“Wage growth has caught up with inflation on average. But wage gains haven’t been uniform: The lowest-paid workers saw some of the biggest gains, particularly in the leisure and hospitality sectors, but other industries, from advertising to chemical manufacturing, saw their wages decline relative to inflation.”
…
“Even if workers received raises that outpaced inflation, that doesn’t help with sticker shock. Research has shown that consumers have an internalized “reference price” — a conception of what constitutes a fair price for a good they routinely purchase. If that imagined price doesn’t match up with reality, consumers feel short-changed.”
…
“Consumers also often misunderstand how inflation works. The important thing to know is that it only goes one way: When inflation decreases, that just means that prices are increasing less quickly, not that they are going down. (That can happen, though rarely.)
Prices going down, a phenomenon known as deflation, would be a potentially worrying signal about the health of the economy. If consumers pay less for a good, that can translate to less money to pay the workers who produce and distribute it, leading to less consumer spending overall and slower economic growth.”
…
“people are staying unemployed for longer: 1.6 million Americans were unemployed for a period of at least 27 weeks in October, compared to just 1.3 million the same month last year.”
…
“After a brief spike in savings rates during the pandemic due to a series of stimulus checks, Americans are now saving less than they were pre-pandemic. This creates a cycle where Americans have less money, so they borrow more. Because interest rates have been high, borrowing has become more expensive, leaving them with even less money.”
“The nationalist conservative obsession with blue-collar manufacturing jobs often ignores the interests of workers and the will of consumers. Sen. J.D. Vance (R–Ohio) provided a perfect illustration in an early August campaign speech in Nevada on “the American dream.”
In it, Donald Trump’s protectionist running mate declared that “a million cheap, knockoff toasters aren’t worth the price of a single American manufacturing job.”
On its face, that’s just rhetorical silliness. Common sense says anyone should be willing to make that trade: Affordable and abundant appliances are part of the reason that 21st century America is the best place to live in the history of the human race. Jobs are abundant too—there were 7.6 million unfilled jobs in August, per the Department of Labor—and the loss of a few should not worry vice presidential candidates.
But when right-wing populists such as Vance make this argument, they mean something less literal: that America would be better off if the nation manufactured more and imported less, and Americans would be better off working in metaphorical toaster factories than doing whatever job they have now.
Both ideas are wrong.
The supposed decline of American manufacturing is wildly overstated by politicians such as Trump and Vance (and across the aisle by President Joe Biden). Yes, a lot of low-level manufacturing has been outsourced via global trade, but American manufacturing output is running at near-record highs these days. Instead of making toasters, America makes BMWs and designs the components in, and apps on, your iPhone.
That’s a good tradeoff, especially for workers. You earn more building fancy cars than you do piecing together basic kitchen appliances. The average wage for manufacturing workers (excluding managers) has doubled since 1999, outpacing inflation.
Vance and his nationalist conservative allies think that’s a problem, one they wish to solve with more tariffs and other trade barriers that they hope will incentivize low-paying toaster-making jobs to return to the United States.”
…
“When Biden expanded Trump’s tariffs on imported steel and aluminum earlier this year, one of the many objections came from the North American Association of Food Equipment Manufacturers (NAFEM). In a June letter to the U.S. Trade Representative, the trade association pointed out that higher tariffs on the raw materials needed to manufacture appliances would, predictably, harm American companies.
“Even in instances of growing sales, the costs of tariffs grow with business,” NAFEM wrote. Member companies would thus be forced to “reallocate the funds that would be used for wage increases and additional employees to pay for the increased tariff costs.”
The nationalist conservatives also misunderstand Americans’ willingness to accept Vance’s deal—even if many prefer the idea of boosting domestic manufacturing.
Earlier this year, the Cato Institute polled consumers to ask if they’d support a tariff on imported blue jeans in order to increase blue jeans manufacturing jobs in America. About 62 percent of respondents said yes.
But hold on. When told that the tariff would make jeans just $10 more expensive at the store, support for that policy flipped: Now, 66 percent opposed it. And if the tariff would make jeans $25 more expensive, an overwhelming 88 percent said no.”
…
“How many Americans living in the year 2024 aspire to work—or see their children and grandchildren work—in a toaster factory?
The answer is pretty close to none. That’s great. We should prefer a country where young men and women aspire to be scientists, AI developers, and tech entrepreneurs over one where the dream job is a 40-hour-per-week gig at the local toaster plant.
Vance, and his nationalist conservative allies, are selling a vision of America that’s long out of date. It’s a backward-looking economic message that assumes people would be happier if they were less materially wealthy and had fewer prospects. Most Americans seem unwilling to go along when you show them the bill.”
“When asked why Harris has not distinguished herself by opposing these measures, Lincicome notes that supporting tariffs is just part of the “conventional wisdom in Washington today” even if polls may not completely support this assertion. “The view among the political experts is that elections are won or lost in a few places with a few votes,” and those critical “voters like tariffs.”
Given the IMF’s projections, bipartisan support for tariffs could lead to increased costs and slower economic growth for Americans regardless of who wins in November. ”
…
“former President Donald Trump floated a specific 60 percent tariff on Chinese goods alongside a 10 percent across-the-board tariff, which he recently increased to 20 percent. “It’s just what he thinks galvanized an audience,” Scott Lincicome, vice president of general economics and Stiefel Trade Policy Center at the Cato Institute, tells Reason. “Let’s face it, none of this has any rigorous econometric modeling behind it, so it could be as simple as he thinks 20 percent sounds better.”
“Taking the candidates at their word, you would have to say that Trump’s tariffs would be orders of magnitude worse than what Kamala Harris might do, or say she will do,” Lincicome adds.”
“Northeast Asia undoubtedly benefited from capitalism (private profit-driven production), and
from access to the world market. To this extent the mainstream is correct. But five qualifications
have to be made.
First, for the first several decades the Northeast economies relied not so much on ‘the world
market’ as on ‘empire preference’ to the US market—and to US technologies, US capital, US
military and civilian aid, and US public procurement—thanks to their role in the US’s geopolitical
strategy to contain communism and show the world that ‘capitalism’ was superior to ‘communism’.
Second, the US’s threat perception, its commitment to getting front-line allies economically strong
enough to be a credible defence against communism, and its intense involvement in national
economic policy-making and institution building, kept the national elites relatively unified and not
at each other’s throats. So on the spectrum of ‘weak state/special interest state/common interest
state’ these were special interest states moving towards—with a lot of American help in the first
decades— common interest states.
Third, steered by a developmental mindset, the developmental state was organized differently than
the model neoliberal state. The latter has no strong centre of coordination (because markets played
by private capitalists, not states, are the resource coordinating institution), and has arms-length
relations between the various ministries and between ministries and business. The developmental
state has one or a few powerful centres of coordination and market leadership, a limited role for
the legislature in matters of economic, financial, and security policy, and well-developed
mechanisms of consultation and coordination with private capitalists, in the spirit of ‘embedded
autonomy’.
Fourth, these governments made intensive use of policies and institutions frowned upon in the
neoliberal playbook—such as managed trade, sectoral industrial policy (‘making, not picking,
willing winners’), targeted concessional credit, and capital controls. These instruments were
intended to buffer (not insulate) producers in selected sectors from international competitive
pressure and volatility—so profit-raising protection and subsidies came with performance
conditions, which were enforced. The whole complex would have scored poorly by Washington
Consensus criteria. For example, Taiwan’s financial system was and remains the despair of visiting
western economists. That being said, there is no knock-out evidence on the effects of these
‘government interventions’. The causality is too difficult to disentangle rigorously.
Fifth, from early on they undertook to develop domestic technological capacity, such as
engineering faculties at universities and public laboratories, to aggressively seek out western
technologies and domesticate them for deploying in national firms, and much later to undertake
world-standard innovation and attract back a high proportion of overseas graduate students—this,
rather than rely, as in much of Latin America, on incoming western multinational companies.
Singapore, as noted, did rely on western multinationals—which were left in no doubt as to who
called the shots”
The U.S. trade deficit is a problem, and the best way to solve it is by a weaker dollar. Free trade is good, broad tariffs are bad, and the trade deficit is best dealt with by a weaker dollar.