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Politics : Liberalism: Do You Agree We've Had Enough of It? -- Ignore unavailable to you. Want to Upgrade?

To: lorne who wrote (103208)	4/25/2011 2:12:16 PM
From: TimF	1 Recommendation Read Replies (1) \| Respond to of 224749

President Trump...Has a nice ring to it don't you think. No I don't. Tariffs hurt us, they don't help us. They would hurt China as well, but why attack (if you must attack at all) with a weapon that also hits yourself? -- "Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same--to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war." - Henry George -- The budget fight ultimately comes down to the fact that we don't have an economy large enough to generate tax revenue commensurate with the spending we have voted for. But why isn't our economy big enough? Because the spending we have voted for is way too high. But the curious thing about the concept of trade war is that, unlike actual shooting war, it has no actual historical precedent. In fact, the reality is that there has never been a significant trade war. There have been any number of examples of retaliatory tariffs and/or non-tariff trade barriers. Not that we need retaliation to cause us harm, the tariff directly harms both our trading partners and us, and the retaliation adds harm to both. The usual example free traders give is America's Smoot-Hawley tariff of 1930, which supposedly either caused the Great Depression or caused it to spread around the world. Not exactly. It made it worse and more extensive, but it was hardly the sole cause. What exactly does the U.S. have to lose in a trade war? Markets for our goods (we are one of the largest exporting nations, and also goods and services from overseas, and competition that helps drive down costs or improve quality per money spent. Then there is the awkward problem of what China would do with all the money it would get by selling off its dollars. There just aren't that many good alternatives for parking that much money. That point is correct. If China tried to dump its reserves it would harm itself along with us. One person on SI argued that China could hurt us by cutting off trade with us, and dumping dollars. I described that as like trying to use a grenade in close quarter hand to hand combat. You would have us do part of that damage to ourselves rather than having the Chinese try to do it. But it would be damage either way. We could – a grossly irresponsible but not impossible hypothetical – repudiate our debt to them (or stop paying the interest) as the ultimate countermove. Yes we could, if we wanted to trash the credit of the United States. Of course we would have a problem funding our deficits if no one wants to lend to us. It would be one thing if the deficits where only the result of interest on debt, if we had a primary budget balance or surplus, but we are very far from that. More plausibly, we might simply restore the tax on the interest on foreign-held bonds that was repealed in 1984 thanks to Treasury Secretary Donald Regan. We have lots of little cards like that up our sleeve. and see investment in US corporate bonds, loans to cover our deficit, and probably non bond investment as well dry up. The reality is that the United States is already in a trade war with China. Trading is not war, not even in the sense of "a trade war".