The Net Worth of Americans Still Hasn't Recovered from the Last Recession

The Net Worth of Americans Still Hasn't Recovered from the Last Recession

01/09/2018Ryan McMaken

Axios is reporting today on commentary from Deutsche Bank economist Torsten Slok in which Slok concludes that Americans now have a smaller net worth than they did in 1989: 

A greater share of Americans have more debt than money in the bank than at any point since 1962, according to Deutsche Bank economist Torsten Slok. And, in a note to clients yesterday, Slok said that, despite record stock market wealth and home price levels just shy of housing-bubble highs, Americans are poorer than at any point in nearly a quarter century.

Why it matters: The data suggest that the third-longest economic expansion in history, and the lowest jobless rate in 17 years, has benefitted an exceedingly thin slice of the American public.

Here's the graph that goes with the story: 


Unfortunately, no link is given to the client note. 

If you're like me, though, you always like a context for research like this, and aren't content with a quick blurb. 

So, to add some background to this, I managed to find a working paper from the NBER, titled "Household Wealth Trends in the United States, 1962-2013: What Happened Over the Great Recession?" which goes into a little more detail on these calculations. 

The Deutsche Bank data appears to be continuing Wolff's research from this older NBER report, which stopped with 2013 data. 

In it, we do indeed see that median household net worth as of 2013 was lower than at any other time shown since 1962: 


As the report notes, household wealth plummeted during the Great Recession, and as of 2013, at least, had not recovered. Slok's update suggest that net worth has increased since then. It looks like median household net worth increased from about $63,000 to about $78,000 between 2013 and 2016. That's good, but it's still well below where it was in both 2001 and 2007. 

But why do households appear to be largely spinning their wheels on household net worth?

For decades, net worth in the United States has been closely connected to housing prices. The homeownership rate reached 69 percent in 2004, and those homeowners saw their net worths expand as home prices expanded in the same period. 

In recent years, home prices have gone up considerably. So why has net worth not done the same? 

According the the NBERreport:

Asset prices [including home prices] plunged between 2007 and 2010 but then rebounded from 2010 to 2013. The most telling finding is that median wealth plummeted by 44 percent over years 2007 to 2010, almost double the drop in housing prices... Relative indebtedness expanded, particularly for the middle class, though the proximate causes were declining net worth and income rather than an increase in absolute indebtedness. The sharp fall in median net worth and the rise in overall wealth inequality over these years are traceable primarily to the high leverage of middle class families and the high share of homes in their portfolio. The racial and ethnic disparity in wealth also widened considerably. Households under age 45 saw their relative and absolute wealth declined sharply. Rather remarkably, there was virtually no change in median wealth from 2010 to 2013 despite the rebound in asset prices. The proximate cause was the high dissavings of the middle class, though their debt continued to fall. 

So, the situation did indeed stabilize as home prices rebounded, but Americans were also neglecting to save any money in other forms. In part, they stopped saving in order to pay off debts, which were substantial:

The stagnation of median wealth from 2010 to 2013 can be traced to the depletion of assets. In particular, the middle class was using up its assets to pay down its debt, which decreased by 8.2 percent over these years. This shows up, in particular, in reduced asset ownership rates. The homeownership rate fell from 68.0 to 66.7 percent, that of pension accounts from 45.8 to 44.4 percent, that of unincorporated businesses from 8.2 to 6.6 percent, and that of stocks and financial securities from 15.3 to 14.2 percent. However, the reduction in assets was greater than the reduction of debt. 

So, we end up with a picture in which Americans did see their asset values increase, which did help net worth. But at the same time, owner asset rates among many Americans actually declined, and at a faster rate than debt declined. 

This is a fairly grim picture, and does paint a good picture for the standard of living Americans will enjoy once their prime earning years pass us by. 

All too often, economic indicators rely on current earnings, and current spending. Net worth, however, gives us a glimpse into the future. If net worth is declining or stagnant, than future retirees will eventually spend down their savings more quickly, and then have to cut back their standard of living to pay for basic necessities. 

Moreover, if the current trend continues, Americans will begin the next recession from a far lower level of net worth than they started the 2007-2009 recession with. That is, we'll begin the next recession with our net worth not even having recovered from the last one. That's not a great place to start. 

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"Big Data" Isn't Enough to Make Socialism Work

03/16/2018Tho Bishop

When sharing Bob Murphy's excellent article today on the Knowledge-Calculation Debate, one of the most common responses has been "Murphy makes a good case, but why does this really matter?" 

Beyond the value of grasping intellectual nuance, I think this debate has actually increased in real world importance over time with the rise of "Big Data."

Increasingly we see entrepreneurs, economists, and other thought leaders discuss the possibility of using improved data collection and algorithms to solve the "knowledge problem" Hayek famously outlined.

Now, of course, these big data central planners still suffer from their own fatal conceit, as brilliantly discussed in this article by Per Bylund. Still though, laissez-faire skeptics are able to use Hayek's knowledge critique of socialism as a way of justifying their new tech-backed schemes.

The same can't be said for the Misesian critique of socialism grounded in economic calculation, as Xiong Yue noted last year:

[T]hose who consider the problem of socialism as merely a problem of information failed to understand that the core problem of socialism lies in the absence of prices in a centrally-planned economy. The role of prices in the market economy is unique because money prices offer an indispensable tool in economic calculation. As Mises writes in Human Action,

One cannot add up values or valuations. One can add up prices expressed in terms of money, but not scales of preference.

With prices as a guide, entrepreneurs can potentially pursue profits by examining differences in the market prices of production factors and the expected prices of the final products. He or she can then organize production accordingly.

Therefore, even if we have some excellent data already, without this market-price mechanism, neither the economic calculation nor the efficient allocation of resources is possible; the planned economy is therefore not feasible. Because rationally planning or resource allocation requires the ability to calculate economically, such calculations need the prices which can be determined only in the market by the real-world exchange of owners of private property in the first place. Since the planned economy requires state and collective control of resources — and thus does not allow for these necessary voluntary exchanges between owners — it cannot rationally plan the operation of the modern economic system.

As a result, it's theoretically impossible for a planned economy to determine the prices needed for economic calculation. The cutting-edge technologies may help Jack Ma to optimize his strategies in his private enterprises in a relatively capitalist society. However, for a modern economy, as long as there are no prices available on which to base economic calculation, the failure of a planned economy is inevitable. As Joseph Salerno writes in his postscript to “Economic Calculation in the Socialist Commonwealth”:

[I]n the absence of competitively determined money prices for the factors of production, possession of literally all the knowledge in the world would not enable an individual to allocate productive resources economically within the social division of labor.

As someone who has witnessed first hand Barney Frank quote F.A. Hayek in order to justify the creation of new government bureaucracies, I have seen how dangerous people can twist his ideas to justify all sorts of elaborate government schemes. It is much harder to do so with Ludwig von Mises

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Trade from San Francisco to Miami Saves NFL Player $300,000

03/16/2018Tho Bishop

In the face of staggeringly high tax rates and growing housing costs, people are abandoning San Francisco at such a rate that U-Haul prices have skyrocketed in the area.

The start of the NFL off-season offers an amusing illustration of just how significant the California tax burden is compared to other states. As Mike Florio of ProFootballTalk notes, when center Daniel Kilgore was traded from the 49ers to the Miami Dolphins, he saw his roster bonus increase by over $300,000 dollars thanks to Florida not having California's 13.5% income tax.

Unfortunately for Kilgore, he won't be quite so lucky with his remaining $2.525 base salary. The majority of states with professional sports teams have what is often referred to as a "jock taxes," where states (and some times cities) steal from the game checks of pro athletes. It was these taxes that actually led to Cam Newton having to pay the State of California for the privilege of losing in Super Bowl 50. While Kilgore will avoid them every time he plays a home game, only one of his 2018 away games (against the Houston Texans) is in a state that doesn't engage in this practice.1

Still, Kilgore was a financial winner thanks to his trade to South Beach. Now whether the extra cash is worth moving from Jimmy Garrapolo to Ryan Tannehill is another matter altogether. 

  • 1. Along with Florida and Texas, Washington and Tennessee are the only other states without these taxes. Nevada will be the fifth, after the Raiders move to their new tax-payer subsidized stadium.
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It Doesn't Take a Genius to Understand Economics

03/16/2018Per Bylund

In fact, most geniuses seem to simply not get economics. An example is the recently departed physicist Stephen Hawking, who - like so many - made rather ridiculous statements of economic nature. Quoted by MSN/MarketWatch, Hawking makes several very simple mistakes in his attempted economic commentary. For instance, he seems to not understand the difference between a natural resource (the physical production factor) and an economic resource (the subject value), which leads him to erroneously conclude that hoarding, and the resulting increased scarcity of physical ​resources, impoverishes humanity. Also, Hawking noted:

“If machines produce everything we need, the outcome will depend on how things are distributed,” he wrote. “Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution.”

This is a common view that at best captures a fundamental misunderstanding of economics: that ownership of the means of production somehow implies power (economic or otherwise). But, as we've known since Menger, the means of production have only value to the extent they contribute to the production of consumers' goods, the consumption of which is the realization of value. In other words, if I buy all machinery in the world and refuse to use any of them to produce goods, the economic value is zero. If I don't use the machinery to produce and sell ​consumers' goods, I have destroyed the economic value of my property.

The real effect of robots "producing everything" is that the cost of production plummets, which offers producers profits. But as we're flooded with goods, their market price also plummets. And as the (only) role of capital is to increase the productivity of labor, it means we don't have to work much to support a very high standard of living. The true gig economy is that we can work only for an hour or two - ​when we feel like it - to support a month's (or maybe a year's) worth of luxurious leisure. 

​This is apparently a problem to some geniuses.

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Hyperinflation Has Venezuelan Merchants Weighing Cash, and Now It's Breaking Their Scales

03/15/2018Tho Bishop

It is interesting to see how prices emerge in a hyperinflationary environment like  see in Venezuela. While the government finally cut its “official” exchange rate of 10 bolivars to the dollar, it continues to vastly overstate the value of its currency.

Luckily markets continue to find a way. Assisted by good old fashion corruption, military members and other government officials are able to profit off selling government supplies. Of course the question still remains: how is economic calculation is possible in a monetary climate as extreme as Venezuela?

In 2016, the Wall Street Journal published a fascinating article about a Home Depot employee named Gustavo Diaz who runs one of the most subversive websites back in his home country, The website takes information gathered from Venezuela black markets and uses it offer a real market value for the Bolivar. This information undermines the ability of the government and central banks to hide the consequences of their policies, leaving market actors better informed.

As Mr. Diaz puts it:

It’s ironic that with DolarToday in Alabama, I do more damage to the government than I did as a military man in Venezuela.

Another interesting measure has been pieced together by Bloomberg. Their Cafe Con Leche Index looks at the price of a cup of coffee in Caracas. A March 14th report has a .50 cent cup of coffee now costing 75,000 Bolivars, pushing the annual inflation rate over 4000%.

coffee idnex.png

The rising price does create other challenges though. Increasingly merchants have relied on weighing cash used for transactions, rather than counting. Unfortunately this has created some new challenges for merchants, whose scales are not capable of handling the weights now required to buy goods such as ham. As Patricia Laya writes as part of a fascinating series Life in Caracus:

The store’s deli scales run to only six digits. And ham, my Whatsapp food-hunting community tells me, is retailing nowadays for about 1,480,000 bolivars per kilogram. It didn’t matter that I wanted only a few hundred milligrams. The cost was, at this market at least, incalculable.

A similar dynamic is impeding the use of credit and debit cards. The price of a set of sheets (33,541,963), a pair of Adidas sneakers (10,500,000) or even a slice of lasagna (401,450) can’t fit on the screens of older card machines; the solution is to split one purchase into several transactions. Even the invoice printers that many businesses use for reports to tax authorities are running out of space.

So how does a country like Venezuela reverse this sort of monetary chaos? Luckily the answer there is simple. It must end the socialist policies that destroyed the country, and abandon the Bolivar. At some point the latter will be inevitable. Hopefully for Venezuelans, the former is as well.

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Of Course the UN Is Considering Legitimizing Maduro's Next Election in Venezeula

03/15/2018Tho Bishop

Venezuela continues to be one of the great humanitarian crises of our times. Every day brings new horrific headlines of starvation, violence, and chaos. Not only should this tragedy serve as a reminder of the true evils of socialism, but is vivid illustration of what hyperinflation looks like in the modern world.

While the Venezuelan government has tried it hands with modern gimmicks - like the largest cryptocurrency scam since Prodeum - the citizens continue to struggle with the realities of a currency so worthless that thieves don’t even bother picking it up off the floor.

The question now is simply how long this horror story continues.

Elections in the country are set for May, but of course no one expects politics to offer much hope for the Venezuelan people. What’s interesting here is that it provides another fascinating example of how dangerous the United Nations truly is.

Stalin is credited to have said, “It's not the people who vote that count, it's the people who count the votes.” Understandably his ideological heir, Nicolás Maduro, feels pretty good about his re-election chances in Venezuela. His opponents  have no delusions to think elections will be handled fairly, and are calling boycotting elections.

In enters the UN, who is considering sending in observers to ensure the integrity of the election process. Of course this is precisely what the Maduro government desires. After all the Venezuela people, beaten and starved, are unlikely to take the presence of a few foreign bureaucrats as the protection they need to stand up to their oppressive leaders. The UN’s presence will only serve to prop up Maduro, at least until complete economic collapses leads to military intervention – which some analysts think could be in the next 12 months.

Still, the fact that the UN would ever consider serving the desires of Venezuela’s socialist government is simply another reminder that the UN is worse than useless.  

Of course, at the end of the day, any inevitable change in leadership in the country will not solve the plight of the country without a revolution in ideology. As Jose Nino has noted in several great articles for us, socialist ideology was a Venezuelan problem before Hugo Chavez, and risks outliving the rein of Maduro

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Why Gun Control Doesn't Explain Australia's Low Homicide Rates

03/14/2018Ryan McMaken

Gun control advocates often point to Australia as an example of how "banning" guns leads to significant declines in homicide rates.

Whether or not the much vaunted gun laws were ever fully implemented remains a matter of debate, but data does indeed suggest Australia's already-low homicide rates continued to slide downward in the twenty years following the alleged banning of guns. Unfortunately, as Leah Libresco writes at the Washington Post, this doesn't give us enough information to draw many conclusions:

I researched the strictly tightened gun laws in Britain and Australia and concluded that they didn’t prove much about what America’s policy should be. Neither nation experienced drops in mass shootings or other gun related-crime that could be attributed to their buybacks and bans. Mass shootings were too rare in Australia for their absence after the buyback program to be clear evidence of progress. And in both Australia and Britain, the gun restrictions had an ambiguous effect on other gun-related crimes or deaths...

That sample sizes should be so small in Australia is not a surprise. Commentators on Australia often neglect to note that the country has a population smaller than that of Texas. Obviously, the demographics, geography and history of the two regions are extremely different as well. 

But with so few homicides to analyze in the first place, any asserted causality between the gun "ban" and homicide rates is indeed ambiguous. 

Other data suggests that Australia's experience is less than useful as an example to the rest of the globe. One of our readers, who goes by the pseudonym Alex Great, sent along a number of useful links in his own commentary which follows: 

Proponents of gun control will point to the declining homicide rate and claim that Australia has seem zero mass shootings since the NFA was enacted.

However, analyses like this are quite simple and miss a lot of important data. For example, looking at official homicide data from the Australian government, we can see that the sharp decline occurred years after the NFA was enacted. A 2003 study backs this up, noting that homicide rates were already falling before the NFA.

A report from 2007 titled “Gun laws and sudden death: Did the Australian firearms legislation of 1996 make a difference?” also noted that homicides were already falling prior to the NFA being enacted, and found that the NFA did not speed up the declining rate of homicides in Australia. More recent studies still find that the decline in homicides can not be attributed to the NFA, since non firearm homicides also sharply declined in the same period:

There was a more rapid decline in firearm deaths between 1997 and 2013 compared with before 1997 but also a decline in total nonfirearm suicide and homicide deaths of a greater magnitude. Because of this, it is not possible to determine whether the change in firearm deaths can be attributed to the gun law reforms.

In fairness, a review of the literature from Harvard did find that states that had more guns bought back experienced more rapid declines in homicide. However considering Australia was experiencing a decline in non firearm homicide at the same time, it is difficult to pinpoint exactly how much of an effect the NFA actually had. Even the review admits that no study was able to explain exactly why gun deaths were falling.

The claim that Australia has had no mass shootings since the NFA is also blatantly inaccurate, for example, there was a school shooting in Melbourne in 2002 that killed two and injured five. The 2014 Sydney Seige, where a man armed with a shotgun took a cafe hostage, also shows that despite the NFA, Australia has been unable to get rid of gun violence in public places.

This lack of causality is also reminiscent of the gun control experience in Britain. As I noted in this article, England and Wales already had very low homicide rates — both historically and globally — by 1900. But given that gun control measures were not enacted until years later, it would be inaccurate to simply refer to gun control as the cause of low homicide rates in the region:

The first significant modern gun control law in the UK was the Firearms Act of 1920. The Act abolished what had been up until then an assumed right to carry arms.  The Act was likely introduced as an anti-Irish and anti-communist measure, as there was no evidence (then or now) of rising crime at the time. The 1920 act was followed by increasingly restrictive gun control laws in 1937, 1968, and 1988. From the 1950s into the early 2000's however, the homicide rate grew steadily.

Thus, these examples do not really provide a historical experience that we can point to and say "gun control led to low homicide rates in the UK and Australia." 


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Explaining the Economic Calculation Problem in a Principles Class

03/14/2018Jim Cox

A microeconomics principles class presents professors with the opportunity to at least briefly explain the economic calculation problem. Almost every text spends a page or two on the production function — the relationship between inputs and outputs by a firm.

Here is the relevant data and graphs from one such text.


The professor can ask the students, “at what output should the firm produce?”— which is a central issue in microeconomics. Looking at the figures and the graphs the students will likely answer, “at the peak of Total Product”, or “at the highest Marginal Product”, or “at the highest Average Product”.

None of these responses is correct, as there is no rational way to answer based on the limited information given. There is no rational way to answer because the data only include quantities of inputs and quantities of outputs. There is no value in the form of prices attached to either the inputs or the outputs. Until the prices of these are included there is no answer.

Here’s an example to illustrate this point:

If the outputs are valued by consumers in the market at a price of $1.00 while each input costs the firm $100.00 it is obvious that to produce any of these outputs would be a financial disaster for the firm in the way of major losses (and thus the firm will be destroying value in the world). Conversely, if the consumers in the market value the outputs at a price of $50 each and the input costs are $2 for each, the firm can make major profits (and thus the firm can be adding value in the world).

Socialists had proposed abolishing both money and prices leaving them in the same position as our students in trying to determine which output quantity would be best. Pointing this out allows the professor to recount Ludwig von Mises’s highlighting this problem in his 1920 article, "Economic Calculation in the Socialist Commonwealth" and the resulting debate over the issue in the 1920s through the 1930s.

While Mises — and Hayek who also participated in this debate — maintained their views, the socialist critics retired from the debate self-satisfied that they had answered the challenge by claiming that the socialist authorities could direct the managers to adjust production by simulating markets, that is non-existent markets! They would just be “playing market”.

As Mises pointed out, even the best intentioned socialist manager would be lost in trying to discover just what the best output would be.

I also like to make the point in my classes that playing market with assets one does not own is far removed from risking personal assets one does own! When one owns the assets, such decisions will have a major impact on the owner’s personal financial well-being.

(By the way, I have never in my many years of teaching principles classes seen a text that raises the economic calculation issue at all.)

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Democrats Side with FDA over Terminal Patients

03/14/2018Tho Bishop

Often the worst of Washington is a bipartisan affair, but late last night a solid Democratic voting block stopped legislation that would allow terminally ill patients the ability to seek help from non-FDA approved treatments. 

Needing a two-thirds vote to expedite right to try legislation, 140 Democrats voted against patient rights. Representative Frank Pallone Jr. of New Jersey, the senior Democrat on the Energy and Commerce Committee, defended his vote by saying "By defeating this bill tonight, we protected patients and supported F.D.A.’s continued role in approving experimental treatments that may help save a patient’s life.” 

Yes, in the twisted world of Washington politicians limiting the choices of dying patients is "protecting them."  

While Democrats desperately clung to the narrative that non-FDA approved drugs represented "false hope", we are given examples every day of how absurd this notion truly is. Rather than being some sort of scientific seal of approval, the FDA approval process is a bureaucratic nightmare, taking years of testing and millions of dollars to complete. The numbers of lives lost due to the FDA's actions is incalculable. As Timothy Terrell has noted:

The American public tends to think of the FDA as a protector against dangerous side effects, as we saw with Thalidomide decades ago. But how many Americans have died because of lags in approval? A five-year delay in bringing the antibiotic Septra to the US market may have cost 80,000 lives. A lag in the approval of beta blockers may have cost 250,000 lives.1 The FDA's ban on advertising aspirin as an effective preventer of first heart attacks may have caused the deaths of tens of thousands of Americans every year. But because it's easy to identify those harmed by side effects, and difficult to identify who might have been saved by earlier introduction of Septra to the marketplace, the FDA tends to be over-conservative in its regulatory process.

In spite of yesterday's vote, this right to try legislation isn't dead yet. Legislators supporting the measure have made it clear that it will be reintroduced and go through the standard voting process. Of course this delay, coupled with what will be required to get it through the Senate, could prove fatal for many of  Americans who could possibly benefit from medical freedom. 

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Rand Paul's Attacker Should Never Have Been Tried in Federal Court

03/13/2018Ryan McMaken

Rene Boucher, who attacked Rand Paul at his Kentucky home last year, has pled guilty in Federal court:

At first glance, this appears to be as things should be. Given what information is publicly available, it seems clear that Boucher was the aggressor ,and attacked Paul, although Paul posed no threat to Boucher. 

But there's a problem here. The case was tried in federal court even though there is no shortage of state laws that forbid assault and battery. So why is the federal government involved? Well, it should surprise few people that there are two sets of laws in the United States: one for high ranking government officials, and another set of laws for everyone else. 

By attacking a very-special member of the American ruling class, Boucher opened himself up to federal charges of "assaulting a member of Congress resulting in personal injury, a felony under federal law."

This situation is relatively new, however. 

Once upon a time, attacks against federal politicians were handled by state law. As one legal blog correctly notes, this changed with the adoption of 18 U.S.C. 351into the US code: 

This law provides for a death penalty for killing a member of Congress, a presidential or vice presidential candidate, or a Supreme Court justice, as well as imprisonment up to life for attempting to kill such a person...

The background of this law is interesting. When President John F. Kennedy was assassinated in Dallas in 1963, it was not a federal crime to kill a U.S. president. Had alleged assassin Lee Harvey Oswald been tried, the trial would have taken place in a Texas state court. In 1965, Congress passed a law, 18 U.S.C. 1751, making it a federal crime to kill, kidnap, or assault the President or the Vice President.

In 1968, presidential candidate and U.S. Senator Robert F. Kennedy was assassinated in Los Angeles. That was not a federal crime at the time, and Sirhan Sirhan was convicted in California state court for the murder and sentenced to death. (That sentence was commuted to life in prison in 1972, when that state abolished the death penalty, and Sirhan remains in a California state prison.) In 1971, Congress enacted 18 U.S.C. 351, which extended the protection of the Federal criminal law to members of Congress, paralleling that extended to the President and the Vice President.

One can be sure, of course, that when important federal personnel are victims, federal investigators will bring to bear a large amount of focus and resources. On the other hand, when it's just ordinary school children, as in the case of the Parkland school shooting in Florida, the FBI is much too busy to pay attention. 

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Tariffs Are Not the Answer

03/13/2018Ron Paul

President Trump’s planned 25 percent tariff on steel imports and 10 percent tariff on aluminum imports may provide a temporary boost for those industries, but the tariffs will do tremendous long-term damage to the American and global economies. Tariffs raise the price of, and reduce demand for, imported goods. Tariffs ensure the preferences of politicians, instead of the preferences of consumers, to determine how resources are allocated. This reduces economic efficiency and living standards.

Some justify these economic inefficiencies as being worth it to save American jobs. This ignores how tariffs increase costs of production for industries reliant on imported materials to produce their products. These increased costs lead to job losses in those industries. For example, President Trump’s proposed steel tariff could cost nearly 40,000 jobs in the steel-dependent auto manufacturing industry. Tariffs also cause job losses in industries reliant on exports. This is especially true if — as is likely to be the case — other countries respond to President Trump’s actions by increasing tariffs on US products.

Many of President Trump’s critics do not themselves support true free trade, which is the voluntary exchange of goods and services across borders. Instead, they support the managed (by government) trade of NAFTA and the World Trade Organization (WTO). NAFTA and the WTO promote world government and crony capitalism, not free markets. Any libertarian or free-market conservative who thinks the WTO promotes economic liberty should remember that the WTO once ordered Congress to raise taxes!

Foreign manufacturers may make convenient scapegoats for the problems facing US industry. However, the truth is that most of the problems plaguing American businesses stem from the US government. American businesses are burdened by thousands of federal regulations controlling every aspect of their operations. The tax system also burdens businesses. Until last year’s tax reform bill, the US had the highest corporate tax rates in the developed world. The tax reform bill lowered corporate taxes, but the US corporate tax rate is still higher than that of many other developed countries.

The United States not only spends more on military weapons than the combined budgets of the next eight biggest spending countries, but also spends billions subsidizing the defense of developed counties like Germany, Japan, and South Korea. Bringing US troops home from these countries is an excellent place to start reducing spending on militarism.

The biggest cause of our economic problems is the Federal Reserve. America’s experiment with fiat currency has enabled a system based on private and public debt. This makes trade imbalances inevitable as the US government needs foreign investors to purchase its debt. Foreign investors get the money to purchase the US government’s debt by selling products to American consumers. A trade war could cause foreign investors to stop buying US debt instruments and could end the dollar’s world reserves currency status. This would cause a major economic crisis — but at least it would stop our shores from being flooded with “cheap foreign goods.”

President Trump’s claim that trade wars can be easily won is as credible as the neoconservative claim that the Iraq War would be a cakewalk. A trade war would likely push the global economy into a recession or worse. Instead of imposing costs on American businesses and consumers and putting those whose livelihoods depend on imports out of s job, President Trump should address the real causes of our economic problems: the welfare-warfare state, the IRS, and the Federal Reserve.

Reprinted with permission. 

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