The last post to close this series…
If I were actually running for president, I wouldn’t mislead (read: lie) to the American people by using the typical ideological tropes that do not accurately reflect how jobs are created and how vital international trade is to the prosperity of our country.
Ergo, this series-closing post covers the myths that are used to mislead (read: lie to) the American people vs simply outlining a policy position.
The Two Myths About International Trade and Job Creation
Myth 1: Trade deficits are bad.
This is a particularly pernicious myth because it feeds the myth that follows it.
People tend to equate words that typically have a negative connotation in most contexts with having a negative impact in a different context, though the term “deficit” in this case does not represent a negative, per se.
It is helpful to actually know what a trade deficit is so that when the term “trade deficit” is thrown around to suggest that something is wrong and in need of correction by a politician (non-attribution here), then you will know that politician is either lying about it or is ignorant.
A country running a trade deficit simply means that it imports more goods than it exports.
To the sincerely ignorant, this sounds like America is “losing” because we are buying more than we are selling. If the country were a monolithic business (news flash: it’s not), then yes, this is a big problem. However, this is not how international trade works.
The fact is that the bigger the trade deficit is, the better it is for the prosperity of our country.
Big trade deficits show that our country got more for its exports than did the other countries it trades with. The bigger the deficit, the better our country came out in the trade deals. Sounds counterintuitive, but this is truly the truth about how international trade works.
For example, China funded (and continues to fund despite the Trump “trade war”) the huge U.S. trade deficit by lending money at ultra-low interest rates. That means that China helped finance the U.S. economy. Contrary to popular belief, if the U.S. had a trade surplus with China, then China‘s economy would be financed by the U.S., which wouldn’t be nearly as good a situation.
It is better to be a buyer than a seller. The seller has the burden of performance and can’t sell anything without a market to buy what it is selling. The buyer almost always has more options than the seller.
Myth 2: The wealthy are the job creators.
Firstly, the notion that the wealthy alone are the job creation gods (aka: supply-side economics) is just as misleading and inaccurate as the notion that only demand from the masses (aka: demand-side economics) is the ultimate driver of job creation.
This sort of dichotomous, ideological thinking is wrong-headed because the supply-side and the demand-side have a symbiotic relationship and are decidedly NOT mutually exclusive.
Favoring one side of a symbiotic relationship for the other is not remotely logical, yet Republicans and Democrats argue for favoring one side over the other ad infinitum.
Giving corporations and businesses a tax cut is not a bad thing, but it is disingenuous for any politician to say that a business will hire more people or hold off automating or outsourcing jobs just because they got a big tax cut.
Corporations and businesses are more likely to use that saved revenue to buy back its own stock (paying down debt), pay out dividends (investors love companies that pay dividends) or pocket the money for a rainy day, which is logical. Corporations are not in the business of hiring people out of magnanimous charity. Which leads me to the demand-side of the equation…
Secondly, businesses create jobs when there is a demand for a product or service that they need to expand or adjust their business to meet.
A restaurant does not hire more cooks or wait staff unless there is enough customer traffic (demand for the product or service) to justify the added expense. A business’s largest expense is the overhead cost to pay its employees. The employee absolutely must provide added value by facilitating the business’s mission to meet the demand for its products and services.
Ditto for the grocery store or the department store or the car manufacturer or the coal mine.
Again, the requisite demand for the product or service the supplier offers must exist before the supplier can justify the cost of supplying the demand.
Ergo, any tax cut should benefit both businesses and individuals on equal terms and any tax hike should be applied similarly to both sides of the symbiotic equation.
So ends my case to be president. Would you vote for me?
Let me know in the comments.
-The Rational Ram
The Rational Ram 