Economics for Dummies Part One - Tariffs

 

Economics for Dummies, part one: tariffs

        I’m calling this “Economics for Dummies” because we continue to see ludicrous claims about things done by not only the last administration, but by most recent Republican ones. This included some which are so lunatic in nature that Adam Smith himself would have puked had he read them. Most who will actually read this already know better.

        I know, “So who was Adam Smith?”  Adam Smith was a British citizen who wrote and published, in 1776, what is considered by most literate humans to be  the first scholarly and researched book on economics, “An Inquiry into the Nature and Causes of the Wealth of Nations,” generally abbreviated as simply “The Wealth of Nations.”  It is the second most cited book in the social sciences published before 1950, behind Karl Marx's “Das Kapital.”

        To understand economics requires a bit of vocabulary. Smith lived in the period just prior to the American Revolution when economic issues were driving major political disagreements (as in fact they pretty much always have). In this case, it was primarily the American Colonists dissatisfaction with being on the “wrong end” of British Colonial policy, described in economic terms as Mercantilism, or the mercantile “system.” Economics and/or religious factional disputes, in one form or another, were also root causes of the almost constant tension between the colonial nations of Western Europe.  

        Mercantilism, and to large extent, Colonialism, was driven by circumstances primarily unique to long standing European nations which had the need for raw materials to continue industrialization and who were fast consuming those within their own continental boundaries.  A secondary issue was that colonies were regarded primarily as sources of these raw materials and markets for finished goods exported from the “Mother country.” In summary, wealth was supposed to flow from the colonies to the mother country.

        “The Wealth of Nations” attacks a major tenet of mercantilism: The idea that protectionist tariffs serve the economic interests of a nation (or indeed any purpose whatsoever) is disparaged, yet greed prevails.

         Tariffs, lauded and enacted by Trump and regarded as ludicrous by actual credentialed economists, exist principally to make foreign imports more expensive than domestic production, thus assuring domestic manufacturers of an “edge.”  Among his many intellectual failings was the fact that Trump enacted tariffs on some foreign import products not produced, or not at a remotely competitive price, domestically. He compounded this lunacy by insisting that “China will pay the tariffs.”  At this point his Treasury Secretary should have bitch slapped him.

        Trump undoubtedly has never heard of South Carolina's first threat/attempt at secession in 1828. The Tariff of 1828 was a very high protective tariff that became law in the United States in May 1828. It was called the “Tariff of Abominations" by its Southern detractors because of the effects it had on the Southern economy. It set a 38% tax on some imported goods and a 45% tax on certain imported raw materials. The tariff of 1828 raised taxes on imported manufactured goods from Europe. The South was hurt badly by these tariffs, because just as today, US importers added the cost of tariffs to the retail prices. This simply passes the cost of the tariff on to American consumers. Remember, the idea is to make domestic products more attractive to our own consumers. When US manufactures are far more expensive for whatever reason, the import even with tariffs added is still cheaper.

        A simple 1828 example: Shoes made in America at the time were generally produced as one offs in cottage industry settings, and almost exclusively in the North, as the South was cash crop, largely agricultural driven. Meanwhile Northampton alone, in England, had over one thousand shoe and bootmakers.

         A simple math example: Shoes made in New England shipped to Charleston were, let’s say $6 per pair, meanwhile shoes made in England, even with shipping, would sell at the Port of Charleston for $4 per pair. The obvious conclusion is that English shoemakers had an edge over domestic manufacturers, but to the agrarian South Carolinians it was simply a math exercise: “Buy British for 50% less” (and the quality was probably better.)       

     The Tariff of Abominations led to a near bout with secession in the South that could have destroyed the Union 30 years before the Civil War. South Carolina's state legislature actually passed articles of secession. Andrew Jackson publicly threatened the use of Federal Troops to enforce the tariff collection while clandestinely ordering “his men” in Congress to pass a new and much lower tariff bill. Presented with greatly reduced tariffs, S.C. relented. 

        The Trump tariffs do not and cannot “protect” American manufacturers simply because American consumers will still buy Chinese products at Walmart, even if the cost is a bit higher, because they are still either cheaper than such products made in America (if there are any, especially in the area of electronics). The far greater impact is on US manufacturers who “assemble” locally but use imported parts or raw materials such as steel. The importers' cost of Trump's tariffs on imported Chinese steel have simply been passed on to American consumers who buy products made from it in this country. China produces roughly twice as much Steel at lower prices than the US.

     The National Association of manufacturers estimates that the Trump Tariffs have cost the average American household an additional $850 or so each year since their inception, China has borne none of these financial burdens, rather Ford, Black and Decker and a host of others have simply upped their retail prices to cover their added cost due to tariffs.   

        The circumstances driving tariffs have varied with time. In 1776, England, themselves, produced no tea, but they had granted the British East India Company a monopoly on tea imports directly to the American colonies, That didn’t drive colonists to rebel, but the tax imposed on it (in essence a tariff) certainly did. (Can you say Boston Tea Party?) Of course, another issue was that while England granted no real citizenship status to most colonial “possessions,” they had appealed to Colonists as “Englishmen” to support the French and Indian war, promising to pay for it. When that proved impractical, in part due to continuing conflict with several European neighbors, England reneged, imposing “taxes” (really more tariffs) on the colonies. We all know (well, maybe Trump isn’t so sure) how that turned out.

        In fact, since 1776, economists have generally regarded protective tariffs as bad ideas and have proved it several times since in US history. One more example, then I’m done: In the early days of the Great Depression, as the US economy tanked, Congress passed, and Herbert Hoover signed, the Smoot-Hawley Tariff Bill into law. The Smoot-Hawley Act increased tariffs on foreign imports to the U.S. by about 20%. This set off a domino effect of trade wars across the globe that resulted in a 66 percent decline in total world trade from 1929 to 1934.

         Not only did this trade-war environment exacerbate the already lackadaisical economic conditions of the Great Depression, but it also fueled the irrational despotism and militarism that preceded the outbreak of World War II. At least 25 countries responded by increasing their own tariffs on American goods. Global trade plummeted, contributing to the ill effects of the Great Depression. That is the result of economic ignorance and flamboyant efforts to look like a leader. As usual, many of those who supported the Hoover administration were victims of said incompetence. The harsh reality is that tariffs yield clear benefits primarily for the narrow interest groups that promote them.

        Would tariffs ever make sense? Perhaps as an “internal stimulant” to push industrial expansion in a nation with loads of all the natural resources to fuel it. No such developed nation now exists on earth. Raw materials are distributed with no regard to national boundaries. Artificial boundaries such as tariffs are of little use, and as in the case of the Trump tariffs and others before them, actually may well do harm to the larger economy. The annual Trump tariff cost to American households is an aggregate of about $130 billion (nine zeros!) 

 

 

So Wrong It's Not Even Wrong"

 

“So Wrong it’s Not Even Wrong”

“Dockworker salaries already average $171,000 a year.”

                Betsy McCaughey, Op-ed, 10/10/2021

        Wow, that’s really high wages, huh? In fact, the lying (more on that, next paragraph) shrew’s target in the editorial was, of course, Joe Biden. the Op Ed was a screed blaming Biden for the current dock issues on the West Coast. In McCaughey world, this really means she opposes the right of workers to organize and/or demand fair treatment. Of course, in supporting worker’s rights, Biden has no real dog in the fight which, if such “fight” even really existed,  would be a matter to be settled between port officials and their longshoremen, if either were actually to blame for the current “supply chain” situation.

        Ms. McCaughey is doing, as others have of late, a classic “shift the blame” for partisan reasons, cheap shot hatchet job. There is no truth to the claims, made by McCaughey and her ilk that, in some alternate reality scenario, the President is in any way responsible or even remotely involved in the current port cargo glut. No, not ever, just as POTUS is and cannot be responsible for fuel prices fluctuations.

        I led with the quote simply because it is, as Nobel Physicist Wolfgang Pauli once said of a truly horrid piece of student work, “so wrong it’s not even wrong!” (By which he meant that the alleged data was faked, and the conclusions based thereon were categorically wrong.) So, how does that relate to the McCaughey dock backup claims? First off, US ports usually don’t work around the clock as many other nations’ do. Why? Because the Longshoreman’s union is selfish enough to believe that they, like most other “shift work” employees, should receive a shift or holiday differential, which port operators simply don’t want to pay. And no, port operators are not remotely in dire financial straits. They can easily afford shift and holiday extras, but they just don’t want to.  

        Now to the big lie: Because I know how to research, vice simply believe anything I read, and because the $171,000 annual salary claim seemed grossly inflated, I looked up average longshoreman’s compensation for Pacific coast ports. The average Longshoreman salary in Long Beach, CA is $64,715 as of September 27, 2021, but the salary range typically falls between $55,374 and $73,992. The highest paid dock worker on the West Coast makes about $50,000 less annually than McCaughey cites as “average.”   

        McCaughey fails to mention that ports on New York and down the US east coast are in the same crunch. And, oh by the way their average annual salary is about $100k lower than the McCaughey quote.

Why is this really happening?  US major ports’ cargo traffic has been rising since the pandemic took hold because many of us, as homebound/distancing Americans, began ordering goods online, with a record number of ships waiting to enter ports at Los Angeles and Long Beach. Marine terminals and trucking companies have been unable to keep up with the volume, resulting in bottlenecks at ports and rail yards from California to New York.

        Here’s a quote from an actual knowledgeable port management expert:  "The pandemic has exacerbated a situation that’s been building for years, as growing consumer demand for imported products comes up against an aging supply chain", John McLaurin, president of the Pacific Merchant Shipping Association, said in an interview with FactCheck.org. “We’ve never seen this amount of cargo, and at some point, you simply can’t violate the laws of physics. You can only move it so fast; you can only pile it so high, and then you just run out of space. We’re at that point, and we have been for a while.”

        The current administration has inherited that infrastructure with limited capacity. In truth, the Biden proposed infrastructure package includes billions of dollars in funding for port infrastructure, as well as money for rail, and the administration has formed a task force on supply chain disruption and named a “port envoy” to work to resolve the congestion at U.S. ports, Kabir noted. As for automation, some of which (in the interest of truth) the Longshoreman union opposes, the implementation of such shortcuts lies with Port Operators. Can they afford it? The port of Long Beach generates an average of $100 billion annually. You tell me.  

        When blaming unions and, by extension, President Biden, Betsy McCaughey is really blaming Franklin D. Roosevelt for Depression era labor legislation. As a PhD Economist she knows better, as an asshole far right sycophant, she simply doesn’t care.

Just Another Partisan Hack Union Hater

 

Just Another Partisan Hack Union Hater

        In a recent rightist op-ed diatribe, the well-educated, but prone to prevarication, Betsy McCaughey attacks the Biden infrastructure bill. It is worth recalling that Ms. McCaughey used the Big Lie to help scuttle the Clinton effort to reform health care in the 1990s. She wrote a long op-ed claiming that the plan would make it illegal for individuals to negotiate their own health care plans or pay their own doctors. This lie gained traction even though the proposed legislation contained a provision specifically stating that any such provision was illegal. She later, thanks to the newly gained notoriety, ditched hubby number one and married future Trump Commerce Secretary, millionaire Wilbur Ross. The Washington Post stated, "Her toothy good looks, body-conscious suits, Vassar BA and Columbia PhD reduced right-wingers to mush." (Probably not that hard).

         She became Michael Pataki’s Lt. Governor in New York, completely alienating him and his entire staff by the second year and, being “uninvited” to the ticket in 1998, ran against him as a Democrat, receiving only 1.56% of the general vote for governor. She then sued her (by then) ex-hubby (Mr. Ross) because he “only” spent $20 million on her campaign, instead of the $40 million they had “agreed” on. In later op-eds, she echoed the soon to be discredited Sarah Palin “death panel” claims about the Affordable Care Act. That’s enough. If you haven’t figured out that Betsy McCaughey is a political hack by now, stop reading.

        To be sure, the Infrastructure bill which, of course, the President didn’t personally write is, unfortunately, encumbered by some entitlement type issues which, while listed with expiration dates in the bill, may well, as these things frequently do, become permanent.         Examples include a $25,000 freebie to first time, low income, home buyers who stay in the house, etc., etc. It is a bit reminiscent of the Homestead Act. McCaughey’s complaint goes on, however, to whine that it’s really aimed at “diversifying the suburbs”.

        This sort of rhetoric is vintage far right drivel.  In fact, there are far more Caucasian families on welfare (about 40% of all recipients) in America than any other ethnicity. In states like West Virginia, where Senator Joe Manchin lives comfortably, deep in the pockets of Big Coal, far more of his constituents would benefit from such a program and the vast majority of those are white.

         Again, I am not sold on taxpayer dollars buying homes (or at least providing a hefty down payment on them) but I couldn’t care less who moves into my neighborhood. Pigmentation isn’t on my list of good neighbor attributes, but character is. Bigotry is a big downer, though. Now, if Tucker Carlson moved next door, that would be a disaster.   

        Another big issue for McCaughey is that where incentives are offered in the proposed legislation for homeowners who have energy efficiency upgraded (solar panels/ heat pumps, etc.) the bill requires that such work be done by union labor. Again, I think that is a bit restrictive since, in some, locales the local heating and cooling guy may be an independent dealer, may not be unionized, and may well be the only game in town.

        However, McCaughey jumps from this into a generally vicious anti-union diatribe. Now, as usual, here’s the history lesson:

        Ms. McCaughey would apparently (never having actually worked for a living) have us forget what the labor situation was in America before the union movement began. Workers were, in most, cases treated as chattel. This was only marginally better than in the UK, where until 1824, labor organization of working men was a crime. Employers like Ford, Big Steel and even worse, mine operators in Joe Manchin’s West Va. and Kentucky region treated working individuals as if they owned them. Ford employees on the factory floor were actually forbidden to talk with each other while working. In fact, in many cases, they learned to speak with minimal lip movement and referred to it as “Fordalization” of the face. Mine operators, many of whom lived in New York while selling coal mined in Appalachia, paid miners in “scrip”- paper chits only useable at a company owned store. When miners even spoke of unionization, thugs hired by the operators killed several leaders.  

        Even today, coal miners as a group can expect to lose about 12.6 years of life span compared to non-miners and this is better than in the 1930s.  Yet Manchin signs on to much of the anti-union rhetoric, as McCaughey does. Why? Because union workers with fair wages and adequate safety provisions get a larger share of the profits than powerless drones. Since becoming a Democratic U.S. senator in 2010, Manchin’s total coal stock related income has topped $4.5 million!

         I am not overlooking the fact that with unions, as any organization, (even Congress!)  there are potential abuses which make realistic oversight necessary. But factually, the industrial boom which followed WWII was actually almost as much a result of the Roosevelt era labor legislation which empowered workers to demand and obtain fair income which was, in turn, largely responsible for the increase in home ownership and movement into the middle class of the 50s and 60s. As other nations rebuilt, Japan and Germany among them, America’s monopoly in the mass auto market as well as other heavy industries faltered, and the Big Three US Auto brands and Right-Wing politicians, such as Joseph McCarthy, playing the “socialist/communist” card, were quick to blame labor.

         What usually falls through the cracks is that, for union retirees and active workers, much of the steadily increasing expense of unionized labor was (and is) extravagant health care coverage, negotiated in 1950, in the case of the United Auto Workers, when the corporations would rather throw money at Unions than address quality of work life issues. This is known as “welfare capitalism” and was actually invented by Henry Ford, who paid the (at the time) very high wage of $5 daily, expecting absolute obedience as the result.

      Blaming unions for what is a steadily increasing US health care cost debacle looks in the wrong direction. Don’t like escalating drug costs? Look to a gutless Congress where the Big Pharma lobbying bucks go.  Look to Joe Manchin’s daughter, who retired as CEO of Mylan Pharmaceuticals with $19 million as her final, salary. On her way out the door she also, by the way, increased the cost of potentially life-saving Epi-pens by 581%!

        Once upon a time patients could only see prescription drugs advertised to a greatly restricted degree and then only subject to FDA approval. Fast-forward to the 1980s: while Nancy Reagan was telling Americans to "Just Say No," to illegal drugs, the feds cozied up to the pharmaceutical industry, lobbied the hell out of legislators and as a reward got relaxed legal restrictions. Direct-to-consumer marketing, or what you know as "drug commercials," was first given the seal of approval in the US in 1985. Only we and New Zealand today are subject to such mass media scare come-ons.

         Unions are an easy target, and as auto makers (rightfully) complain about rising employee and retiree health care costs, it is essential to remember that most of these union perks were negotiated, well before the last 45-year steady increase in Health care, and especially prescription drug, costs. As a simple example: average worker earnings increased by 37% between 2000 and 2010. Over the same period, health insurance premiums increased by 114%. As a result, employee contributions to health care insurance increased by 147%. The Cost of living (CPI) increase over the same period was only 20.5%.  In plain terms, the average cost of health care nationally increased almost six times as much as the cost of living. While some of this increase was borne by employers, the expense to the average worker (increased co-pays and deductibles) increased by an even larger margin, a factor of 7.2!   

        So, while the McCaugheys and Manchins bitch about and finger point at Unions, much of which is related to increasing health care demands, they rarely, if ever, mention that the medical community, predominately Pharma and Insurers, especially Medicare Advantage plans, are far more culpable.  In fact, in 2009, the United Auto Workers took over most retiree medical responsibility and are doing a better job of it at lower costs, via the UAW Retiree Medical Benefits Trust, than the big three managed to do. Still, unions are subject to Republican scorn and blame laying, Why? Because unions tend to support Democrats. So, especially in the case of Betsy McCaughey, it’s simply her typical partisan carping. 

Cleese

 

                                Have to share this first off:

 

Ode to Sean Hannity

Aping urbanity, Oozing with vanity

Plump as a manatee, Faking humanity

Journalistic calamity, Intellectual inanity

Fox Noise insanity, You’re a profanity,

Hannity

John Cleese:

 

        In the almost unthinkable case that the reader doesn’t know who John Cleese is, he has been a diehard Trump and Trump enabler critic for the last four years, a Python, A knight who says “Ni,” an ascerbic innkeeper named Basil Fawlty, Tim the wizard, and the head of the ministry for the development of silly walks.

        Reading this, and laughing as I did, I was flooded with several thoughts at once (it could happen). The first was remembering being at weekend parties with Navy friends in the late 60s and early 70s. It mattered little whose house, what ranks/ratings were in attendance or what the occasion, but at 11:00 pm, the television was turned on and tuned to PBS to watch Monty Python’s Flying Circus.

        This would have been, as I said, the late 60s, very early 70s, and there was nothing even remotely comparable on American television at the time. the late Steve Allen and Ernie Kovacs had done some sketch comedy with zany premises, but neither were as outré and socially critical as the Pythons.

          Allen’s best shows ran from 1956 to 1961 and then in syndication several years later. The primary difference was that Allen, a genuinely funny man and TV icon, was always the host and left that role only briefly to do a sketch-based role. In the main, Steve was always Steve. To give props where they are due, he did have a cast of regulars, several of whom launched careers with his show. Allen was also a man who appreciated comedic talent and was the only mainstream TV host to give the stage to Lenny Bruce. For those who don’t remember, Bruce was the man who paved the way for Carlin, Pryor, Williams and many modern stand-up comics and paid for it with his life.

        Ernie Kovacs died in 1962 at just 42 years of age. In that shirt lifetime he, like Steve Allen, was a tv comedy pioneer. While he was still “the host.” Ernie did characters which were closer to the Pythons in outrageousness, and occasionally pushed the envelope in doing so. His gay poet, Percy Dovetonsils, was hilarious, but sexuality was never mentioned (standards and practices censors). His Nairobi Trio (three guys in ape suits) was also innovative. Kovacs did sketch comedy on the edge much of the time and was instrumental in beginning to change some of what was allowable and wasn’t.

        That aside, America had never seen anything quite like the Pythons. First off, none of them ever appeared in the show as themselves, and the characters they did appear as in the show, which was completely sketch based, were often caricatures of British “types”. While it took some American viewers some time to adjust to “local jokes” which were only local if you lived in the UK, there were plenty of sketches so brilliant that it didn’t matter what or where the settings or premises were.

        Only the Pythons could craft a sketch based entirely on Spam. (“We have spam, spam, spam, spam, eggs and spam”) American audiences were treated to mugger grandmothers in drag, blustering Army officers, philosophers playing soccer, dead parrots, cheese shops with no cheese, and a government bureau devoted to the development of silly walks. Although the Flying Circus as a TV show only lasted for four seasons, it remains in eternal syndication. What followed were a series of three equally brilliant movies and, thanks to Python Eric Idle, an equally entertaining Broadway musical as well. While each remaining Python is still active to some degree, Terry Jones and Graham Chapman are gone.

         That however is all preface to a question which arose (for no related reason) while I was cleaning cat litter pans shortly after reading Mr. Cleese’s poem. I found myself wondering how much, if any, influence the Pythons, which aired in the US until 1973, had on a young Lorne Michaels, when he pitched Saturday Night Live to NBC management. As I think about it, I believe that there must have been some significant influence.

        Prior to the SNL there were American shows which did sketch comedy, but not only sketch comedy.  More significantly, SNL, while showing all players in the opening credits, always had (has) them in character throughout the show. We never saw Dan Ackroyd performing as himself, but he cracked us up as Julia Child, Beldar Conehead, a Festrunk brother, or the Bass-O-Matic pitchman.

         Perhaps the only time real names were used was the “news” sketches, where real names were used, but still in character. Even the continuing inside jokes (Generalissimo Francisco Franco is still dead” and the entire “Buckwheat saga” have a Pythonesque tone. Of course, once SNL showed that off the wall comedy works and the networks figured it out, we soon saw In Living Color, Second City TV and others. However, Graham Chapman, Terry Jones, John Cleese, Michael Palin, Eric Idle and Terry Gilliam showed the way. And remember, always, “No one expects the Spanish Inquisition!”