improved under his "leadership." Keep in mind, we had recovered to pre-recession (late 2007) levels for the variables below by the dates indicated and have continued into record territory since:
Real (inflation-adjusted) GDP: Q3 2011
Household net worth: Q4 2012
Real GDP per capita: Q4 2013
Jobs: May 2014
Full time employment: August 2015
Unemployment (U-3): May 2016
Unemployment (U-6): May 2017
7
Watch out Fed. You will be Trump’s newest Deep State scapegoat if his administration’s economic promises fall short - to the delight of conservatives. Maybe this was part of the “long game”?
1
I am still in awe that we drifted from Obama to Trump in one swing (I know, I know, Russia, Facebook, etc, but it happened). What a bipolar country.
Trump does not dwell on results or facts, he dwells on setting up the narrative. If the numbers suit his narrative, he will TWEET Them all! If they do not, he will call them fake. His audience will believe him no matter what. Besides, he connects a few swings with a swiftness missing in the Democrats or so-called intellectual conservatives. When he says "people want borders" he corners pro-immigration and integration minded arguments and he gets affirmed by Brexit. Democrats never connect with such force.
In short, you are arguing in a ring where there is nobody for combat. Now, is this all sustainable, meaning that there can be infinite damage and Trump will continue his course? Of course not. But the US economy is Trump's buffer. It is large and can absorb many blows. After all, when California's economy grows Trump just needs to say that his federal policies are a success and take the credit.
The damage may come, but it will take a while, perhaps too long to have an electoral effect. Democrats are a disaster taking credit for their good deals and Republicans are irresponsibly talented at shifting blame on others on their bad deals (the dems of course). How perverse is that we need soybean producers in Iowa to do bad to start winning some elections.
4
Tofu? Surely you know better. The soybeans are fed to pigs in torture factories. If humans ate tofu instead of pig corpse we'd only have to grow a fraction of the crops we now grow and we' d have a fraction of the problems we now have from agriculture. Same for corn and cows, chickens etc. Our stubborn insistence on cruelty is destroying us.
2
If not for the monumental, mind-boggling incompetence of economists, Trump would be doing Bitcoin infomercials.
Just sayin'.
Not following you at all. We have this psychopathic moron in the White House because of economists? Can you explain your point more fully?
Let's see why Trump's tax cuts are not going to work as he says. He says they will enable people to buy more stuff and corporations to invest in their businesses & thus hire more workers & pay them better. Krugman's column shows this isn't working. I will try to show why.
Economists have a concept called the velocity of money. It is the frequency, how often, that money changes hands in domestic commerce. You can think of it as how useful that money is for the economy.
Trump's bill sends most of the money to the Rich. Money going to the Rich has a lower velocity than money going to the non-rich. The Rich spend a lower percentage of their money. What's a guy or gal who already has so many houses he can't remember how many & an elevator for his horse gonna spend his money on? The answer is he is going to use it to speculate.There is a correlation between inequality & financial speculation. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746 Speculation is bad for the economy. That money has a very low velocity. AND it increases risk which we have seen in 2008 ain't a good thing.
As for corporations, the tax cuts won't matter so much because they already shield their profits fron taxes by fraudulently attributing them to foreign subsidiaries. If you look at corporate taxes actually paid as a percentage of GDP BEFORE the tax bill, the US was tied with Turkey for the lowest value which is also about a third of what it was in the prosperity of post WWII.
4
The idea that the tax cuts would lead to wage increases was not nonsense if we buy the claim that there is now a shortage of workers. If companies really need more workers they should be willing to offer higher pay, and the tax cuts should give them room to do so.
The lack of effect on wages may be another indication that U-3 unemployment is not really representative of the labor market, or that economic theory about this, such as the theory of the NAIRU, may be wrong in some other way.
Of course the idea that raising wages was the real reason for the cuts is nonsense. Any benefit to workers would have to come after raising stock price with buybacks (which is mostly what has happened) and higher dividends, and investment to reduce dependence on labor costs.
Anyone familiar with the modern boardroom mentality could have predicted that the bulk of net tax savings would be used to buy back stock to extinguish the obligation to pay dividends in the future.
2
I know the GOP will say "sour grapes" to you for warning all of us about the quarterly numbers. But they will continue to whistle in the graveyard while trump fiddles with our economy. He doesn't seem to understand the first thing about trade or trade wars. He puts a tariff on steel, Harley says they may have to move production overseas to remain viable, and then he attacks HARLEY for making an economic decision based on his own deeply flawed policies. He's going to "tax" them harshly. Remember when the GOP went nuts because they thought the IRS was auditing religious organizations? This is trump targeting and attacking a single AMERICAN company by using the IRS as a weapon. The GOP keeps whistling. One can only hope the midterms are the graveyard they hope to pass, and when that is over, they'll start acting. I don't really believe it though, because then 2020 will be the next graveyard, and they'll still be whistling "Donny cracked corn (and soybeans and our economy) and I don't care."
11
Regardless of positive or negative numbers, trump will claim economic victory as he knew all the while - he's really smart, right? Begs the question, how much to believe the numbers put out by his government. At this point I trust North Korea's Kim more than I do trump - imagine that!
Trump saved the economy just as he saved us from nuclear war with Kim.
By the way, what portion of that 1/3 of foreign investors benefiting from the tax cut giveaway are Russian oligarchs or Middle East kleptocrats?
6
Paul enjoys pointing out the fallacies in GOP rationalizations of their actions. But valuable as penetrating illogic and denial of fact may be, Paul ignores the obvious: that the GOP doesn’t believe their arguments either. They are constructions intended to conceal what they are consciously and successfully about: doing the bidding of a handful of bonkers billionaires who have them bought-and-paid for.
19
Complex decisions regarding the economy require in-depth understanding of the interplay of global economic forces, planning and foresight to mitigate unintended consequences, and very importantly, an achievable strategic vision on the outcomes. This administration falls short on all of these.
14
No responsible CEO is going to green light millions of investments with the uncertainty Trump has created. The smartest thing for said CEO to do under the circumstances is to use his much greater after tax cash flow for larger dividends and share repurchases. And you can't criticize he or she for doing it. Of course in the longer run corporations can't sustain this. Plant and equipment wear out and become obsolete. They have to reinvest to grow. But Trump has created such uncertainty no CEO is going to risk millions on capital projects.
10
Given the President's unpredictable spontaneity I wouldn't be surprised at all if Trump threatened corporate America with rescinding the tax cut if it doesn't create the intended outcome, in terms of accelerated GDP growth behind more capital investments, higher productivity and rising wages. This would certainly be an option if one of his "prompters" from Fox would raise the point.
2
Trump can’t rescind 5he Tax Cuts.
Only Congress can.
And the big donors, like the Kochs, Adelson and Mercers, wouldn’t allow that.
13
The Republican responses to failed tax cuts and to failed trade tariffs will be more tax cuts and more trade tariffs. And the more the Republican Party fights to make its base great again will only cause the lower 90% to have less and the upper 10% to have more.
5
With 6.5 million job openings unfilled and crops being left to rot in the fields for lack of a labor force one wonders what is going on. Higher education has become so expensive that only a few can manage to indulge their children in it which explains the first problem and the immigrant labor that is being forced out of this country with no replacements in sight explains the second. If we really wanted to make America great the emphasis would be on fully supporting our educational system and making it affordable to qualified students regardless of their economic circumstances and to making it much easier to come into this country to take jobs that few wish to do. When I hear complaints that the immigrants should do it legally all I can do is ask How? in our broken inadequate immigration system. Tax cuts and Tariffs are not going to do anything for the average person except move more of their money to the people higher on the economic ladder.
19
Dear Hugh, a country full of educated, critical thinkers is not in the best interest of our current Republican party. Reasons for the incredible rise in cost for college and university education is complex, convoluted, and reduced funding by Republican leadership, Scott Walker comes immediately to mind, plays a role. But one of the predictable outcomes is students (encouraged by parents) who increasingly avoid courses and majors in liberal arts fields that cultivate critical thinking so they can "get graduated and get a job." Others can't see how they could get a return on their investment, considering stagnant wages and high student loan debt. So in a stunning reversal of the Founding Fathers vision, we edge toward a society of masses of under educated workers under the thumb of oligarchs.
8
Very well said and very important! When the Kochs and Art Pope in North Carolina set out to destroy public universities, they used the “business model” method, denigrating any studies that wouldn’t “make money.” At the same time the GOP was taking over state houses and slashing education funding at all levels. Classical studies, history, political science, philosophy, languages, arts, of no value to making money, so education at all levels suffers. The once-valued general education is no longer valued. Perfect venue for a “birther” who could play on general ignorance and, with the help of British, Russian, and American oligarchs and a hackable computer system, get enough votes to become “president” of the disunited States of America.
1) If things go south economically (no, not Brazilian soybeans) expect Trump to jigger economic statistics - in the same way that former Argentine autocrat Cristina Kirchner notoriously did, and as China does today, and as the EPA does today. 2) As a vegan I expect to see my costs for tofu and soy milk soon drop.
11
The tax cut is doing precisely what it was designed to do. It is enriching the already rich, who have turned from productivity to strip mining American wealth out of the system and storing it in the Caymans. It is punishing any blue state - any state with high density populations - in an effort to reward the "one acre, one vote" model of American representation.
Since boosting the economy was only a cover story to get the travesty passed, it of course, is not boosting investment at all, because it was never designed to.
We have a bridge for sale - any buyers?
59
For those who believe that Brazil or Argentina can't replace China's soy bean demands, a 16 year-old paper here suggests otherwise:
http://ageconsearch.umn.edu/bitstream/19621/1/sp02hu06.pdf
Another interesting paper, "International Comparison of Cost and Efficiency of Corn and Soybean Production" from 2015 can be found here:
http://ageconsearch.umn.edu/bitstream/196885/2/Cost%20and%20Efficiency%2...
The rest of the world can and will compete for China's soy bean business.
The interesting question is: Once China's business is lost is there any reason to believe that it will ever again buy Iowa beans?
25
Apparently Russia is now getting three times the soybean orders from China as it had previously while orders to American farms have dropped like a stone.
2
Since GDP measures production, not demand, there's no way the trade war could have influenced GDP via soybeans (yet). Otherwise, stay tuned to PK's trade comments. No one's more qualified to tell us about the endless stream of bad trade news ahead.
12
The NYT's economic coverage is New York-centric. And New York city is America's capitol of global finance.
An apt alliteration is an artful aid and Prof Krugman has captured in his title an alliteration
Trump certainly is generous in his giving reporters and opinion writers something to say on daily or even hourly basis. With the democratic party lacking any thoughtful or constructive critique it is left to the press to be lead the opposition.
Tariffs end up as revenue stream for governments and an excuse to extract taxes under a different name.
Soybeans are good for everyone and if paying more for Tofu is what it will take to continue consuming it, so be it. If you shop in a large grocery store in China, there will be a whole aisle of a variety of tofu and it is unlikely that the Chinese consumer is all of a sudden say no Tofu for me.
Tax cuts are a bail out to the tax payer and always make sense that they get to keep some pocket change or "crumbs" like some may call it instead of Washington spending every penny and then some.
2
Girish Kotwal: Your statement that soybeans are good for everyone failed to consider the damage to the environment produced by Brazilian cultivators who hack down forests to expand their production. Try reading more about this issue.
Thank you once again PK. Your references are great and allow me to go back and look at your points in more detail.
I wonder if it may come about that purchases of US soybeans from countries other than China might make up for the loss of sales leaving little net change in US farmers exports.
3
The point of the article is that trickle down economics of Tax cuts does not work. What Democrats need to understand as well is that trickle down Keynesian economics do not work either. The Keynesiam push of the Bush and Obama administration of bailing out the failing banks and QE ended up being correct in pulling out the American economy from the great slump much faster then the Austerity measures at first instituted by the Europeans in face of the financial crisis. However the Keynesian trickle down failed to lift all boats in the American economy. The 1 percent got richer and more powerful. There is still no evidence that the Democrats have a plan to explain clearly to the American electorate how they plan to make trickle down economics work for the majority of the population.
4
Your argument is self-contradictory where it doesn't miss the point.
Keynesian policy did exactly what it was supposed to do and was predicted to do in 2009. Besides the stimulus, the countercyclical effect of e.g. food stamps propped up demand when GM couldn't secure overnight paper.
Keynesian policy per se does not address income equality. The policies over the last several decades of wage suppression, less progressive taxation, and exaggerated "intellectual property" rights are not Keynesian policies. They are neoliberal policies. And, yes, Democrats have a lot of explaining to do.
Some Democrats — the majority, if they vote — have come to recognize the error in cozying up to big money. To favor capital over labor is to make them indistinguishable in effect from Republicans. Greater income equality will require a return to a much steeper income tax, a commitment to public education and universal healthcare, and far greater support for workers' rights.
It's a long row to hoe, for sure. But don't blame Keynes.
3
If the economy is stimulated by providing cash to the lowest income citizens (who tend to spend, aa opposed to invest), but those folks spend the money on imported goods, how does that help anyone but retailers, who famously pay the lowest wages, often without benefits?
Krugman, like others, bases economic success on job growth. But one of my retirement funds announced -1.65% return in the first 6 months of 2018 after a 21% return in 2017. The prospectus claims that the loss is due to "uncertainty" in the market. If I were to invest in soybeans, or anything else, "job growth" would not be the metric influencing my decision. The uncertainty of the soybean market is what matters to investors. Perhaps Krugman could emphasize that.
7
Knowing that the tariffs are a consumer tax on imported goods, Trump is emitting a smoke screen by obscuring the tax with a daily Trade war headline stream. Fully advise the public the tariffs are a tax on consumers designed to offset the tax cuts which largely benefited the wealthy individuals and corporations.
5
Advising the public that the tariffs amount to tax on consumers would mean the Trump administration would have to be honest and truthful. That is not going to happen. Ever.
13
And the demonized "subsidies" from ACA were tax cuts. Well said, Shakinspear. We have a vernacular problem.
1
There is more to the Trade Wars than the tariffs. It's a given we consumers would be victimized by the consumer taxes they are, but no one has addressed the aggregate effect extensive trade wars will have on gross goods sales. The Consumer tax tariffs may seriously affect consumer buying habits where we have to worry about steep declines in purchasing items entirely.
6
The Trump tax cut is working exactly as designed, make the already rich richer. All the predictions of growth, productivity increases along with wages was just noise for their base voters. If there is one thing Republicans understand is that there base voters have the attention span of a two year old. Trump gets on a stage somewhere and screams about immigrants and the tax bill is a distant memory.
Will be interesting to see if any of those voters who suffer some economic pain as a result of Trumps trade wars actually hold him responsible. Republicans are masters at never accepting responsibility for their failures and with a large percentage of their voting base receiving their information from Fox, essentially the state propaganda arm of the Republican Party. I have little hope of reality intruding into their universe, problem is the rest of us thinking people have to share that same universe.
18
"So how is the Trump economic policy doing? The tax cut is utterly failing to deliver on its advocates’ promises."
Consider that no one knows this better than Mnuchin who probably sees numbers in real time - he also knows he's gotten about $800 million so far just from metal tariffs. 25% on $50B of Chinese imports will give him another $12.5B. Most of this will come from US consumers. Initially, prices may drop as businesses try to get rid of excess product like pork, but later, as they try to make up for lost export revenue, prices will go up even more.
13
We would not have Trump if the economy was growing as before 2008. MAGA perhaps means the wishful thinking of returning to rates of return prevalent in the 1990s. Trade ha been slower since 2008 too. It is now at 55% of global production. Stocks buybacks only produce illusory gains. The real productive rate of growth is nowhere near before the crash. Brexit, Trump, the ascendancy of protofascism in Europe and America are not just a coincidence. Sooner or later the white working class needs to realize that the problem is not the immigrant, the blacks and brown people, or, in general, the other. The problem is the system of production and distribution in which we live. Inequality and concentration of wealth on the one hand and poverty on the other are inherent to it. No need to blame people.
19
For most Americans tariffs are some distant component of international trade and of little direct significance, their shopping carts full of Chinese products at Walmart notwithstanding. It would be more useful to underscore that Donald Trump is imposing sales taxes of 10 to 25 percent with the full support of a Republican Congress. Would American support candidates who pledge to give the president power to impose a 25 percent sales tax? No way! But a tariff rationalized sd bringing pack a job in a steel mill sounds acceptable. A 25 percent sales tax to do the same thing, well not so much. Indeed, as corporate tax cuts reduce federal revenue there is increasing motivation to extend this selective federal sales tax to more items.....a 25 percent federal sales tax on $400 billion in Chinese goods produces $100 billion in revenue, masking completely the tax giveaway to corporations. Over time purchases of Chinese goods may fall, shrinking the tax take but that will not happen overnight.
And it is worth reminding Americans, frequently, that price increases at the gas pumps not only drains away their tax cut but is an enormous gift of foreign exchange to Russia. That's right folks, if you want to know why Vladimir Putin will give Donald Trump a great hug it will be for the billions of dollars Trump has shifted from American workers to the Russian state. Putin is happy to have American acceptance of the Crimean invasion but the real prize has been the golden shower from Trump.
20
You're so right. A rational case has been made on national security grounds, for decades now, for a tariff on imported oil. Nothing would deplete the coffers in Iran and Russia to make mischief better than a $1/gallon gasoline tax. It would have many other salubrious results, too, from cleaner air to safer cars.
But no. Instead of a good tax for myriad good reasons whose purpose can be honestly stated, we have a ridiculous tax to no purpose whose rationale is patent nonsense.
1
I have to say my major problem with your relentless drumbeat about the negative consequences of the imposition of tariffs and the likely disastrous outcome of a trade war is the continued climb of the stock markets.
If, as you say, your view is shared by an overwhelming majority of mainstream economists I would expect the markets would react accordingly, and as of today this is not the case. In fact, today the Dow had one of their best days in quite some time, which would seem to indicate to me at least Wall Street is not worried at all about an impending trade war.
There is one caveat, which may turn out to be prescient, and that is prior to the 2008 crash, specifically December 2007, the Dow hit its highest point to date at the time; the most recent high point for the Dow was in January of this year, it will be interesting to see if past is indeed prologue.
Stock buybacks are pushing stock prices, not investment or long-term profit projections. As the buybacks wane, we can expect a correction.
51
Yesterday was a good day for the DOW, but it is currently at its level of 6-7 months ago. A year of so ago Larry Summers described the upswing as a "sugar high", based on tax cuts for the stock-buying crowd, and buy-backs, neither of which is likely to get a second go-round. So, currently at least, it's a stretch to say there has been a "continued climb".
6
It's a good idea to keep on mind that stock market prices reflect the interplay of supply and demand for stocks, nothing more. There are several unusual factors in play right now. Tax cuts for the wealthy put more money in the hands of those who buy most stocks. Since the wealthy already consume as much as they want, they invested the gift. Corporations are using some of the funds repatriated from offshore tax havens to buy back their own shares and retire them, thus reducing supply and increasing reported earnings per outstanding share, and the appearance of success ("financial engineering"). These factors may be driving prices higher than they otherwise would be.
5
Clearly, tariffs will not improve the economy of the U.S. Nor will a trade war benefit the U.S. economy. It is likely that the war will result in the U.S. losing global market share. I think the early outcomes will be unfavorable to Republican members of Congress who represent agriculture States.
The last I checked the U.S. had a comparative advantage in food, aircraft, aircraft engines, medical services and military materiel that were reflected in our exports. We were also doing well in attracting foreign students to our universities.
No doubt there are some unfair trade issues, but we have international organizations to deal with these issues.
I thought the purpose of the U.S. was to foster global cooperation and set in motion a framework for achieving global macroeconomic stability and better living conditions on the planet.
I find the refugee problems from areas that are engaged in non-rational civil wars and crime infested areas, like Syria, Yemen, and Central America are incredible failures of the International organizations that were organized in 1945.
There are some successes, like nuclear arms control, and in the creation of common markets that facilitate non-tariff trade but there is still evidence of very high unemployment, unrealistic approaches to water, food & energy, and an unhealthy concentration of wealth.
There are no technical barriers to resolving global warming but we must organize an international response.
This trade war is not helpful.
6
Trump's "America First" translates to "America Only" as he isolates us from foreign affairs - while his low-brained supporters cheer him for it. He and Congress had a chance to do some good things (cut aid to Pakistan, get NATO nations to pay more), but Trump's using easy, ham-fisted tactics instead of analyzing the situation and making specific, targeted changes ... like China did to hit Trump states. But this was expected - he hasn't "grown into the job" and runs our country like he ran his casinos.. his "gut instinct" isn't good.
The Republicans always want to do anything possible to make the rich richer and create more of the mega-rich. This is not trickle down economics, it is "maybe something will fall off the table" economics. If we only let the rich get more money, maybe they will save us! Give us a raise. Give daddy a job. What if they don't? Well, at least the ownership class got more money, so things are fine.
There is a basic economic principle called "capital formation". It holds that a society or a nation cannot progress until capital forms pools of at least modest wealth so that investment can follow. We don't need that now, in America, in a highly developed nation with, in fact, billions of dollars ready and willing to invest in the next big idea. In fact, money now chases IPOs, start-ups and bold ideas, like Tesla. We are far beyond the primitive stage. Still, worshiping a myth works politically, for some because many don't see the falsehoods behind it.
Obama got enormous discredit for the Great Recession which was birthed during the administration of G.W. Bush, who handed Obama two wars and the entire world on the brink of financial collapse. Trump, on the other hand, was gifted a growing economy and, until it starts to sink again, many will now think he made it happen. Facts don't matter because propaganda and mythology are more important, more desirable.
Trump is setting the table for another economic whirl wind, a big downturn, and his tariffs are just the tip of the iceberg.
74
I could write a detailed lengthy comment on these tariffs, but the simple truth is that last years Ryan "Duties" are now Trump's Tariffs meant to offset the exorbitant budget deficits the Tax Cuts will create over the next ten years, to the tune of 1.27 Trillion Dollars. The tariffs are just another tax on consumers to to make up for the decades budget shortfalls. Last year the term "Duties" resulted in a public backlash that knew it was a consumer tax. Fast forward to now, Trump changed the name to dupe the public. It worked.
18
Another distressing aspect of Trump's protectionism is the reaction by those on the left who epitomize the fact that "protectionism is the progressivism of fools". Bernie Sanders and Senator Sherrod Brown (D-Ohio) are prime examples of the "progressivism of fools" branch of protectionists. The only objective of tariffs supported by those on the left is to transfer wealth to the employees and owners of favored domestic producers. That the costs and losses to the rest of Americans far exceeded the gains to the employees and owners of favored domestic producers is never a concern of the "progressivism of fools" branch.
Rather than finally realizing that protectionism lowers standards of living for everyone, the many Democrats whom have been traditionally protectionists, are not rejecting protectionism, but simply complaining that Trump is not engaging in the correct type of protectionism. The "progressivism of fools" branch of protectionists generally only say that Trump policies are the wrong type of protectionism, but do not seem to give any details as to what they think correct type of protectionism would entail. Even worse some of the Democrats seem to be embracing the fallacious arguments regarding national defense reasons for protectionism.
With some significant exceptions, most of the Republicans who previously have supported free trade are either conspicuously quiet on the subject or come up with excuses for Trump's .."
https://seekingalpha.com/article/4184866
6
I can help you out with the right kind of protectionism. I don't even think it's complicated.
This country has protection for workers and the environment. In my view those protections should be stronger, but in the view of many capitalists, they should be weakened. We also protect patents and copyrights. In my view those protections far exceed their public benefit — explain to my why Mickey Mouse is still copyrighted — but many capitalists want to see our protections globalized.
Our "free trade" agreements uniformly serve the capitalist agenda: international protections for "intellectual property", and international nonprotection for workers and the environment. We export the exploitation of workers and the environment abroad in exchange for cheaper goods and cleaner air here. We also shackle ourselves to unnecessarily expensive drugs and even music. Any progressive change to those agreements would be on those axes.
Progressives also recognize the role globalization has had in wage suppression and income inequality. All gains due to productivity growth since 1979 have gone to the top 20% of wage earners; 70% went to the top 0.01%. The median wage sank, meanwhile, by 10%.
The right and fair and efficient policy response is not to rescind free trade, but to redistribute the wealth that (perhaps inadvertently) accrued so unequally. That is, a wealth and income tax proportionate to the inequality created by "free trade" policies.
2
Trump's tariffs have had several other unintended consequences like solar panels dropping in price, or plunging as Bloomberg put it, bloomberg.com/news/videos/2018-06-21/solar-panel-prices-tank-after-china... .
The Chinese dropped their supports for prices and the market experienced a glut so the prices fell rapidly.
To be sure US companies are laying off workers in the industry but that's uncertainty, not prices.
That uncertainty will ripple thru the country while Trump goes off like a loose canon for our economy. Businesses with cash will sit on it or buy back their stock while others will hold off on loans and expansion.
It's difficult to say what motivates Trump, it's not that he's inscrutable, he was described by Barney Frank as "irrational" a year ago and that seems, to me, to be the best way to describe him.
The Chinese have been masters at business and hegemonic practice for thousands of years. Trump? Didn't he drive casinos into the ground?
I suppose pig farmers could buy all those cheap soy beans and feed it to their hogs!
4
I’m calling much of what Trump does as “Playing Putin.” Oligarchs, Russian or American, are favored by Trump as well as, Putin. In America the middle to lower classes earn little while those with wealth earn far too much through the tax cut. Every move of Trump’s right now favors Putin. There is the ridicule and bashing of the the G7 and then Trump agrees to no S. Korea/U.S. military exercises. Putin, smiles, of course. Next will be the continued attack of NATO and Putin smiles and rests easier that he can reclaim whatever territory he wants. As Commander in Chief of America it looks more and more treasonous that Trump plays to Putin’s wishes while ignoring America’s long term agreements with our “friendly” nations. One quarter is not a final indicator, but a year plus makes Trump’s moves dangerous to America.
11
How does Tofu fit into the Trump trade war and tariffs? Chinese leaders should encourage Chinese to cut back on pork, may be out of patriotism. If plant protein from soybean is used for direct human consumption instead of feeding pigs, China will not need to import as much. It will change the basic supply/demand equation. Tofu is more healthy than bacon anyway. However, I read that economic calculation is rational. Politics? Not so much. Too bad economics always got tangled up with politics. That's where rational people can misread the craziness of politicians, especially one playing the part of a politician.
2
Half the world's pigs live in China. Most cars are manufactured in China. China used to make the most motorcycles too, but India took the #1 spot. Someday, perhaps soon, Americans will discover they are not the center of the universe.
China has now increased their subsidies of soybean as well, though nothing like what America does. China is actually self-sufficient in food production. They just buy American food because it's cheap.
America exports food because American taxpayers heavily subsidize the production of said food, which is then dumped on the world a less cost than it takes to actually grow.
So, now you have tariffs and boycotts on US farm products, which will mean even more farm subsidies at US taxpayer expense (or rather more debt), and this farm produce will then be dumped at firesale prices. In the near term, more farmers in poor countries will go under, not being able to compete against the insane US subsidies. In the long term, the bill will come due for Americans, likely in the form of very high inflation. It's the only way they'll ever be able to deal with their debt.
Proverbs 22.7 "the borrower becomes the lender's slave" No one talks about the debt we owe to China, which is several trillions. Maybe Mr. Krugman can explain to us how this tariff war can be won when we owed Trillions to all these countries. What would happen if they say: pay me....
4
You don’t understand debt. When the country borrows, because we have a fiat currency, we are borrowing from ourselves. China invests, or buys that “debt.” It’s not like we are borrowing money from China. We can pay that debt tomorrow if we want by minting a single coin. It’s not at all like the Greek debt crisis. They do not have a fiat currency, they have euros so they literally had to borrow from the EU. America’s currency doesn’t work like that.
4
Jude, you have really hit on why person debt and national debt is not the same thing. Wish the Democrats would use your explanation on the campaign trail. I teach modern world history in high school. I explain this to my kids and they never thought of debt this way.
I don't think you should be using Proverbs as your economic Bible.
“Lower taxes on corporations would lead to a huge surge of investment, …. would eventually be passed on to workers in higher wages…… hourly wages of ordinary workers were slightly lower in May than they were a year earlier.”
-Paul Krugman-Today
“Some people continue to defend trickle-down theories which assume that economic growth,…. will inevitably succeed in bringing about greater justice and inclusiveness in the world,”...
“Meanwhile, the excluded are still waiting.”
-Pope Francis-2013
Seems like Paul and the Pope have it figured out. We’re still waiting.
10
If tariffs damage farmers, some would switch to corn other commodities and survive, others would sell out. Would think Chinese companies would begin buying up farms in the Midwest at rock bottom prices once S &P really cracks and trade war fallout crashes farm prices, along with pork, corn, soybean and other commodities in the mix. In other words, everyone is in search of better trade agreements, but they don't happen. So, why not get around tariffs through buying up farms on the cheap?
3
Trump does what he does (THIS IS NOT A POLICY) because he understands the average American, since they are his marks. They have no retirement savings, they have credit card debt, they don’t read or watch the news and they are easily fooled by sincere-seeming con men. Trump is only focused on today; what can I sell you right now. When tomorrow comes whatever it might brings, he will sell Americans something else. The sad fact is, he will most likely get away with it.
43
Maybe this is the time for liberals to think about the long term, use our IRA’s and 401K’s to buy at low prices those businesses whose stocks were most hurt by the “easily won” trade war, and then put our corporate money behind politicians who support better trade relations.
2
In fact, it looks as if the trade war is in general going to hurt Trump’s supporters more than his opponents.
Good! At this point I’ll take a little pain if it causes a lot of pain to Trumpers.
7
Trump doesn't care about the long-term effects of his policies, as long the GOP basis remains enthralled by the Trump show. And neither does the GOP itself. And now that Fox and the White House have normalized lying nothing short of another depression is going to change that.
Steel prices are rising? The work of unscrupulous speculators! Soybean farmer go belly up? The EU is killing us with their silly food safety regulations! None of this is going to have any political effect, because Republicans have checked their rationality at the entrance to Trump's circus.
As long as Trump is "tough" on immigration, and activist Supreme Court judges roll back 40 years of precedent, all will be just beautiful.
15
How long will it take the Trumpublicans to realize that increased healthcare costs, fallout from Trump’s trade war, rising gasoline prices, increased rents, etc., have already eaten up their wondrous GOP tax break?
Trump’s continued support reconfirms that: It is easier to con a man than it is to get him to admit he has been conned.
19
It's not a case of having eaten up the GOP tax breaks, it is about having eaten up any growth in wages since 2016. It is all about bending the real wage curve downward and leaving more and more Americans unable earn enough to achieve their American dream.
Thank you, Dr. Krugman, for pointing out that looking at short term numbers is meaningless. But, sadly, too many in this country are obsessed with looking at and reporting on numbers even though precious few have to tools, capacity and patience to truly understand what those numbers say. From the daily reporting of what's happened to the Dow Jones Index or in NASDAQ (which somehow has managed to become a proxy for economic health) to the numerous daily polls on how we feel about things (which amazingly have become the basis for making policy) to the often unsubstantiated billions of dollars of gains or losses bandied about in relation to the tax cuts and the impending trade war, we are awash in a mind-numbing tsunami of numbers.
That way too often these numbers are reported without any context or explanation is beside the point. Small wonder, then, that those who use these numbers can twist them in whatever way best suits their purposes. By the time the real manifestation of what's going on behind these numbers hits home, it is too late.
And then the numbers cycle will begin anew.
9
I'm sorry to be so repetitive, but I have a reason.........
The price of oil is what crippled the world's economies at the same time and the drop in world oil prices is what allowed the long duration rise in employment and greater world growth.
The entire world economy tracked the price of oil over time, decades for that matter.
When Trump embarked on his campaign, the price of oil was 27 dollars per barrel and at this time is just below 75 dollars.
The entrenched costs of energy and raw materials made from oil rising will inhibit economic benefits of the tax cuts.
As the price of fossil fuels goes, so goes the world's economic health.
27
Total sales to China only amount to less than one percent of GDP. What bothers me is that China is trying to manipulate our political system with tariffs in much the same way as Putin tried to get Trump elected. Maybe Mueller should investigate this Chinese manipulation. I would not call this a trade war, but rather a "trade transition" in which we find better trading partners. The Chinese have never been fair, or our friends.
Trump can't even maintain trade with Canada. Who are you expecting to trade with? You want better partners? Who? Russia? North Korea?
Do you really want a list of nations Trump has bollixed up trade with? It's a long list.
2
With friends like Trump, they don't need enemies.
Perhaps the reason that The White House doesn't fully grasp what its trade (non)policy is doing is that there is no one in the administration who understands trade policy, let alone economics.
Donald Trump and the Republicans knew full well that the tax cut would benefit their donor base but not their voting base. But the fact is neither the president nor his Congressional lackeys care about the poor schlepps who voted them into office. Why else would they make such a big deal about taking away the life-saving health insurance President Obama and the Democrats gave them?
That can't be said about the trade war Republicans in Congress refuse to put a halt to even though many of them have voiced objections to it. They know full well it will cost Americans both jobs and money. Soybean farmers are simply the first to confront a Trump Reality: If he says something is white, you can put money on it being any color other than white.
29
"In fact, it looks as if the trade war is in general going to hurt Trump’s supporters more than his opponents."
Expertise matters. Emotional stability matters. Votes matter. This was inevitable.
The "Confidence Fairy" may be a myth but the "Accountability Fairy" is real.
35
Maybe the soy beans that were destined for China before Trump’s tariff can be used to feed people in our country. It’s looking like Trump’s poorly thought out tariffs will be costing jobs and raising prices in the near future. If Trump is not indicted before the 2018 elections he may well be facing a Congress that is controlled by Democrats in the House or Senate.
9
One of the huge revelations of the past several years of economics discussion is that truth in economics plays no role in economics policy, at least when some factions are in power. People going to grad school in economics-related fields stay up late studying, working on research and so forth, sweating over exams, and for what? So fools in elected office can do what they want without regard for what the findings of real economics are. Instead, the wishes of the lobbyists who have the ears of politicians are the basis of the policies developed.
This is a very broad trend, with attacks on everything from space science and the great moon missions of a generation ago to sound medicine and nutrition.
Until some stunned politicians look around at the rubble of their collapsed ideas and ask what the H happened, it's hard to be optimistic about progress.
44
Trump is no doubt banking on his fan base feeling sated enough on resentment and fueled enough by his faux-persecution at the hands of the Fake News Media to totally miss the sudden lack of food on their tables and affordable gas in their cars.
With any luck the fans will start correlating the hard times to come with their beloved anti- hero. I wouldn't bank on it, though. November is creeping up fast, even faster than the hive-mind of the GOP is descending into full-fledged dementia and even faster than the strength is seeping from their withered carcasses. Mitch McConnell can't even go to a restaurant in deep red Kentucky without being heckled by the Democratic Socialists of America.
So I hope that those short-term gains are quickly joined by enough pain in enough people to knock some sense into them. Surely, the survival instinct will trump any loyalty they feel to Boss Trump!
Surely the glut of soybeans on the American market and the ensuing rush to buy "365 Ways to Cook Tofu" on Amazon will make them rethink their electoral choices.
So many ifs, ands and buts. All I can say is that the Brits couldn't have picked a better time to launch their gigantic Trump baby balloon, complete with giant diapered butt, just in time for his stealth visit to London to meet the Queen.
Trump has actually stooped so low that he is attacking breastfeeding mothers and babies. That's how cruel and insecure he is. That's how dangerous he is.
https://kmgarcia2000.blogspot.com/
123
Look, I detest tRump, and I spend time on breitbart debating with deplorables.
But so far, all I've seen are stories regarding U.S. steel mills starting up again and re-hiring workers. The Chicago Tribune ran a story on this, noting that in addition to the steel jobs, other local businesses are benefiting as well.
I've also read all the dire predictions about the tariffs. and while I'm not disputing what economists are saying, the point is that if these predictions don't pan out-and soon-Dems will be slaughtered like lambs in November as the republicans run on increased jobs and GDP numbers from tax cuts and tariffs.
8
America's largest nail manufacturer is close to or is shutting down, Harley Davidson and other companies have announced shifting manufacturing overseas to prevent losing markets, the tariffs just went onto effect and can be expected to continue.
Debating with people of the basket may be amusing, but you cannot expect to sway ANY minds.
As for November - news can break at any time that will destroy the Republican hold over the congress - one if not both houses. Be patient.
37
the fact is, if these tactics work and the economy keeps on booming, maybe we're wrong and trump is right. there's always the possibility of that.
the trouble is, trump hasn't been right about anything yet. this would be a good time to start, but it looks iffy.
1
The trump admin keeps saying the idea of the tariffs is to force other countries to remove all trade barriers.
Thing is, that could backfire because trade deficits could actually increase if that were to happen.
For example, Germans have little interest in American cars while we love Mercedes BMW and Audi.
Also, we have a 25% duty on pickup trucks, the most popular vehicle type. If that's removed, it's possible that American automakers could lose market share in this highly profitable segment of the industry.
The argument is that a tariff (a tax) will raise the cost to producers and to consumers. Agreed.
However, if foreign demand for US goods is reduced because of a tariff, wouldn't that lower the price of domestically produced goods domestically?
The end result really can't be anticipated, but if more Americans are working, then they have more income and can afford higher prices, if that comes about. Doesn't it?
1
Since wages are still flat with unemployment at 4% the extra money is not going far. If demand for exports slow so will the need to make as many of a particular product.
7
Unfortunately, our markets look at the short-term and not the long-term. And, as you note, the news will be good. But, will the floor fall out as it did in 2008? It all depends on whether the trade war escalates as Trump keeps threatening. But, even if it doesn't, the Chinese and the Europeans have targeted their retaliatory tariffs toward the denizens of Trumpland. The farmers are already waving their pitchforks, but will more of the Trump base join them? It just may (hopefully) turn out that "trade wars are easy to win" if you're a Democrat running against a red state Republican. We can only hope so.
52
The unemployment rate is a lag indicator. The lead indicators Prof. Krugman mentioned are down. When the Chinese complaints about higher tofu and soybean oil prices go viral, and everybody in China with a wok buys soybean oil, the government will blame the US. And they will be justified. The tariffs do nobody any good, but to Mr. Trump that's not the point, is it?
29
There are big lies waiting in the wings
With self praises as Donald sings,
It will be his trade war
He'll be itching for more
What comfort a disaster brings.
Will soybean farmers blame the Don,
When usual lies will be spun
Or call it a plot
China uses a lot
Fall patiently for the Don's con?
34
Martin Luther King was right All they can hear are the whispers of that old psychological bird.
https://www.rimaregas.com/2016/11/22/martin-luther-king-saturating-the-t...
3
Maybe the tax cut did not do what was supposedly promised, but it did what was actually intended, to award the fat cats who donated millions to Republicans.
352
Exactly- a payoff to the donor class.
11
The truth favors the simple.
Here in Quebec we have just experienced our hottest week in history and Quebec is very large. Five hundred and ninety five square miles and lots of water and our soy beans are the best I have ever eaten. Quebec's pork producers are chomping at the bit. Mark Twain's Mysterious Stranger might say nothing is so bad that somebody doesn't benefit and for the family farmers that our government has protected all these years Donald Trump is the best president they have ever had. it will take years to shift agriculture production to crops most of us haven't seen but legumes will enrich both our soil and our pocketbook.
I have never understood massive corn production when protein crops are what the world needs.
I understand this op-ed but from this side of the border we may hate Donald Trump in the short term but long term there is going to be great pain for our most vital trading partner and on food production I trust my provincial and federal government to do the right thing and wean us away from your economic orbit.
214
At least corn is not estrogenic. Soy is hugely so. If so was so wonderful, why have ancient cultures only used it fermented or in very small quantities?
2
Probably similar to the reason that many ancient cultures practiced infanticide, human sacrifice, and barred women from participation in society. In other words, their superior wisdom.
Five hundred and ninety five thousand square miles.
So sorry
Since those who created this problem with short sightedness they will reap what they sow. Culture wars can not be fought with tariffs or tax cuts, you are seeing a postponement of investment that is a definite drag on economic growth.
17
" Short-term growth is noise, signifying nothing ". What a remarkable coincidence. Everything from Trumps mouth is nonsense and lies, signifying disaster and corruption. You sure can pick'em, GOP.
November. Seriously.
93
The tax cut is turning out like the Kansas experiment, but on a national scale.
272
"If you look at job growth you see a steady upward trend, seemingly unaffected by political events."
It all depends on who we are talking about. Professor Krugman used to write about the older workers who lost their jobs to the Great Recession. Millions of them never recovered. Millions of their children, saddled with college debt and jobs that aren't sustaining, live at home, still, in multi-generational arrangements never before seen in our history in such numbers. We have a new economy of gigs and very low paying jobs.
Corporations, Wall Street, are doing exceedingly well in this Ferengi economy. After 10 years, people who haven't had a good job for so long will take anything they can get, however they can get it. We saw documentaries about people in their sixties and seventies working at Amazon distribution centers, living rent-free in their RVs. We heard about elderly people doing stocking work at night at Walmart in Arkansas. This is the dystopian present too many Americans believed Trump was going to fix, and couldn't believe the left refused to address...
We've stopped reading about the precarious conditions so many Americans live under, but precarity still exists and it will continue to fester until the next FDR is allowed to rise.
---
https://www.rimaregas.com/2016/11/27/silent-class-revolt-most-democrats-...
148
"in multi-generational arrangements never before seen in our history in such numbers"
No, Rima, not seen in such numbers in recent decades.
Pre-WWII and SS most Americans lived in multi-generational arrangements -- maybe did not like it so much, as once SS and good pensions became available after WWII, families split up into the nuclear family arrangements most of us grew up in and became accustomed to seeing as the norm. Children before WWII generally did not leave their birth household until they married out, and many remained working on their parents farms, which they expected to inherit. This increased with the Great Depression, as many delayed marriage, setting up their own household, having children due to the Great Depression. And many young married people could not afford their own household so continued to live with one or the other's parents. Many also lived in boarding houses, which are few and far between now. We have come to expect a much higher standard of living than people expected in the past.
But I do agree that many young adults are still living with parents that would have set up their own independent households a generation or two ago, in the decades of second half of the last century, due to education debt/lost years of working/saving after the meltdown/high housing prices. I also agree that many older people lost ground and much better paying jobs after the meltdown and have never recovered their savings, dignity, financial stability.
4
Buffalo,
You can dispute Pew Research. They put out a big study in 2016.
It is quoted here extensively.
https://www.rimaregas.com/2016/06/03/profiling-the-angry-american-in-thi...
1
Buffalo,
You wrote:
"Children before WWII generally did not leave their birth household until they married out, and many remained working on their parents farms, which they expected to inherit. This increased with the Great Depression, as many delayed marriage, setting up their own household, having children due to the Great Depression."
This is incorrect.
If you look at Pew's graphic, you will see that current living arrangements edge out that of the Civil War and Depression eras. You can get further analysis information from the study, which is linked.
I always appreciate your columns Dr. Krugman. They are chock full of statistics and logic with sound analysis. However, I keep thinking that you are not standing far back enough to see the what your numbers are all leading up to.
I have asked the question previously a few times, and I will ask it again. What if there is a massive reorganization of the trillions in national/global trade to make new winners and losers - on purpose ?
What if there innumerable back room and hidden deals with the President, his family and his backers (in and out of the administration) ? It would seem, just on the surface, that there have been a lot of short deals already so far. (that we know about)
This administration is taking for granted the base - the ''heartland'' (as republican do generally all the time ) while they may be striking at power bases that normally support the other side. ( in particular unions )
The end game is to buy up industries/ or whole sectors for pennies on the dollar for when they get decimated by said trade wars and tariffs.
I am no conspiracy theorist, however, I would like very much (as I think others) to hear your point(s) of view on this beyond your strict interpretations and modest points of view ?
Regards,
170
Funky,
I am not Krugman and I am not an economist happy to answer your question and soy and pork are a great place to start but let us start by going back to High School biology and nitrogen fixing bacteria and legumes.Soy beans are legumes and provide a habitat for those wonderful bacteria that are a basis for protein. Corn is a carbohydrate and need lots of water and fertilizer and in terms of conversion produces as much energy as it takes in. Corn is a luxury food fit for the diet in very wealthy countries.
Chrystia Freeland Canada's Minister of Foreign Affairs and our head of Nafta negotiation was an economics journalist. She focused on Russia and her two books Sale of the Century and Plutocrats: The Rise of the Global Super-Rich and the Fall of Everyone Else tells the story of how Plutocracy came to dominate. She explains the rapid rise of the Plutocrats in terms of simple economics and makes it perfectly clear there was no conspiracy just good old economic know how.
15
Yes you are correct. We need to look at stock shorts and how they are affecting market swings.
Also, as small firms and farms go under, deep pocketed agri-companies will swoop in and grab land and water rights.
An increase in food cost can really hurt families.
23
I don't think there's any "what if" about it. We're seeing collusion of the boundlessly greedy on a massive scale.
18
Just a guess but most of any large capitol investments were budgeted way before the tax cuts and if there is a wildcard in the mix most large companies would hold off new investment until it became clear which way the economy was going to go... I would say trump is a wildcard and the tariffs are slop so much so that it’s time to fold and hold your cash until you’ve got aces or a straight flush. I know in my former industry one year was a minute and until they see which way the winds blowing they’re not going out to sea
2
To Trump voters, Republican voters for that matter, none of this will matter until well after it is too late. That is how they were indoctrinated to think. Tell them Trump is a traitor and they don't care. Show them some evidence that not all was right, and they don't care. Show them their elected representatives just went to Moscow, and they still don't care.
When Trump told them, just as Martin Luther King described decades ago, they cared!
"“If it may be said of the slavery era that the white man took the world and gave the Negro Jesus, then it may be said of the Reconstruction era that the southern aristocracy took the world and gave the poor white man Jim Crow. (Yes, sir) He gave him Jim Crow. (Uh huh) And when his wrinkled stomach cried out for the food that his empty pockets could not provide, (Yes, sir) he ate Jim Crow, a psychological bird that told him that no matter how bad off he was, at least he was a white man, better than the black man. And he ate Jim Crow. And when his undernourished children cried out for the necessities that his low wages could not provide, he showed them the Jim Crow signs on the buses and in the stores, on the streets and in the public buildings. And his children, too, learned to feed upon Jim Crow, (Speak) their last outpost of psychological oblivion."
Racial divide and conquer is where America still is and what must fundamentally change.
--
https://www.rimaregas.com/2018/06/18/white-liberals-selfsoothing-sprinkl...
106
Racial divide and conquer, economic divide and conquer, social divide and conquer - divide and conquer in general, is a destructive tack that America must wean itself of. It seems that we can't manage our politics without some form of it.
Trump is not the only ruler by which we measure wrong. Not Trump does not equal good. Not Trump is not a policy alternative. What will it take for the Democratic leadership stand up and stand out?
---
https://www.rimaregas.com/2018/06/25/white-liberals-self-soothing-part-t...
27
If by "democratic leadership" you mean putting every issue through a racial and gender filter, I hope they don't stand up. It's that fragmentation of the democratic base that lost them a large fragment of it, white males (and a lot of females). It was a piece that they couldn't afford to lose. Their strategy, therefore, was to sow division *within* their own base. Monumentally stupid. The price is being paid now, and you're not helping by putting even trade policy through the same divisive lens.
*Actual* leaders will make policy that helps everyone who needs help in the face of the corporate goliath. Democrats used to be good at that. They better get good at it again, and fast. They have dug themselves a deep hole.
Steven Z
Everything in America intersects at race, gender, and class. When you Photoshop them out, the result is a fantasy. Reality always catches up.
https://www.rimaregas.com/2018/06/19/trump-and-the-gop-more-jim-crow-tha...
2
Progressives should work harder to correctly label these tariffs as the new taxes being imposed, which they really are. The Disgraceful POTUS is engaging in subterfuge by pretending he isn't raising taxes - and primarily on his base.
256
I agree with your assessment of these new tariffs and its true nature as a tax increase on the public but progressives have railed against trade and its impact on lost jobs in the U.S. to switch their narrative that trade barriers are wrong.
What I don't understand is why Democrats aren't trumpeting "Trump's failed tax cuts" and "Trump's disastrous trade war" the way the republicans blasted Obama. In the latter case, the truth was opposite but in the case of Trump, his policies really are a disaster and failure.
579
"Trump's failed tax cuts": The GOP promised 1) GDP growth of 3% to 4% and 2) that consequent growth in tax revenues would pay for (cover) the reduced tax rates. Most economists agree that such growth rate is unlikely and that deficits would increase rather than be covered. But those are still "views" and not a fact yet.
"Trump's disastrous trade war": Trump trumpeted that "trade wars and good and easy to win." It has only begun and the disasters have yet to materialize.
You see, the Democrats are more responsible than the GOP.
3
Democrats appear weak. The liberal media appear weak. Mueller appears weak.
Trump is going to Helsinki to meet one-on-one with Putin, who he considers to be "fine." As a quid pro quo, could he give up U.S. military secrets? Could he make the U.S. vulnerable to a Russian cyberattack? Could he give up nuclear secrets? Does he have the power to do these things? And who would know about it?
Trump is nominating a Supreme Court justice who could influence the results of the Mueller investigation. This nominee could say anything to get confirmed by the Senate, and then do anything else afterwards.
This column talks about tariffs. But the central question is how we can allow a single person, and a potentially severely compromised one at that, wield such power? What is the plan? What are we doing?
1
Unfortunately, the Democratic politicians appear to be so uncertain as to what they stand for, what type of future they want for the US, and how they should craft thir election message that they may as well be statues or ice sculptures.
2
Soybeans do not an economy make. Last year, we exported 12.4 billion dollars worth of soybeans to China. We have a roughly 19 trillion dollar economy. That's 4.75 trillion per quarter of GDP. 12.4B/4.75T is 0.26 percent. How does a surge of soybeans in one quarter push quarterly growth by 0.6% if that figure is 28.5 billion which is over twice last years total sales? You can't get there from here.
But what the tariffs will do is collapse the price for soybeans to where farmers lose money. Their margins are thin. When supply exceeds demand, the price craters. That's what is happening. This has a highly negative effect on a relatively few individuals, namely soybean farmers. Good for them. They deserve it for supporting Trump.
The real damage will occur in manufacturing. The input costs to our industries will rise above what keeps our products cost competitive on the global market. That's a whole bunch of jobs, potentially millions when the effects of reduced sales ripple through all supply and sales chains.
So if we see a pop in GDP growth of 4% this quarter, then either Trump's people cooked the books, the figure is total fake news, or it didn't come from soybeans.
Besides, it usually takes two additional quarters to get a reasonably accurate quarterly GDP growth number because they always get revised, and often quite substantially. We will have a good estimate of second quarter GDP in Jan. 2019.
174
Thanks Bruce, that number sounded awfully suspect.
Almost every working American can tell the same story: tax cuts do not increase the standard of living, do not lead to higher wages, and do not bring jobs back to America. If I'm a business and I have my money in an offshore bank and I'm incorporated in a country where the tax structure is advantageous I'm not going to return to America. It took me time to develop the relationships I needed where my money is. I moved jobs overseas or outsourced them to make more money. The cost of living in the United States has not come down. Americans will not accept wages that do not pay the bills unless they are desperate, uneducated or both. As a corporation I have no interest in improving the life of the average American. It's all about profits.
The tariffs don't matter to me either if I'm in another country, if I relocate jobs to continue to satisfy my shareholders. Trump is lying or he doesn't understand how businesses work. Large well run companies can ride out disturbances like Trump. It's the average citizen who cannot. As a corporation I don't care about citizens. I don't see them as necessary no matter what country I'm in. I can always move jobs to a cheaper place. If Trump doesn't understand that that's not my problem. If the GOP doesn't understand that they haven't been paying attention for the last 40 years. Your poverty is not my concern.
173
it is becoming clear that Trump's assertions that "trade wars are easy to win" were fallacious. No one ever wins a trade war, just some lose more than others. The retaliating nations have a tremendous advantage of those instigating protectionism. This can be seen with tariffs on steel and aluminum that increases the costs of every product made in the USA that uses those metals. Thus, American consumers and producers are already net losers from these ill-advised protectionist tariffs, even before any retaliation. These tariffs increase consumer prices and make products produced in the USA less competitive relative to those made outside the USA using steel and aluminum priced at the world market rather than the artificially propped-up, protected US steel market.
As Trump discovered when a retaliatory tariff was put on US motorcycles (Harley-Davidson(HOG)) that will not raise any costs on any EU producers or raise prices for anyone in the EU, except for buyers of motorcycles, the cost to the retaliating nations is miniscule. HOG has announced it will have to shift production outside of the USA as a result of the tariffs. Thus, on top of the costs to American consumers, producers and exporters of the steel and aluminum tariffs, before any retaliation, American workers at HOG lose jobs and shareholders of HOG suffer as well..."
https://seekingalpha.com/article/4184866
2
I'm going to have to disagree with Paul on this. China has no alternative to American soybeans. Expect demand to return, the price to the Chinese will be a little higher, but not much. Brazil will mown down a few more million acres of the Amazon and a couple more Brazilians will get rich.
The American farmer, if he is worried, should be worried about global warming.
24
An article a couple days ago said China is subsidizing their farmers to produce soybeans - though farmers said soybeans are so cheap, they wouldn't grow them without subsidies (this sounds similar to US dairy farmers who get $22B/year in subsidies). Even before tariffs China was increasing pork production.
I believe there will be long-term ramifications with tariffs - other countries will make trade agreements among themselves and increase their own production. Trump will cause the US to lose market share and some may never come back.
8
We have to learn that the United States is no longer the center of the universe. Brazil supplies about 50% of China's imports of soybeans. Argentina also supplies soybeans to China but has problems with frequent droughts. If Chinese tariffs on US beans continue, Brazil could increase soybean acreage, and Argentina could have a good year. Even so, China would still need some imports from the USA, but a reduced amount. Political vitriol will probably make the US loss of market share permanent. Arrogance is not a good negotiating tactic.
70
Russia (!) has also just recently cut a deal with China to increase their production of soybeans. China will have alternatives very soon, but America's farmers cannot find new customers at a larger scale.
Once Brazil, Russia and others have beefed up their soybean production, the US farmers are out of that part of the business for good.
MAGA.
10
Short term growth reports are molded by seasonal variables like winter snows or summer's worker vacations much like those variables mold quarterly employment reports.
Early on, we all knew the tax cuts were a payback by Republicans for the big wins they incurred as a result of the Citizen's United decision opening the floodgates of corporate money to elect their favorite representatives, the Republicans.
Then along came the problem of how to offset the 1.27 trillion dollar ten year deficit they created, a significant budget shortfall.
Last year, giving some credit to the devious Republican strategy forethought, the Republican Speaker Ryan proposed "Duties" on imported goods, obviously meant to fill the government coffers before the tax cuts passed, but the astute American public quickly recognized the "Duties" as a new consumer tax. The idea quickly faded, or so we thought.
Trump resurrected the idea of offsetting the Tax cuts budget shortfalls by cunningly deceiving the nation by renaming the Ryan "Duties"; Tariffs which upon presentation and unthinking ways seems like a tax on the countries sending the goods here. It even fooled me for a day. The fact remains, the tariffs are a consumer tax just with a different name to fool everyone, and they were fooled.
So now we face extraordinary consumer taxes that are building by the week and threatening to drive our economy into recession or worse.
Trump must back off his war posturing. We are more important than his Ego.
63
Shakinspear: Don’t hold yer breath till that happens.
1
How do we get that hard core Trump supporter to see the bait and switch they have just had played on them? Do we show a before and after tax cut pay check of Paul Ryans school secretary with her whopping $1.50 a week increase and then the effect of a Trumps import taxes will have on the cost of those imported goods at her local Walmart?
Or maybe explain to that pickup truck loving red state citizen how a 25% import tax on foreign produced trucks makes them extremely profitable for US manufacturers but extremely expensive for them.
Not sure any of this can break into their bubble of fake news and propaganda spewed daily from the White House and right wing media. But might be worth a try.
78
Chris, et al.,
"How do we get that hard core Trump supporter to see the bait and switch they have just had played on them?" Sadly, you can't. Why? Because their support for Trump is strictly emotional.
Yeah, people are being played, but they don't care because "it feels so good!" Angry, want to poke "the man" in the eye? That is what Trump has convinced a lot of people that he is doing. Just like his "University", his ventures, his TV Show, and even his "Brand" it's all show, all sham, none of it is real, but he does make you feel good. "Are you not entertained?"
2
I moved from Chicago to Rock Hall, MD 17 yrs ago, a farming community. I listened to farmers and I learned that farmers, have special skills and savvy. Rainfall or heat may make wide swings in crop size. Too much crop leads to low prices, droughts cause year to year variations that have to be dealt with. The cash crops here are Beans, Corm and Wheat in rotation. Farmers may have to adjust their rotation or find another crop but they will find a way, certainly before November. So:
- Overall, the tariffs are a really stupid idea but will not affect the farmers as much as the commodity market in Chicago. Tariffs are taxes and if they designed to soften the budget deficit, it is a hidden tax and I wonder why Grover Norquist is not yelling, well, because of hypocracy.
- We have a good economy now but with structural problems of an advanced economy dealing in wants (for the top 30%) rather than needs. The problem is income disparity and relative poverty at the lower 50% of the income scale. So, it is a bad economy for too many vulnerable people.
- Where do we go for answers? The oligarchs who want more profits and cheaper labor? aka the Trumps of the world? I don't think so. Dreaded "liberal" ideas Tax policy, unions, socialism, subsidized wages, guaranteed income? Or trickle-down (trick)?
- In now way does the Trump crowd think of this other than how business can keep high profits and pay for Trump properties.
64
Farming will go on, but for many the commodity price drop offs will lead to bankruptcy. Most American farmers grow corn or soybeans and across most of the midwest farm income has been plummeting with the price of corn and soybeans. Bankruptcy filings by farmers were already substantially up across the midwest in 2017, a trend that will only be exacerbated in 2018 if prices move even lower.
"Overall, the tariffs are a really stupid idea but will not affect the farmers as much as the commodity market in Chicago."
I'm afraid the farmers will be affected - all futures prices converge to the cash price at expiry. And if farmers are under-hedged or worse, hedged in the wrong direction, they will feel even more pain.
Nothing is to stop Canada from buying US soy at depressed prices and selling them to China at a price that allows Canada to profit but less than China would have to pay if they bought them from the US. A win-win... for China and Canada.
154
Cheaper for China to buy them directly from Brazil. Might be a long time before we get that market back. Maybe U.S. soybean farmers can change careers and start mining coal?
6
Appears to already be happening in South America; they're buying beans from us at depressed prices to feed their livestock while China buys Brazilian/Argentinian beans at a big premium over ours. (Actually with the infrastructure setups, it may be them buying our beans and then just immediately turning them around to resell to China, cause why not make easy money being a middleman?)
1
Sure they do. First, Brazil has massive room to expand and improve, particularly now with so much money it'll be better infrastructure making them all the more competitive and from the tropics, their beans are better than ours, i.e. higher calories and protein.
Next, soybeans are mainly used to feed animals; China takes a national policy to reduce meat consumption, prices will fall off a cliff.
Finally, American farmers are some of the biggest contributors to global warming; not only because of the resources they consume and greenhouse gases emitted(think cows & methane), but the way they vote(Republican) is often the most destructive to the Planet. Granted, there are many now "wind-farming" that see the light, but irony so many seek to still hurt themselves.
1
Professor Krugman is wrong about how the Trump tax shift and deficit expander was suppose to work. It was suppose to give Trump and Republicans an excuse to claim credit for the Obama economy. That is the Trump tax bill that increases taxes on upper middle class income while blowing up the deficit was suppose to reward people like Trump and get the gullible media to give credit for Obama's boom to Trump. My concern is that because of weak Dems who are affraid to make any point that requires analysis, it is working. People are giving Trump, whose policies so far have had little effect on the economy, credit for the Obama boom.
84
The old investor's adage, "Don't fight the Fed" never seemed more apropos, or more ignored. Here we are, on the cusp of an all-out trade war, with rising interest rates and the hint of tax-cut stoked inflation, and yet the market continues its high wire act. It all has the feel of unsustainability. I wasn't alive during the Roaring Twenties, but from what I read this period resembles none so much as that. How did that end again?
51
You don't need to have lived in the 1920s, Michael. Just remember the housing boom and the crash in 2008 that followed. Every boom is followed by a bust. And I fear we are heading to a great big one.
Self-defenestration, as I recall.