What Is It About Trade That Makes People Spout Nonsense?
. . . but because our political betters do not understand this we are saddled with the nonsense emanating from The Bern, and The Donald, and the Hillary, and likely from a large number, perhaps a majority of our politicians.
"Suppose Toyota sells a $20,000 car to an American and then immediately uses that $20,000 to buy software from Microsoft. Because the value of additional U.S. imports (a car) equals the value of additional U.S. exports (software), there’s no change in the U.S. trade deficit.
Now tweak the example just a bit. Toyota sells a $20,000 car to an American, then uses that $20,000 to buy stock in AT&T from another American. The American who sold the AT&T stock, in turn, spends the $20,000 on software from Microsoft as part of his effort to launch a new business. Because Toyota spent none of the $20,000 on U.S. exports, the U.S. trade deficit rises by $20,000.
Is the second situation worse than the first?
If the pronouncements of the mainstream media and of most politicians are to be believed, the answer is a resounding yes. A rising trade deficit is bad!
But look more closely. In both cases, Americans get an additional car worth $20,000, and Microsoft produces and sells additional software worth $20,000. In both cases, the amount of extra American-made output produced and sold as a consequence of Toyota selling that car to an American is the same: $20,000 worth of Microsoft products. If you’re a Microsoft employee, shareholder or creditor, it matters not a whit to you whether that company’s increased sales are made to foreigners or to Americans.
Clearly, a rising U.S. trade deficit does not necessarily mean less demand for American-made goods and services."
The wanker candidates do not understand this. It really is simple, but apparently impossible for people of above average or better intelligence, once they become politicians.
The article is worth a read. It shows one of the harebrained ways the progressives analyze trade.
Trade, and immigration are pillars which make America Great, not mercantile protectionism, and border walls. We do need to create an orderly mechanism for entry, but we should simply fully, and permanently renounce all trade barriers.
The real problem with immigration is the way the welfare state is constructed, and implemented. Unfortunately, it is designed to destroy the incentive to work, and family formation.
We need better candidates.