(What’s Left of) Our Economy: The Dubious Labor Shortage Claims Keep Coming

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Perhaps some day we’ll find out when it apparently became mandatory for journalists to write articles about supposed labor shortages in the American economy without once mentioning the word “wages.” For now, RealityChek will have to settle for citing yet another example of this phenomenon that contains an interesting twist: The reporter in question did look at some data from the Bureau of Labor Statistics (BLS), the U.S. Labor Department division that gathers and publishes employee compensation figures. But she still left out BLS numbers on wages and salaries.

According to Jilian Mincer of Reuters:

“Hospitals nationwide face tough choices when it comes to filling nursing jobs. They are paying billions of dollars collectively to recruit and retain nurses rather than risk patient safety or closing down departments, according to Reuters interviews with more than 20 hospitals, including some of the largest U.S. chains.

“In addition to higher salaries, retention and signing bonuses, they now offer perks such as student loan repayment, free housing and career mentoring, and rely more on foreign or temporary nurses to fill the gaps.”

And as indicated above, she is clearly familiar with the BLS as a reliable source of information on the American employment picture. Later in the article, she writes that “Nursing shortages have occurred in the past, but the current crisis is far worse. The Bureau of Labor Statistics estimates there will be more than a million registered nurse openings by 2024, twice the rate seen in previous shortages.”

But for some reason, she didn’t mention the BLS wage data – a crucial omission because everything we (think we) know about economics tells us that when anything, including labor, is scarce, its price (pay in this case) will rise until the greater rewards attract an adequate supply. Common sense supports this analysis, too. If employers are scrambling to fill jobs, it stands to reason they’ll offer better pay to make sure they and not their competition attract the needed workers.

And what the BLS data tell us is that no such scramble is taking place – or at least not enough of one to bid up wages. The last year for which detailed data for occupations (as opposed to sectors of the economy) is available is 2016. The numbers say that last year, the mean (average) national annual wage for registered nurses was $72,180 before inflation, and the mean hourly wage was $34.70.

Now let’s go back five years. The 2011 numbers? An annual mean wage of $69,110 and an hourly median wage of $33.23 per hour. So pay by these key measures wages rose by 4.44 percent over those five years and 4.42 percent, respectively. And again, that’s before adjusting for inflation. Does that sound like the hospitals and other healthcare providers that employ nurses are desperate for more?

Even stranger: Nursing pay has been rising more slowly than pay overall during this period. Between 2011 and 2016, mean annual wages for all occupations were up 9.73 percent, and mean hourly wages were up by 9.75 percent. That’s more than twice as fast! (See the same links that contain the national nursing figures.)

In fairness, Reuters’ Mincer looks at an additional nursing issue – the labor situation in rural areas, which she describes as especially dire. And it does seem to make some intuitive sense that small towns and farm communities would have special difficulties staffing medical facilities. But the numbers don’t seem to back up that story, either.

The author spent considerable space reporting on West Virginia. But the BLS numbers show that, between 2011 and 2016, both hourly and average nursing pay advanced by 4.50 percent. That’s only slightly more than the national rates of increase.

Yes, Mincer’s piece did talk a lot about healthcare providers offering “higher salaries, retention and signing bonuses [and] perks such as student loan repayment, free housing and career mentoring….” It’s entirely possible that she’s right. (The government doesn’t keep detailed occupational figures on these scores.) It’s also entirely possible that the data that is tracked by BLS is way off base. But when you’re claiming “labor shortage,” shouldn’t you at least mention that the most comprehensive facts available about base pay say nothing of the kind?

Moreover, buried in the article – indeed at the end of the quote immediately above – is a clue to the apparent paradox: Mincer’s observation that the healthcare industry is relying “more on foreign…nurses to fill the [employment] gaps.”

If true, that would make clear that lax immigration policies are still enabling nurses’ employers to suppress pay by easing any shortages in the domestic labor force by hiring immigrant nurses who will work for significantly lower pay than native-born workers. And it would suggest that the Cheap Labor lobby encompassing so many American businesses is still able to keep these wage-suppressing global labor pipelines open by peddling a steady stream of warnings about bogus labor shortages to gullible journalists.

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(What’s Left of) Our Economy: Flunking the NAFTA Laugh Test

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Remember the wonderful David Letterman show feature “Stupid Pet Tricks”? I couldn’t help but think of it while reading various news reports and analyses claiming that the demise of the North American Free Trade Agreement (NAFTA) will bring apocalyptic consequences to three signatory countries: the United States, Canada, and Mexico. But my parents always told me never to use the (needlessly harsh) word “stupid.” So instead, I’ll call them, “Silly NAFTA Studies.” Examining two that have attracted major attention will make clear why.

First, let’s look at findings released in August by a Colorado consulting firm called ImpactEcon, and revised in October, that was mindlessly written up by The New York Times, The Wall Street Journal, CNN.com, The Los Angeles Times, and many other big news organizations. According to this report:

“Overall, the results show that the US’s reversal of NAFTA leads to a decline in real GDP, trade and investment in the US, Canada and Mexico, with most of the losses resulting from Canada and Mexico’s reciprocation. The losses in low skilled employment are most significant, with employment declining by 256,000, 125,000, and 951,000 in the US, Canada and Mexico respectively. Production and specialization of production across the NAFTA region declines, particularly in those sectors with the highest levels of vertical specialization across NAFTA. The motor vehicles and services sectors in all three NAFTA countries decline, along with production of US meat, food, and textiles; Canadian chemicals and metals; and Mexican textiles, wearing apparel, electronics and machinery.”

Sounds awful, right? And especially dumb for President Trump, who won the votes of many American workers without glitzy high tech skills.

But buried here – glossed over in the press accounts – are results that should be screamingly obvious to anyone knowing anything about intra-NAFTA trade balances, the Canadian and Mexican economies, and in particular their heavy dependence on exporting to the United States: Canada and Mexico take much greater growth and employment hits from NAFTA’s termination than does America.

The passage quoted above shows a major gulf between the projected job impacts.  But the differential effects on real growth rates are even greater – and more threatening to Mexico and Canada. (The researchers assume that all three countries return their tariffs to pre-NAFTA levels.)

Real GDP:

U.S.: -0.09 percent

Canada: -0.48 percent

Mexico: -0.88 percent

And keep in mind two other considerations: The Canadian and Mexican economies are much smaller than the U.S.’ So the jobs losses are much more important for them, relatively speaking. Moreover, Mexico is still a developing country with real political stability problems. Growth and employment shocks like this would spell big, and possibly fatal, trouble for its ruling classes.

In fact, the damage to Canada and Mexico is so great that the (closely related) policy conclusions couldn’t be clearer (except to economics reporters). First, America’s NAFTA partners simply can’t afford to retaliate against the United States if the treaty is terminated; and second, as a result, a walk-out by them is wildly improbable unless Washington’s demands are positively draconian.

The second silly study (and related press coverage) comes from the Motor & Equipment Manufacturers Association (MEMA) – the trade association of an industry that has moved massive amounts of production and jobs to Mexico (much of it from the United States), largely to serve the American market, not the Mexican market or third country markets.

So obviously, the group’s findings should be viewed skeptically. Additionally, however, MEMA assumes (along with the ImpactEcon findings and another study – from another offshorers’ organization – the American Automotive Policy Council), that higher NAFTA requirements for origin rules will leave external tariffs low enough to enable auto manufacturers to ignore the standards and keep shipping product with lots of content from outside the hemisphere all around the free trade zone. Worse, without higher enforcement tariffs, the auto industry might also supply American customers to an even greater extent from even lower-cost economies, like those in Asia.

It’s true that the Trump administration hasn’t discussed raising those tariffs to levels that would bite. It’s also true that these moves would violate all three NAFTA countries’ World Trade Organization commitments on bound tariffs, and similar promises they’ve made in their other trade deals. But the folly of preserving that status quo is so clear cut that it’s entirely reasonable to expect a Trump-ian learning curve. And the President does prize his reputation as a disrupter.

Moreover, all he needs to do is look at the situation for sport utility vehicles and other so-called “light trucks.” Since their non-NAFTA U.S. tariff remains at 25 percent, even staunch opponents of a major treaty rewrite conceded that factories will return stateside if this status quo ante comes back. And P.S.: These products are increasingly dominating American passenger vehicle markets.

A second substantive reason for discounting this study concerns the auto parts makers’ claim that “Raising the automotive content thresholds and forcing automakers to verify the North American origin of more electronics and other parts now sourced from Asia would cause some parts manufacturers to forego NAFTA benefits.”

As just mentioned, the second fear is warranted if tariffs for the origin rules stay where they are. But the point about forcing the companies to verify where their inputs come from? Vehicle makers have already required to provide exactly this information for NAFTA’s entire life by the American Automobile Labeling Act. And they clearly view NAFTA as a huge success. Many companies in the parts supply chain are much smaller, and detailed reporting could indeed become an unreasonable burden for them. But many parts makers are plenty big enough to assume this responsibility easily (unless they don’t know where they themselves manufacture?). Much more important: The information would greatly aid policymakers and the public in (finally!) evaluating the impact of trade agreements and related policy decisions with a critical mass of precision.

Im-Politic: How the Weinstein/Hollywood Scandals Look a Lot Like Policy Debates

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One reason I’m so grateful for having edited magazines for so long was the chance I got to learn about so many of the intellectually dishonest ways in which even some of the world’s most eminent scholars and statesmen argue for or against certain propositions.

Some well known examples? Trying to end debate through stigmatization. (“My opponents are isolationists.”) Pretending that only black and white choices are available. (“It’s either capitalism or socialism.”) Defining a problem out of existence or assuming it away. (“Free trade always creates more winners than losers.”) Launching ad hominem attacks. (“He wants to limit immigration because he’s a bigot.”) And appealing to either anonymous authorities (“All the experts agree….”) or identified authorities (“As Henry Kissinger says….”).

In fact, these ruses were so common that I identified one of my own – a device so popular and sleazy, but so subtle and thus effective, that it’s well worth spotlighting. And finally, after struggling for years to come up with a catchy (or even comprehensible) name, the Harvey Weinstein/Hollywood sex crimes scandals have finally crystallized its essence for me. I call it “preemptive bogus alarmism.” It consists defending a prevailing, longstanding idea or opinion or policy by warning of terrible consequences if (for reasons never specified) change results in a wildly excessive overreaction that’s also thoroughly improbable precisely because the status quo is so well established.

If you think about it, it’s becoming almost de rigeur in defenses of establishment positions on foreign policy, trade, immigration, and many other issues. What after all, has become more routine on the op-ed pages and the like than the concern that “We wouldn’t want ignoring foreign crisis X to turn into ignoring all foreign crises”? Unless it’s “We wouldn’t want fighting foreign protectionist practice Y to produce a shutdown of all trade.” Or “We wouldn’t want more border security to bring on a ban on all immigration.” Or “In trying to prevent another financial crisis, we mustn’t outlaw all Wall Street risk-taking.”

The intents, of course, are to portray even modest new wrinkles in current approaches as dangerous gambits all too likely to trigger widely feared disasters; to deny the possibility of exercising any judgment or identifying any useful opportunities for discrimination; conversely, to pigeonhole all supporters of change as reckless hotheads; and to depict current conditions as indisputable but deceptively fragile bests of all possible worlds that are held together only through the expert, Herculean, and sadly under-appreciated exertions of their supporters.

Which brings us to the Harvey Weinstein angle – and an example of preemptive bogus alarmism that struck me as particularly disgraceful. I’m talking about Woody Allen’s statement in a BBC interview that “it was important to avoid ‘a witch hunt atmosphere’ where ‘every guy in an office who winks at a woman is suddenly having to call a lawyer to defend himself'”.

In other words, we’ve now had weeks of revelations leaving little doubt that various versions of what used to be winked at (by lots of us movie-goers and other non-entertainment industry types, too) as “the casting couch,” have been deeply embedded in Hollywood’s business model for decades, and have victimized even many genuine superstars. And Allen is warning that the nation at large should be at least just as worried that any crackdown not sweep up the innocent as well as the guilty. Even recognizing that law enforcement can be political, and overzealousness is certainly possible, in the “bend over backwards” sense, whenever long-term neglect or laxitude has been exposed, the suggestion that this hypothetical should be on or near center stage sets new standards for obtuseness, at very best.

In fact, Allen’s own dubious past in this regard is enough to break the chutzpah meter. Which suggests a new category of intellectually dishonest argumentation: “Preemptive self-serving bogus alarmism.” But whatever the form it takes, I hope you all agree that the practice needs to be called out – and to the greatest extent possible, stamped out. Moreover, I hope you’ll help me in this effort by sending examples to RealityChek‘s comment section. As soon as I get enough of them, I’ll post them – with full credit provided if that’s what you want. You’d certainly deserve it!

(What’s Left of) Our Economy: September Sees Bigger Hurricane Toll for U.S. Manufacturing but Fractional Overall Production Gain

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The Federal Reserve’s new industrial production figures show greater hurricane-related damage to real U.S. manufacturing output in September than in August, with the losses in chemical industries using oil and gas feedstocks great enough to plunge all of domestic industry into a technical recession. Inflation-adjusted manufacturing production is now 0.14 percent lower than in February. Yet on month, overall after-inflation manufacturing output eked out a 0.10 percent gain.

Most seriously affected by the devastation of the energy-rich Texas and Louisiana Gulf coasts were organic chemicals (where monthly production plunged by 14.71 percent), and plastics materials and resins (down 8.16 percent) — both post-recession worsts. The volatile artificial and synthetic fibers and filaments sector, whose after-inflation sequential output was reported to have sunk by 11.25 percent on month in August saw that figure upgraded to an 8.44 percent decline and boosted its monthly real output in September by 5.83 percent – its best since last September (9.67 percent). Price-adjusted oil refinery production for August was slightly downgraded to a 2.52 percent fall-off (its biggest since January, 2010’s 2.75 percent), but September monthly production dipped only fractionally.

The non-durable goods supersector containing these chemical industries saw its constant dollar output slump by the greatest rate (0.89 percent) since January, 2015 (1.20 percent). Revisions for real manufacturing output as a whole were negative, with August’s reading slightly upgraded but July’s downgraded from a slight increase to a significant drop.

Good news came from the automotive sector, however, especially its first back-to-back monthly real production increases since the May-October period last year, and a strongly upgraded August gain (3.56 percent) that was the sector’s best since June, 2016 (3.89 percent). As of September, however, in inflation-adjusted terms, American manufacturing is 4.26 percent smaller than when the last recession began at the end of 2007 – more than nine years ago.

Here are the manufacturing highlights of the Federal Reserve’s new release on September industrial production:

>Although September’s manufacturing production figures showed hurricane-related damage to American industry to be considerably worse than in August, and indeed bad enough to plunge the entire sector into a technical recession, industry managed an overall 0.10 percent real monthly production increase during the months.

>Due to major constant dollar output drops in chemicals and especially sectors heavily reliant on oil and gas feedstocks from the storm-struck Texas and Louisiana Gulf coasts, domestic manufacturing output after inflation was 0.14 percent lower in September than in February – a seven-month stretch that conforms with the standard definition of a recession (two consecutive quarters of economic contraction).

>The worst September sequential real output losses were suffered by organic chemicals (14.71 percent), and plastics materials and resins (8.16 percent). These decreases were the biggest experienced by these industries since recessionary September, 2008 (24.92 percent), and December, 2008 (11.72 percent), respectively.

>Interestingly, an artificial and synthetic filaments and fibers sector whose (volatile) real production fell sequentially by an initially reported 9.10 percent saw that result now judged as an 8.44 percent drop (still its biggest since recessionary November, 2008’s 11.25 percent). Moreover, its September production is now pegged as rising by 5.83 percent – the best such on month increase since last September’s 9.67 percent.

>Similarly, although inflation-adjusted petroleum refinery output in September dropped sequentially by 2.52 percent (the biggest such fall-off since January, 2010’s 2.75 percent), the monthly August decrease was revised up from 1.93 percent to a minimal 0.06 percent.

>All the same, these results were enough to depress monthly constant dollar output in the enormous chemicals industry by a downwardly revised 2.31 percent in August and another 2.62 percent in September. The latter result was the sector’s worst such result since recessionary December, 2008’s 4.85 percent shrinkage.

>And in the larger non-durable goods supersector, although August’s monthly production was upgraded modestly to a 0.63 percent decline in real terms, real output decreased by another 0.89 percent – its worst such figure since winter-affected January, 2014’s 1.20 percent.

>Despite the fractional inflation-adjusted September production uptick in manufacturing overall, , and August’s upward revision from a 0.26 percent sequential decline to 0.20 percent, July’s results were changed from a 0.04 percent rise to a 0.35 percent drop – big enough to turn overall revisions negative.

>Nonetheless, the automotive sector produced some good news.

>It’s true that July real output for this industry, which has led manufacturing’s bounceback during most of the current economic recovery, was revised down from a 4.16 percent drop to 4.85 percent – its worst since winter-affected January, 2014’s 5.87 percent. But August’s month-on-month improvement – revised all the way up from 2.16 percent to 3.56 percent – was its best since June, 2016’s (3.89 percent).

>Moreover, although September’s sequential output rise was a mere 0.07 percent, it produced the first two-month stretch of automotive output improvements since the May-October stretch of 2016.

>As of September, however, domestic manufacturing still had not yet completed its recovery from the historic Great Recession. Real production was 4.26 percent lower than when that slump began, more than nine years ago, in December, 2007.

Our So-Called Foreign Policy: More Childish Attacks on Trump

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I’m getting to think that in an important way it’s good that establishment journalists and foreign policy think tank hacks still dominate America’s debate on world affairs. It means that for the foreseeable future, we’ll never run out of evidence of how hidebound, juvenile, and astonishingly ignorant these worshipers of the status quo tend to be. Just consider the latest fad in their ranks: the narrative that the only theme conferring any coherence on President Trump’s foreign policy is his impulse to pull the United States out of alliances and international organizations, or at least rewrite them substantially.

This meme was apparently brewed up at the heart of the country’s foreign policy establishment – the Council on Foreign Relations. Its president, former aide to Republican presidents Richard N. Haass, tweeted on October 12, “Trump foreign policy has found its theme: The Withdrawal Doctrine. US has left/threatening to leave TPP, Paris accord, Unesco, NAFTA, JCPOA.” [He’s referring here to the Trans-Pacific Partnership trade deal that aimed to link the U.S. economy more tightly to East Asian and Western Hemisphere countries bordering the world’s largest ocean; the global deal to slow down climate change; the United Nations Educational, Scientific and Cultural Organization; the North American Free Trade Agreement, and the Joint Comprehensive Plan of Action – the official name of the agreement seeking to deny Iran nuclear weapons.]

In a classic instance of group-think, this one little 140-character sentence was all it took to spur the claim’s propagation by The Washington Post, The Atlantic, Marketwatch.com, Vice.com, The Los Angeles Times, and Britain’s Financial Times (which publishes a widely read U.S. edition).  For good measure, the idea showed up in The New Republic, too – albeit without mentioning Haass.

You’d have to read far into (only some of) these reports to see any mention that American presidents taking similar decisions is anything but unprecedented. Indeed, none of them reminded readers of one of the most striking examples of alliance disruption from the White House: former President Ronald Reagan’s decision to withdraw American defense guarantees to New Zealand because of a nuclear weapons policy dispute. Moreover, the administrations of Reagan and George H.W. Bush engaged in long, testy negotiations with long-time allies the Philippines and Greece on renewing basing agreements that involved major U.S. cash payments.

Just as important, you could spend hours on Google without finding any sense in these reports that President Trump has decided to remain in America’s major security alliances in Europe and Asia, as well as in the United Nations, the International Monetary Fund, the World Bank, and the World Trade Organization (along with a series of multilateral regional development banks).

More important, you’d also fail to find on Google to find any indication that any of the arrangements opposed by Mr. Trump might have less than a roaring success. The apparent feeling in establishment ranks is that it’s not legitimate for American leaders to decide that some international arrangements serve U.S. interests well, some need to be recast, and some are such failures or are so unpromising that they need to be ditched or avoided in the first place.

And the reason that such discrimination is so doggedly opposed is that, the internationalist world affairs strategy pursued for decades by Presidents and Congresses across the political spectrum (until, possibly, now) is far from a pragmatic formula for dealing with a highly variegated, dynamic world. Instead, it’s the kind of rigid dogma that’s most often (and correctly) associated with know-it-all adolescents and equally callow academics. What else but an utterly utopian ideology could move a writer from a venerable pillar of opinion journalism (the aforementioned Atlantic) to traffick in such otherworldly drivel as

A foreign-policy doctrine of withdrawal also casts profound doubt on America’s commitment to the intricate international system that the United States helped create and nurture after World War II so that countries could collaborate on issues that transcend any one nation.”

Without putting too fine a point on it, does that sound like the planet you live on?

I have no idea whether whatever changes President Trump is mulling in foreign policy will prove effective or disastrous, or turn out to be much ado about very little. I do feel confident in believing that the mere fact of rethinking some foreign policy fundamentals makes his approach infinitely more promising than one that views international alliances and other arrangements in all-or-nothing terms; that evidently can’t distinguish the means chosen to advance U.S. objectives from the objectives themselves; and that seems oblivious to the reality that the international sphere lacks the characteristic that makes prioritizing institution’s creation and maintenance not only possible in the domestic sphere, but indispensable – a strong consensus on defining acceptable and unacceptable behavior.

One of the most widely (and deservedly) quoted adages about international relations is the observation, attributed to a 19th century British foreign minister, that his nation had “no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.” Until America’s foreign policy establishment and its media mouthpieces recognize that this advice applies to international institutions, too, and start understanding the implications, they’ll keep losing influence among their compatriots. And rightly so.

(What’s Left of) Our Economy: The Wage Stagnation Mystery Deepens

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If, like most of the policy and business establishments, you’re mystified by the continuing failure of American wages to rise healthily despite labor markets that seem unusually tight, you’ve stayed mystified this morning. The Labor Department has just reported that inflation-adjusted pay in September in the private sector and in manufacturing both fell sequentially for the second straight month. Moreover, the new data reveal that real manufacturing wages worsened year-on-year for the first time in three years.

The figures are still preliminary, but according to the Labor Department, after-inflation wages for the private sector dipped on month in September by 0.09 percent. That’s better than the 0.19 percent drop in August (which is still preliminary, and stayed unrevised), but it means that, as of now, U.S. workers on the whole have failed to keep up with the cost of living for two consecutive months. (The federal government doesn’t track wages in the public sector, because they’re set mainly by politicians’ decisions, not economic fundamentals.)

The annual numbers are every bit as discouraging. Real private sector pay was only 0.65 percent higher this September than last. The results between the previous Septembers? A 1.23 percent real wages rise.

As for the longer-term, price-adjusted private sector wages are up 4.56 percent since the current economic recovery officially began in mid-2009.

But as bad as these private sector statistics are, they nearly glow compared with manufacturing pay’s performance. Industry’s real wages fell 0.09 percent on month in September, too – but that decline followed an unrevised 0.91 percent monthly plunge in August that was the worst since November, 2011’s 0.95 percent nosedive.

Even worse, after-inflation manufacturing wages are now down 0.18 percent year-on-year. That’s their first annual deterioration since September, 2014 (0.29 percent). Moreover, between September, 2015 and September, 2016, real manufacturing pay improved by 1.40 percent.

And since the recovery officially began, more than eight years ago, manufacturing pay has stayed ahead of living costs by a grand total of 1.03 percent. Consequently, over the last year, as poorly as real private sector wages have fared, they’ve widened the performance gap with manufacturing wages. As of last September, the former had increased during the recovery by 3.88 percent, compared with 1.21 percent for the latter – or 3.21 times faster. As of this September, overall private sector wages have advanced 4.43 times faster than manufacturing wages.

This manufacturing wage stagnation should be of special concern to President Trump. It’s true that his months in office so far have seen an employment pickup in industry. But if the supposed mystery of wage lag isn’t solved pretty soon, when the next mid-year elections arrive, those “Blue Wall” voters in manufacturing-heavy states that helped put him in the White House last year could still be feeling pretty blue.

Im-Politic: Mainstream Media Again Foster NAFTA Myths and Think Tank Corruption

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Although Donald Trump’s presidency might still turn out to be a watershed for U.S. trade policy, it already seems clear that trade policy coverage from the Mainstream Media will remain uniformly terrible, and unmistakably slanted toward the conventional approach that candidate Trump promised to disrupt. As recent articles from Reuters and the Washington Post remind, the bias takes both subtle and non-subtle forms.

Both pieces deal with the talks to renegotiate the North American Free Trade Agreement (NAFTA), which have resumed in Washington, D.C. this week. Despite its failings, Reuters correspondent Sharay Angulo’s article on the talks’ possible impact on multinational truck manufacturers contained some important information. For instance, she reported that 98 percent of the trucks exported from Mexico are sent to the United States and Canada – which oddly precedes a claim that most of these truck companies “have a similar strategy of building in Mexico to export to countries other than the United States.”

We also learn from her that more than half the “original parts” of U.S. firm Navistar’s Mexico-made trucks come from the United States and Canada (although this information comes from Navistar itself, and like other company-specific information re NAFTA, offshoring, and trade in general, so far can’t be independently verified). In addition, the article (again citing Navistar statistics) states that the firm exports fewer than half its Mexico-made vehicles to the United States – which seems to differentiate it sharply from its competitors.

Where the report veers sharply from the rational is in its unquestioning acceptance of the claim that “Higher tariffs on imports or reduced trade flows would raise the cost of production and of exporting to the United States. That would make trucks more expensive for all Navistar’s customers….”

What’s somehow missed by the author (and all the “experts” consulted by Reuters who allegedly agreed with this contention) is that this result would unfold only if Mexico retaliated against any Trump administration tariffs on its exports to the United States with new levies of its own that would hit manufacturers like Navistar. Given Mexico’s heavy dependence on parts imports to support its export-oriented truck and other industrial production, why on earth would its government take this step? Such retaliation would “raise [its] costs of production and of exporting to the United States” yet higher. Talk about cutting off one’s nose to spite one’s face.

Also missed by Angulo – how higher Mexico production costs could well achieve Mr. Trump’s revamp objectives by shifting truck manufacturing back to the United States. She’s correct in suggesting that low tariffs on Mexico exports to the United States may not suffice. But a logical (and seemingly obvious) implication is simply that higher tariffs will be needed.

The less subtle form of bias came in an October 6 Washington Post article previewing the latest NAFTA talks, and although it’s a more common variety, it was especially flagrant. One big problem is the authors’ (and their editors’) decision, with a single exception, to quote only critics of the Trump administration’s efforts.

Thus, readers are presented with the perspective of a Canadian trade lawyer, a former Mexican trade negotiator who now works for a D.C.-based consulting firm with many offshoring companies as clients, a Mexican business lobbyist who officially advises his country’s NAFTA negotiators, a former Canadian official, a former Obama administration economic aide, and four specialists from two Washington, D.C.-based think tanks.

A second big, and related problem – at a time when the intellectual integrity of such think tanks has come under a positively stygian cloud due to the uproar over New America’s firing of several researchers who ran afoul of big donor Google, the Post piece makes absolutely no mention that both of these organizations depend heavily on contributions from both companies and foreign government organizations with vital stakes in maintaining the NAFTA status quo.

For example, the latest info from the Mexico Institute of the Woodrow Wilson Center (itself a recipient of U.S. taxpayer funding), base for one of the specialists showcased in the piece, reveal that the organization receives contributions from no less than six big Mexican companies, plus Wal-Mart (a big importing business) and the main trade association of the American pharmaceutical industry – which manufactures in Mexico for export to the United States.

The Canada Institute, where the other quoted Wilson Center specialist is based, lists the Canadian government as a donor.

As for the other think tank relied on by the Post for (supposedly objective) expertise, the Peterson Institute for International Economics (PIIE), among its U.S. and foreign multinational funders that produce in Mexico for export to the United States are Toyota, GE, Caterpillar, IBM, Ford, GM, Samsung, John Deere, Procter & Gamble, and Mitsubishi.

PIIE also takes contributions from three foreign government entities that help their countries’ companies engage in export-oriented operations in Mexico: the Korea Institute for International Economic Policy, the Korea Development Institute, and the Japan Bank for International Cooperation.

In addition, in recent years, the Peterson Institute has also cashed big checks from Mexican building materials giant Cemex, and from the U.S. Chamber of Commerce – the organizational spearhead of America’s corporate offshoring lobby.

As I’ve repeatedly emphasized, the point here is neither that these think tanks’ findings and opinions lack merit, or they or their donors have no right to weigh in on important trade and other policy debates. It’s that these ostensible research groups should make clear who’s paying their rent – and that if they continue with what I’ve called deceitful idea laundering on behalf of their sponsors, the press should call them out.

The Mainstream Media, however, keeps failing to fulfill this responsibility – which can only deepen already profound suspicions that it’s abandoning its watchdog role and turning into an establishment lapdog instead.

Making News: On CNBC at 1 PM EST Today!

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I’m pleased to announce that I am scheduled to appear on CNBC’s “Power Lunch” show today at 1 PM EST to discuss the negotiations to revamp the North American Free Trade Agreement (NAFTA) taking place in Washington, D.C. this week.  You can watch live on-line at cnbc.com or on most home cable/satellite systems.

Also, I’m still hoping to post a podcast of yesterday’s interview on Thom Hartmann’s nationally syndicated radio program, but I need to get the show’s permission first.  Stay tuned (figuratively)!

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

 

Making News: On National Radio Early This Afternoon – & More!

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I’m pleased to announce that I’m scheduled to appear today on Thom Hartmann’s nationally syndicated radio show today at 1:20 PM EST.  The subject:  the state of the U.S. and world economies — and specifically, is either one as healthy as the conventional wisdom seems to believe?  All the info you need to listen live is at this link.  As usual, I’ll post a podcast of the interview as soon as one’s available.

In addition, on September 26, the Hong Kong-based ChinaUSFocus.com posted a column by the Cato Institute’s Ted Galen Carpenter quoting my views on President Trump’s North Korea policies.  Truth in advertising:  Ted is a long-time and very close friend.  He’s also one of the sharpest foreign policy analysts I know.  In addition, this website’s sponsor calls itself a non-profit organization, but given that Hong Kong is under China’s thumb in most important ways, this claim should be viewed extremely skeptically.  Moreover, this “non-profit” admits that it gets “support” from a prominent Shanghai-based think tank that (like other Chinese think tanks) is an arm of the Chinese government.

In this vein, however, it’s intriguing that the point made by me and by Ted (who agrees) is manifestly not one that toes the Beijing line on the crisis.

On September 10, a blog post from the Center for Immigration Studies spotlighted my findings on the economics of repeal of the former Obama administration’s Deferred Action for Childhood Arrivals (DACA) program.

And on September 9, my post on the subject was reprinted on the popular ZeroHedge.com economics and finance website.

Finally, as previously discussed, in a September 15 New Republic article, prominent journalist and author John B. Judis quoted my views on the worsening corruption of many already corrupt, corporate-funded American think tanks.  Unfortunately, as I also specified, I don’t believe that John’s treatment of this point met basic standards of fairness.

Keep checking in at RealityChek for news of media appearances and other developments!

(What’s Left of) Our Economy: The Latest Bogus Case for TPP Revival

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The case for the Trans-Pacific Partnership (TPP) trade deal pushed by former Presidents George W. Bush and Barack Obama, but killed by President Trump, was never serious. For example, America’s economy represented nearly two-thirds of the vaunted new free trade zone the Pacific rim deal would have represented. Many of its largest economies (notably Canada, Mexico, and Australia) were already connected with the United States by trade liberalization agreements. These and most other TPP members have depended heavily on amassing trade surpluses to generate growth, casting major doubt as to how widely they’d open their own domestic markets. And despite being widely touted as a counter to China’s growing economic and military influence in the region, the deal contained an immense back door for Chinese products in the form of sloppy rules of origin.

Now the Wall Street Journal editorial board has taken the bogus pro-TPP case another fact-free step further. It’s claiming to have unearthed evidence that Mr. Trump’s decision is already hurting American exporters. Except the only “evidence” presented is from a single Japanese study. And its findings consist not of developments that have already taken place, but of projections of what it thinks might take place.

Everyone is of course entitled to an opinion – or a projection. And maybe Tokyo’s National Graduate Institute for Policy Studies knows something about such forecasts that has completed eluded the U.S. Government – which has a terrible record predicting the results of trade deals. But everyone is also entitled to ask why the Wall Street Journal didn’t look at what is already known about export flows between the United States and its would be TPP partners since the Trump decision.

According to the U.S. International Trade Commission’s Trade Dataweb, year-to-date 2016-2017, America’s goods sales to these countries have grown by 5.36 percent. That’s somewhat less than the 6.38 percent increase in total, global American merchandise exports during that period. But not a lot less.

Moreover, this small discrepancy is anything but unheard of. Since the current U.S. economic recovery began (a period during which the TPP was being considered in Washington and all the other capitals that sought the agreement), America’s global goods exports have topped their TPP counterparts in two years, and the reverse has been seen in three years. In two other years, merchandise exports to both groups fell – both times by greater percentages for TPP exports. Moreover, the differences in none of the seven full years for which data exist is substantial.

In other words, the numbers so far support the observations that many of the biggest TPP member economies comprising the smallish non-U.S. TPP trade area (along with smaller economies like Singapore, Chile, and Peru) already have reached trade agreements with the United States – and that optimism regarding a needle-moving U.S. export boost has never been justified.

Moreover, neither the Journal editorialists or any other TPP revivalists has grappled seriously with any of the other reasons for exports skepticism. These range from the prevalence in the non-U.S. TPP economies of the kinds of non-tariff trade barriers that American trade diplomacy has never eliminated or even significantly reduced, to the related likelihood that most of the TPP provisions concerning these barriers are unenforceable.

Nor have pro-TPP voices explained why other agreement provisions – such as a yet another dispute-resolution system that would override American trade laws, plus that back door for China and other non-TPP countries – wouldn’t have supercharged U.S. imports and further swelled an already bloated, trade deficit.

The Journal‘s editorial ends with the hope that “If the 11 remaining members hold out for a U.S. return, it’s possible that rational American self-interest will prevail over protectionist bluster.” But its fact-free missive makes clear that it’s the remaining TPP supporters in the United States that urgently need to display a learning curve.