I don't know where this tariff idea is coming from, but it's a
non-starter.
That's
your opinion, and nothing more. Tariffs are an excellent idea, and there are bills in Congress right now to impose tariffs that haven't yet come to the floor.
The people benefitting the most from open borders and unrestricted free trade are those at the top. They're the ones who're raking in the profits from the labor cost savings of replacing American workers with foreign workers. They pass on only a fraction of the labor cost savings to American consumers. In some cases that don't pass on any.
It's consumer demand, not cost of production, that dictates prices on foreign-made goods. As long as Americans can borrow enough money to compensate for job loss and wage suppression—from outsourcing and illegal immigration—prices will not fall any. When the credit dries up, and Americans can no longer pay higher prices, import prices will fall—regardless of the cost of production. The cost of production in China is
much lower than the price charged to American consumers. There's tremendous room for
American Corporate
criminals multinationals to reduce prices, and still make huge profits. But there's no reason for them to do so, until Americans refuse to purchase products at current prices.
In one of your articles, Robert, you mentioned the lack of consumer demand. I completely agreed with that point. You made some other good points as well. One of the more insightful points was regarding the importance of demand, and how it has been "papered over" over by an increase in personal debt. The lack of demand, and the necessity of demand, are the underlying themes in almost everything I've written myself.
And how the decline in wage-financed demand has been compensated for by loan/credit financed demand has also been a frequent theme in my own commentary. The artificial wealth created by home price appreciation, and the equity extracted from it, has been a substitute source of funding for consumer spending. And now that this funding source for consumer spending is drying up, consumer spending is also declining. Even this decline has been blunted by massive increases in credit card limits over the last year. The financial industry, clearly aware of an impending and severe recession, are trying to squeeze the last dime out of consumers before the crash. And since CEO and management salaries will continue to flow as long as a financial institution is taking in money, and as long as they can fabricate false financial reports well enough to continue attracting investors. Adding to this, there's no penalty for CEOs & management when the firm collapses--even when it was due to management's stupidity, greed, and dishonesty.
However, both here and in your article, I disagree with your pro-free trade, pro-Globalist viewpoint. (And I also disagree with your pro-Amnesty, pro-open borders position.)
In your article that you referenced in another post on this forum, you stated the following:
"
The US can no longer force trading partners to buy our products at unfavorable prices, there are alternative source of supply...."
You seem to be implying that our outsourcing-induced loss of jobs is because we can't sell our
exports. If that
is your point, you're completely wrong. The outsouring-induced loss of jobs is because we are replacing our own domestic production with imports. Losing exports is a minuscule problem compared to losing our own domestic markets to foreign imports.
Though we were bigger exporters in previous decades, we have had only a minuscule trade surplus (if any) during the past 1/2 century. During most of that time we've had a trade deficit—which means we're losing domestic production to IMPORTS. As a result, we're losing labor demand & jobs to imports. Our trade "problem" is not that we're losing exports. Our trade problem is that we're losing our own domestic market to imports.
We're losing jobs because goods made by American workers are being replaced by those made by Chinese, Mexican, Japanese, and other Asian workers. Losing a $140/day American job to a Chinese worker costs America $140/day in wages and spendable consumer income. Over a year, that's a loss of $36,400 in wages and consumer spending power. Unless the entire $36,400 is compensated for by an aggregate reduction in import prices of $36,400, it's a net loss for American workers and consumers. If 1 milion jobs are lost, it's a loss of $36.4 billion in wages and spending power. If 4 million are lost, it's a loss of $145.6 billion in aggregate American wages and spending power.
And these are just the direct effects of 4 million jobs lost. The reduction in labor demand from the loss also suppresses wages of those still employed. With 146 million employed Americans, a loss of 4 million jobs is the equivalent of -2.7% decline in labor demand. This unquestionably puts downward pressure on wages. Thus, adding wage suppression to job loss causes even more than a -$145.6 billion wage-spending loss.
And even if only the direct job loss is considered, this still hasn't factored in the multiplier effect. Using a conservative Marginal Propensity to Consume (MPC) of 2/3, gives a Multiplier of 3 --> {1 ÷ (1 - 2/3)} = 3 .
Multiplier x MPC x -$145.6 billion =
3 x 2/3 x -$145.6 =
-$291 billion in spending/GDP loss.
An MPC of 3/4 would give a multiplier of 4, and the wage/spending loss would give a spending/GDP loss of
-$437 billion.
Since I don't have any good statistics on the wage elasticity of labor demand, I'm going to assume that the % decline in labor supply = % decline in wages. ("unit-elastic") From this I'll assume that a -2.7% decline in labor demand causes a -2.7% loss in aggregate wages. In current dollars, the average hourly wage is approximately $17/hour. The average work week is approximately 34 hours. The number of employed workers is roughly 146 million. Aggregage annual income would then be:
$17/hour X 34 hrs/week X 52 weeks/year X 146 million = $4,388,176 million, or $4,388.176 billion.
Factoring in a -2.7% decline in aggregate wages:
-0.027 X $4.388 billion = -$118.48 billion
-$118.48 billion in loss from wage suppression.
Adding the $ loss from wage suppression to the $ loss from job losses:
-$145.6 billion + (-$118.48 billion) = -$264 billion.
-$264 billion is the combined loss from wage suppression & job loss.
Using -$264 billion with a multiplier of 3, gives a spending/GDP loss of -$528 billion.
Using -$264 billion with a multiplier of 4, gives a spending/GDP loss of -$792 billion.
Using the above numbers,
With a multiplier of 3, the aggregate price reduction on imports would need to be $528 billion/year to compensate for American job loss and wage suppression.
With a multiplier of 4, the aggregate price reduction on imports would need to be $798 billion/year to compensate for American job loss and wage suppression.
Some will claim the loss of American jobs and wages is offset by the gain in employment of Chinese workers. This claim is ludicrous on its face.
Replacing a $140/day American worker with a $2/Chinese worker reduces aggregate GLOBAL wages by -$138/day, or -$35,880/year. If this shift involves 4 million workers, it amounts to a -$143.5 billion direct loss in aggregate GLOBAL wages. Factoring in the loss from American wage suppression and the multiplier can be easily calculated by multiplying each number by $138 ÷ $140 = 0.986 (or 98.6%)
Using a multiplier of 3, this reduces aggregate GLOBAL wages by 0.986 X -$528 billion = -$520 billion
Using a multiplier of 4, this reduces aggregate GLOBAL wages by 0.986 X -$792 billion = -$781 billion.
The fact that it "helps" Chinese workers has relatively little effect on GLOBAL labor income and production demand. Moving jobs from the U.S. to China, or to any 3rd world country, causes a huge decline in aggregate global wages, spending, and aggregate global demand.
Globalization causes tremendous damage to the American economy, as well as the world economy. Replacing high-paid workers with starvation-waged workers is a loss for everyone—except for Corporate multinationals. Eventually, however, it will hurt them too—as less consumer spending power means less purchase of production, lower sales revenue, and lower Corporate profits.