by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Gene Epstein of Barron’s says the first presidential debate demonstrated the candidates’ unfortunate ignorance of basic economics.
Who won last Monday’s verbal smack-down between the two main presidential candidates? On issues relating to the economy, it was too close to call: They both lost, each having matched the other with displays of economic illiteracy. Space limitations permit only one ignoramus award per candidate.
Consider Democrat Hillary Clinton’s analysis of the Great Recession of 2008-09. “We had the worst financial crisis, the Great Recession,” she noted, “the worst since the 1930s.” After that valid observation, she declared that the disaster “was in large part because of tax policies that slashed taxes on the wealthy, failed to invest in the middle class, took their eyes off of Wall Street, and created a perfect storm.”
That somewhat jumbled formulation almost seemed calculated to stir class hatred. The horrors of the Great Recession must still haunt millions of Americans. As Clinton herself went on to remark, “Nine million people lost their jobs” and “five million people lost their homes.” Yet in her view, “slashed taxes on the wealthy” was a principal cause of this misery, while the “tax policies” that apparently kicked “the middle class” to the curb was a related factor.
This does not even make good nonsense. True, the top 1% of income-receivers paid 28.4% of their income in taxes in 2007, down from 32.5% in 2000. But that was still more than double the share paid by middle-class taxpayers, who also paid a declining percentage of their income in taxes over this period. …
… DONALD TRUMP MERITS THE IGNORAMUS AWARD for his statements about his usual bête noire, international trade, laced with his usual bashing of Mexico and China. “Our jobs are fleeing the country,” he declared. “They’re going to Mexico. They’re going to many other countries. You look at what China is doing to our country in terms of making our product. They’re devaluing their currency, and there’s nobody in our government to fight them.”
Based on those fighting words, the GOP candidate seems to be promising a trade war if elected. Critics (including some at Barron’s) have noted that, far from being devalued, the Chinese currency has actually been rising against the dollar over the past few years. More to the point, Trump doesn’t recognize that U.S. workers are also consumers, and that if the U.S. cuts off cheap imports from China and Mexico, consumers of limited means will suffer.
Nor does he realize that, for all his talk about jobs “fleeing the country,” positions eliminated by foreign trade are a small fraction of those lost and created by domestic competition, and that foreign trade also creates jobs through various channels.