The Debt Crisis at our Doorstep

The Debt Crisis at our Doorstep

In an op-ed piece of March 28, 2018 [The Debt Crisis at our Doorstep] the Washington Post published an opinion signed by five senior fellows and economists from the Hoover Institution. The worry, correctly, that 2018 federal spending will be billions and billions more than the taxes that can be collected now that the Republican Congress made steep cuts to corporate and personal income taxes. The need to borrow to make up the losses will certainly raise interest rates as they predict. Sharply higher interest rates will bring us a recession.

Then they tell us “Congress must reform and restrain the growth of entitlement programs and adopt further pro-growth tax and regulatory policies.” They ignore that Obama, and Clinton before him, delivered well performing, stable economies to the Republicans that included a responsible balance of taxing and spending in both 2001 and 2017. They ignore that America has deficits because the rich won’t pay taxes or take responsibility for the larger society. They ignore that Republicans conducted a two-year 2008-2010 depression when their gamble on Collateralized Debt Obligations failed. Now they’re poised to do it again.

Appropriate taxation can solve America’s deficit problems; piling on policies promoting yet more income inequality will not. I remind the five Hooverites - Michael J Boskin, John F. Cogan, George P. Shultz and John B Taylor – millions of households live exclusively on the Social Security benefits and millions of others get by with low interest credit cards and help from government programs that supplement their life on low wages and long hours. No such “entitlements” were in place during the great depression of the 1930’s. Maybe they’d like to do that again.

Trump and his Foolish Tariffs

Trump and his Foolish Tariffs

The United States economy has fully adjusted to forty plus years of continuous negotiations to decrease tariffs. To announce a draconian increase in steel tariffs and a slightly less draconian increase in aluminum tariffs on a Thursday afternoon will do nothing good for jobs or the economy. Corporate America supported lower tariffs all these years, and NAFTA trade agreements, knowing higher tariffs bring retaliation and a decrease in production and trade for everyone.

That’s a generic conclusion, but to see how foolish it really is for jobs compare establishment jobs at Iron and Steel Mills and Aluminum Production to jobs making finished or semi finished steel and aluminum products from purchased steel and aluminum. Iron and steel mills had an average monthly employment of 82.5 thousand jobs in 2017, down from 134.6 thousand jobs in 2000. Aluminum Production establishments had an average monthly employment of 57.5 thousand jobs in 2017, down from 99.9 thousand in 2000.

Fabricated metal product manufacturing companies that use steel in their production had an average monthly job total of 1.431 million in 2017. These are jobs making cutlery, hand tools, kitchen utensils, pots and pans, fabricated structural products like steel joists, ornamental and architectural products like metal window and doors, boiler, tank and shipping containers, steel and aluminum cans, hardware manufacturing, spring and wire product manufacturing, screw, nut and bolt manufacturing and on and on.

Add another 1.079 million machinery manufacturing jobs where companies buy steel to make finished products. These are jobs producing agriculture, construction, mining machinery, industrial, commercial and service industry machinery, heating, air conditioning and refrigeration equipment, engine, turbine and power transmission equipment and on and on.

So far we are protecting 140 thousand jobs (82.5+57.5) with tariffs while steeply raising prices for steel inputs to companies that have 2.51 million jobs (1.431+1.079). And I have not mentioned jobs in automobile manufacturing or transportation equipment. Eliminating foreign competition in basic steel and aluminum will raise prices, cut production and sales and jeopardize jobs producing products with 18 times more jobs than steel and aluminum (2.51/.140).

Since the end of the recession in 2010 the Bureau of Labor Statistics reports a modest recovery of manufacturing jobs, although the current total remains a million jobs below the pre-recession high of 13.4 million in 2008. Since the recession ended 8 years ago in 2010 manufacturing jobs are up a monthly average of 916.2 thousand. However, the increase disguises an unbalanced manufacturing recovery because some sub sectors like textile production, apparel, paper and printing have lost jobs. However, the increase in fabricated metal products and machinery manufacturing is up 233.5 thousand of the 916.2 thousand jobs, or 25.5 percent of the total increase. If I add just the automobile manufacturing from transportation equipment manufacturing, an increase of 274 thousand jobs, then 55.4 percent of the manufacturing total increase comes in products dependent on steel as a major input in production.

The U.S. economy desperately needs manufacturing employment. Foolish might be too nice a term for the latest Trumpism. How about idiotic? Moronic?