My regular column for tomorrow is about health care, but I felt I needed to weigh in on this idiocy, and not just on Twitter.
The official – and legal – justification for the steel and aluminum tariffs is national security. That's an obviously fraudulent rationale, given that the main direct victims are democratic allies. But Trump and co. presumably don't care about telling lies with regard to economic policy, since that's what they do about everything. They would see it as all fair game if the policy delivered job gains Trump could trumpet. Will it?
OK, here's the point where being a card-carrying economist gets me into a bit of trouble. The proper answer about the job-creation or -destruction effect of a trade policy – any trade policy, no matter how well or badly conceived – is basically zero.
Why? The Fed is currently on a path of gradually raising interest rates, because it believes we're more or less at full employment. Even if tariffs were expansionary, that would just make the Fed raise rates faster, which would in turn crowd out jobs in other industries: construction would be hurt by rising rates, the dollar would get stronger making U.S. manufacturing less competitive, and so on. So all my professional training wants me to dismiss the jobs question as off-base.But I think this is a case where macroeconomics, even though I believe it's right, gets in the way of useful discussion. We do want to know whether the Trump trade war is going to be directly expansionary or contractionary – that is, whether it would add or subtract jobsholding monetary policy constant, even though we know monetary policy won't be constant.
And the answer, almost surely, is that this trade war will actually be a job-killer, not a job-creator, for two reasons.
First, Trump is putting tariffs on intermediate goods – goods that are used as inputs into the production of other things, some of which themselves have to compete on world markets. Most obviously, cars and other durable manufactured goods will become more expensive to produce, which means that we'll sell less of them; and whatever gains there are in primary metals employment will be offset by job losses in downstream industries.
Playing with the numbers, it seems highly likely that even this direct effect is a net negative for employment.
Second, other countries will retaliate against U.S. exports, costing jobs in everything from motorcycles to sausages.In some ways this situation reminds me of George W. Bush's steel tariffs, which were motivated in part by hubris: the Bush administration thought of America as the world's unchallengeable superpower, which we were in military terms; they failed to recognize that we were by no means equally dominant in economics and trade, and had a lot to lose from trade conflict. They quickly got schooled by an angry European Union, and backed down.
In Trump's case I think it's a different kind of illusion: he imagines that because we run trade deficits, importing more from other countries than they sell to us, we have little to lose, and the rest of the world will soon submit to his will. But he's wrong, for at least four reasons.
First, while we export less than we import, we still export a lot; tit-for-tat trade retaliation will hurt a lot of American workers (and especially farmers), quite a few of whom voted for Trump and will now find themselves feeling betrayed.
Second, modern trade is complicated – it's not just countries selling final goods to each other, it's a matter of complex value chains, which the Trump trade war will disrupt. This will produce a lot of American losers, even if they aren't directly employed producing exported goods.
Third, if it spirals further, a trade war will raise consumer prices. At a time when Trump is desperately trying to convince ordinary families that they got something from his tax cut, it wouldn't take much to swamp whatever tiny gains they received.
Finally – and I think this is really important – we're dealing with real countries here, mainly democracies. Real countries have real politics; they have pride; and their electorates really, really don't like Trump. This means that even if their leaders might want to make concessions, their voters probably won't allow it.Consider the case of Canada, a small, mild-mannered neighbor that could be badly hurt by a trade war with its giant neighbor. You might think this would make the Canadians much more easily intimidated than the EU, which is just as much an economic superpower as we are. But even if the Trudeau government were inclined to give in (so far, top officials like Chrystia Freeland sound angrier than I've ever heard them), they'd face a huge backlash from Canadian voters for anything that looked like a surrender to the vile bully next door.So this is a remarkably stupid economic conflict to get into. And the situation in this trade war is likely to developnot necessarily to Trump's advantage.
Tax planning experts working for wealthy clients are already developing strategies to take advantage of the 2017 tax law's new 20 percent deduction for certain pass-through income — or income that owners of businesses such as partnerships, S corporations, and sole proprietorships claim on their individual tax returns instead of paying the corporate tax. As one expert recentlyadviseda conference for personal financial advisers:
As debate continues on a referendum to raise the tipped minimum wage in Washington, D.C., to the minimum wage for nearly all other workers, we wanted to take a few minutes to set the record straight on the facts about tipped worker wages and incomes. Currently, eight states do not have differential treatments of the tipped workforce in terms of the minimum wage.1Throughout this post, these will be referred to as "equal treatment" states. To be clear, tipped workers in these equal treatment states receive the full, regular state minimum wageplustips.
Over the last several years, there has been a great deal of research about the minimum wage and tipped restaurant workers, in particular, and we are going to draw on some of that research to make several key points: 1. In the District of Columbia, women, African American, and Hispanic workers are disproportionately minimum wage workers, including tipped minimum wage workers; 2. Maintaining a separate, lower minimum wage for tipped workers perpetuates racial and gender inequities; 3. In states that have a lower tipped minimum wage, tipped workers have worse economic outcomes and higher poverty rates than their counterparts in equal treatment states; 4. Tipped work is overwhelmingly low-wage work, even in D.C.; 5. Wage theft is particularly acute in food and drink service, and restaurants across the country have been found to be in violation of wage and hour laws; 6. Waitstaff have higher take-home pay in equal treatment states than in D.C.; and 7. The restaurant industry thrives in equal treatment states.
2. Research indicates that having a separate, lower minimum wage for tipped workers perpetuates racial and gender inequities, and results in worse economic outcomes for tipped workers. Forcing service workers to rely on tips for their wages creates tremendous instability in income flows, making it more difficult to budget or absorb financial shocks. Furthermore, research has also shown thatthe practice of tipping is often discriminatory, with white service workers receiving larger tips than black service workers for the same quality of service.
3. The clearest indicator of the damage caused by this separate wage floor for tipped workers is the differences in poverty rates for tipped workers depending on their state's tipped minimum wage policy. As shown in Figure A, in the states where tipped workers are paid the federal tipped minimum wage of $2.13 per hour (just slightly less than the district's $2.77 at that time), 18.5 percent of waiters, waitresses, and bartenders are in poverty. Yet in the states where they are paid the regular minimum wage before tips (equal treatment states), the poverty rate for waitstaff and bartenders is only 11.1 percent. Importantly, the poverty rates for non-tipped workers are very similar regardless of states' tipped minimum wage level. This strongly indicates that the lower tipped minimum wage is driving these differences in outcomes for tipped workers.
Figure A
4. Tipped work is overwhelmingly low-wage work, even in Washington, D.C. Some tipped workers at high-end restaurants do well, but they are the exception, not the norm. The median hourly wage of waitstaff in the district in May 2017was only $11.86, including tips. At that time, D.C.'s minimum wage was $11.50 per hour. In other words, the typical D.C. server made a mere 36 cents above the minimum wage. Proponents of maintaining a lower tipped minimum wage may note that the average hourly wage of waitstaff in D.C. at that same time was $17.48, but this average is skewed by the subset of servers in high-end restaurants that do exceptionally well. The fact that the average is so far from the median wage is indicative of significant wage inequality among district waitstaff.
5. Wage theft is particularly acute in food and drink service, and restaurants across the country have been found to be in violation of wage and hour laws. It is true that the law requires restaurants to ensure that tipped workers receive at least the regular minimum wage when their tips are included, but the reality is that huge numbers of restaurants—helped by too-weak enforcement efforts—ignore these requirements. In investigations of over 9,000 restaurants, the U.S. Department of Labor (DOL) found that 84 percent of investigated restaurants were in violation of wage and hour laws, including nearly 1,200 violations of the requirement to bring tipped workers' wages up to the minimum wage. Among the restaurants that were investigated,tipped workers were cheated out of nearly $5.5 million. Workers in the food and drink service industriesare more likely to suffer minimum wage violations than workers in other industries.
Looking at data specific to the District of Columbia shows a clear advantage to waitstaff in equal treatment states. In California, when the minimum wage was $10.50—8.7 percent less than D.C.'s $11.50—waitstaff there still earned 2 percent moreper hour than waitstaff in D.C. In San Francisco, when the minimum wage was $13.00—13 percent higher than D.C.'s $11.50—waitstaff in San Francisco earned 21 percent morethan waitstaff in D.C. In Washington state, when the minimum wage was $11.00—4.3 percent less than the minimum wage in D.C.—waitstaff there still earned 5.1 percent morethan their counterparts in D.C. Fears of lower wages from equal treatment are unfounded for the large majority of waitstaff.
According to the Quarterly Census of Employment and Wages, full-service restaurants in equal treatment states saw stronger growth both in terms of number of establishments and number of jobs compared to states with a separate, lower minimum wage for tipped workers (Figure B). Between 2011 and 2014, equal treatment states saw 6.0 percent growth in the number of establishments compared to 4.1 percent growth in states with separate, lower tipped minimum wages. Likewise, employment grew 13.2 percent in equal treatment states compared to 9.1 percent in other states.
1.Tipped workers in Hawaii may be paid $0.75 less than the regular minimum wage, but only if they earn a combined hourly wage (tips + base wage) of at least $7.00 more than the regular minimum wage.
Communist Party USA leader John Bachtell will address the international conference "Marxism of the 21st Century and the Future of World Socialism," sponsored by the Communist Party of China on May 28 in Shenzhen. This is the text of his remarks, as prepared for presentation.
We enthusiastically join in celebrating Karl Marx on the occasion of the 200th anniversary of his birth and express deep appreciation to the International Department of the Communist Party of China for hosting this event.
Marxism is the world's most influential body of thought and has changed the course of human history. It is more relevant than ever for addressing humanity's urgent challenges despite the desperate efforts by the capitalist class to bury it.
Among their many discoveries, Marx and his lifelong comrade Frederick Engels showed how capitalism comprised one transitory stage of social development and would be surpassed by higher stages. This couldn't occur without the agency of people, though, and Marx and Engels proclaimed the historic mission of the working class was to lead a revolutionary change to a self-governing society without exploitation.
Marx also revealed exactly how exploitation of labor and capital accumulation occur under capitalism.
Marxism rejects all dogma and its development as a living and creative methodology didn't end with Marx, Engels, and Lenin. It cannot exist without a constant connection to and critique of new experience and phenomena with their many shades, complexities, and contradictions.
Nor can Marxism exist and develop without constant interaction between theory and practice. In the hands of the working class, Marxism is a powerful tool for its self-emancipation – especially through developing revolutionary political strategy and tactics tailored to the specific circumstances of the class struggle of each country.
Communist Party chairman John Bachtell speaks at the party's 28th National Convention in Chicago in 2014. | Gokhan Cukurova / PW File Photo
The world today is a far different place than it was in Marx's time. Even then, however, Marx saw contradictions emerging that would eventually develop into the crises of contemporary capitalism. Capitalist economic globalization, production on an unfathomable scale and the resulting concentration and centralization of wealth, and the mass communications, social media, and technological revolutions have created a fundamental contradiction: the economic ability to address all human material needs paired with a "crisis of extremes."
Just eight rich men have the same wealth as half the world's population. The richest 1 percent appropriated 82 percent of new wealth in 2017. In the U.S., the top 1 percent own more wealth than the bottom 90 percent combined.
This "crisis of extremes" has special impacts based on race, gender, and nationality and between advanced capitalist economies and developing ones.
The drive for maximum profits and wealth accumulation lead to ever more extensive and destructive crises like the 2008 global financial crisis, mass economic migration, poverty, hunger, disease, and the growing displacement of workers through technological revolution.
Capitalism is incapable of solving these crises. Their resolution demands intervention through the organized might of the working class and people, global working class solidarity, and the radical reorganization of society.
Capitalist development has generated two existential threats to humanity and nature: the climate crisis and the danger of nuclear war.
The current climate crisis is the most fundamental of multiple ecological crises that reflect the sharpening imbalance between humanity and nature caused by capitalism. It is directly due to the inherent destructiveness of capitalism's productive process and drive for profit, particularly on the part of the fossil fuel industry. Capitalism's need for infinite expansion is colliding with the Earth's finite resources and capacity to absorb environmental damage.
Marx understood humans were part of nature and interacted with external nature through the labor process. Capitalism, he argued, causes a "metabolic rift" between nature and human society; alienating humans from both their own labor and nature itself.
The anarchy of capitalist production, exploitation, and inequality undermine any effort for dealing with this crisis and all other issues of a modern interconnected economy.
To avert a climate catastrophe, all of humanity—irrespective of class, economic system, and country—faces the enormous and urgent challenge of organizing a rapid transition to sustainable energy production.
Only socialism can ultimately restore a harmonious relationship between society and nature and between humans and their labor. And the remarkable experience in China shows a socialist-oriented system makes the transition to sustainability on a massive scale possible.
But no matter how quickly this occurs, the climate crisis and its consequences of sea level rise, drought, desertification, extreme weather events, acidification of the oceans, and mass species extinction will worsen and continue to plague humanity for generations to come.
Curbing the climate crisis requires global working class solidarity and cooperation of nations regardless of their economic and social system. Countries must learn to share natural resources, redistribute wealth, and re-order their budget priorities to facilitate a transition to sustainability and adaptation.
Secondly, humanity is threatened by militarism and the growing danger of nuclear war. U.S. society is militarized at every level. Wasteful war spending comprises over half the federal budget. The collapse of the Soviet Union removed the main justification for funding over 800 military bases in 70 countries. It's real reason all along was to ensure U.S. imperialist domination.
A new global nuclear arms race has begun amid heightened capitalist and regional rivalries and between capitalist and socialist-oriented states. The U.S. will spend over $2 trillion on nuclear modernization to produce a new class of more dangerous nuclear weapons easier to deploy and use. The risk of nuclear catastrophe is greater now than during the Cold War.
The world's people, beginning with Americans, must intervene to end the threat of war, demilitarize society, and rid the world of nuclear weapons. As Rev. Martin Luther King, Jr. said over 50 years ago, "We still have a choice today: nonviolent co-existence or violent co-annihilation."
Every dollar spent on military production contributes to our nation's spiritual and moral death and robs it of funds that could address the climate crisis and our antiquated infrastructure, as well as the crises in health care, education, transit, and housing.
The danger of authoritarianism and fascism has grown in the U.S. and Europe. Trump and the so-called "alt-right," or fascists, linked to him pose an unprecedented threat to democracy, peace, and the environment.
Trump's presidency is unlike any in our history and is increasingly under a cloud of illegitimacy with an ongoing federal investigation amassing evidence of collusion with foreign entities in the 2016 elections and crimes of financial corruption by Trump, his family, and associates.
The Trump presidency is also a byproduct of extreme wealth concentration and the domination of the government by the fossil fuel industry, military corporations, and right-wing social movements. At the same time, there is now a relentless assault on the truth and an erosion of democracy.
Trump is governing as he campaigned—by exploiting fear, economic insecurities, racism, misogyny, anti-immigrant hysteria, Islamophobia, anti-Semitism, and economic nationalism. He deploys anti-China trade rhetoric to divide the working class domestically and pit U.S. workers against those of other countries.
Trump has assembled a war cabinet whose members have the fantasy of restoring U.S. imperialism as the world's sole superpower. Leading advisors openly advocate regime change in Iran and North Korea and prefer military might over diplomacy. The danger is growing of a Middle East regional war as well, which could conceivably see the use of nuclear weapons.
Building a united front to defeat the extreme right's domination of the U.S. government is an overarching strategic objective. The mass resistance to Trump is unprecedented, including thousands of electoral candidates arising from grassroots movements. But without victories in the 2018 and 2020 elections, it is impossible to envision more advanced stages of struggle, including a future transition to socialism.
Marx foresaw that with the attainment of a bourgeois democratic republic and the universal right to vote, a peaceful path to socialism could be opened for the working class. Under these circumstances, armed insurrection as a form of struggle becomes outmoded. In any case, violence has always been initiated by the capitalist class.
The Communist Party USA, which celebrates its 100th anniversary in 2019, firmly believes the struggle for socialism in the United States must follow a democratic, peaceful path, committed to defending, expanding, and radically reforming democratic institutions. It must utilize all possible arenas: protest, strikes, boycotts, legislative, electoral, and the "battle of ideas."
The Resistance to Trump is turning its eyes toward the 2018 and 2020 elections. Here, Women's March 2018 participants at the National Mall in Washington. | AP
The fight for racial and gender equity and for a sustainable, demilitarized path of development with a vast redistribution of wealth are central necessities for any transition to socialism in the U.S.
The victory of socialist revolutions in the 20th century and efforts to build socialism under extraordinarily difficult circumstances—their achievements, mistakes, errors, and even crimes, and subsequent defeats—provided a wealth of valuable if not bitter experience and lessons.
Those lessons have also been critical to correcting mistakes, reforming old models, and forging new paths to build modern, 21st century socialism.
We continue to hold to our belief that there are no universal models for the winning of political power by the working class and its strategic allies, the transition to socialism, or the specific features of that future system. Every country will find its own path to socialism based on its history, traditions, and the realities of its people.
We are convinced that a democratic, peaceful, sustainable socialism is humanity's future. And the ideas of Karl Marx are essential for getting us there.
In 2016, Donald Trump prevailed over 17 establishment opponents. He is a disrupter. In particular, he disrupted establishment trade policies that have failed millions of Americans.
Too many workers and communities have been left behind. Too much mistrust has grown regarding the way we've managed globalization. Wages have fallen far behind the growth trends of previous generations.
The neoliberal free-market free-trade trickle-down orthodoxy, which we have followed for decades, is exhausted—socially, politically, and economically.
We don't really understand Trump's tariffs, or bluster, or impulsive negotiating tactics, but we do understand that we need a change in direction.
We need new, effective public policies to deal with real problems that affect most people in America—inequality, climate change, health care, opioid addiction, student debt, and decaying infrastructure. We desperately need a manufacturing strategy that creates good new jobs, and stronger employment relationships that would raise family income.
To paraphrase Ronald Reagan, "Unregulated free market orthodoxy cannot solve these problems—free market orthodoxy IS the problem." Our big policy challenges are all market failures.
David Brooks told us that Trump is the wrong answer to the right questions. Trump's disruption gives us the opportunity, right now, to find better answers the right questions. We should start by rehabilitating the role of public policy, restoring trust in public institutions and re-legitimizing the role of government in solving our problems.
China understands this. So do Japan, South Korea, Germany, and the Nordic countries. Also, they all recognize their legitimate national interests. They have various forms of mixed economies, including well-designed industrial policies to improve their living standards. We understood this when we industrialized our economy, and we understood it again in the decades after World War II.
China invests billions in research and development, knowing their investment will be commercialized in their domestic economy. Our billions in publicly funded R&D will be commercialized offshore, producing good jobs in Malaysia, Vietnam, India, China, Mexico and Ireland.
Foreign students are subsidized to study at U.S. universities. Our own students pay prohibitive tuition costs, taking on debt and risk. Many graduates don't find a job in their field of study.
We have done better on each of these measures in the past.
Inequality and climate change—the defining problems of our time—are the biggest market failures in human history. Solutions will require new public policies. NAFTA and subsequent trade policies take exactly the wrong approach. They are designed to merge our economy into the global economy, blur national borders and push aside public interests.
Economic and trade policies should balance investor interests with public interests. That's what we expect any political system to do. That will be necessary, important and fundamentally different from the trickle-down economic policies and free-trade NAFTA approach.
Trump fumbles with this realization. He recognizes the urgency of "doing something." His tariffs are certainly something, but Trump's instinct is to tear down social cohesion, hit back at his rivals, fan conflict, and diminish our leadership in the world.
Our first conversation should be about restoring social cohesion, and recognizing that we all do better when we all do better. Our purpose is to raise living standards and improve well-being in our communities. In a mixed economy approach, we would create policy-driven strategies to address inequality, climate change, health care, education, investment in infrastructure, restoring our industrial base and making key social investments we have let wither for 30 years.
When Trump says it, it sounds ominous, but every country does expect public policies to express their legitimate national interests. What we don't hear from Trump is that the purpose of an economy is to raise living standards. That is true of our domestic economy and equally important for the global economy. We can recognize legitimate national interests, raising living standards everywhere, without being nationalists or xenophobic.
Trump has disrupted economic orthodoxy. We no longer expect the invisible hand of free markets to solve serious social, environmental, and economic problems. But, Trump is transactional; he lacks a coherent vision. His answers look suspiciously beneficial for global corporations, the financial industry and very wealthy donors.
We have campaign seasons in 2018 and 2020 to consider different answers to Trump's questions. Where should we be investing in people, infrastructure, innovation, industries, communities, and clean energy? In each case, we should ask, "Who gets the gains from productivity, innovation, investments, and globalization?"
Trump has put those questions into play. We haven't had this good an opportunity for years.
Paul Krugman@paulkrugman: Trump is going all in on (a) claiming that undocumented immigrants are responsible for a huge crime wave; (b) Democrats supporter immigrant criminal gangs. Both claims are lies, pure and simplehttps://t.co/0orSpr9o5e. One important thing to realize about the immigrant crime wave thing is that the people who believe it mostly come from places where there are hardly any immigrants.https://t.co/wNse30FZwp:
But I guess if you've never met a person from someplace else, it's easier to believe that such people are "animals". We should also note that such people tend to hold false beliefs about other parts of America as well as foreign countries. Like the "American carnage" narrative that sees our big cities—which have never been safer—as something out of "Escape from New York". I had a letter from a Sheriff Joe supporter insisting that I had no idea what it was like living near the border. "How would you feel if New York was full of immigrants?"...
A new Social Security Administration (SSA)studyreinforces what research from CBPP and other experts have found: Most geographic variation in the share of residents receiving federal disability benefits stems from variation in the prevalence of disability itself, as well as socioeconomic characteristics.
