A Battle Over American-Made Products Is Looming and Republicans Are in the Middle of It

Yves here. We warned that Trump would be forgiven a great deal if he increased wages and reduced un- and underemployment. But as his economic plans begin to crystalize, many of his big priorities are near and dear to Republicans, namely, cutting taxes and getting rid of Obamacare (although Trump has also said he’d like to keep some Obamacare features….but the ones he’d like to preserve necessitate keeping the program largely intact). And one of Trump’s big job boosting ideas, infrastructure spending, is now looking more like pork to the rich. Rather than government-funded expenditures, Trump is advocating public-private partnerships that would get special tax incentives to lower not just the cost of borrowing but even the cost of equity investment. Aside from the fact that public-private partnerships are an exercise in looting, this program is unlikely to do much on the jobs front. First, the infrastructure spending won’t lead to an increase in fiscal spending, so it will not act as an economic stimulus. Second, to the extent it does create jobs, investment dollars will go to places where the projects pencil out as providing attractive user fees. That means they will be in places with moderate to high population density….and not in the smaller communities that are struggling from the loss of factory jobs.

So how does Trump plan to deliver on his campaign promise? He appears to be relying entirely on cutting the trade deficit and using immigration “reform” to reduce competition for low-wage jobs. (He may also believe that tax cuts aimed at the rich and deregulation will produce growth, but those were never very productive approaches, and the marginal return from going further down that path won’t be great).

The post below discusses how Trump will encounter resistance from Republicans on his plans to stop sending as much demand as we do overseas, which has the effect of exporting jobs. One would think that “Buying American” would be an uncontroversial idea. Think again.

By Leo W. Gerard, president of the United Steelworkers union. President Barack Obama appointed him to the President’s Advisory Committee on Trade Policy and Negotiations. Follow him on Twitter @USWBlogger. Originally published at Alternet

Virtually every time President-elect Donald Trump performs in cities across America on his thank-you tour, he mentions, to grand applause, his preference for Made in America. He describes his plan to create jobs with a federal infrastructure spending project (improvements to crumbling roads, bridges, waterlines and airports), and then says, “We will have two simple rules when it comes to this massive rebuilding effort: Buy American and hire American.”

That American-job-creating, buy-American thing is supported by 71 percent of the American public. But it is a smack in the face to GOP Speaker of the House Paul Ryan, who just made it clear in the Water Resources Development Act that he’s fine with creating slave-wage iron- and steel-making jobs in China with U.S. tax dollars, so long as a few fat-cat iron-and-steel importers make a profit on the deal.

So clearly, there’s a battle brewing between the President-elect and the Speaker of the House. This is the President-elect who has repeatedly promised the working-class men and women who elected him that he’d support Buy American provisions in federal law to create jobs for them. And it’s a GOP Speaker who wants to ship taxpayer-financed work overseas and let the working class wait a couple more decades to just possibly feel a tiny pinch of trickle-down from the largesse of filthy rich iron and steel importers. This, also, is a clash between a New York real estate titan who won the presidency and a Wisconsin lawmaker who lost the vice presidency.

By advocating night after night for American Made, President-elect Trump essentially warned Ryan not to strip the Buy-American provisions out of the Water Resources Development Act. But Ryan did it anyway early in December when he got the act from the Senate.

The act contained strong, permanent Buy America language when the Senate sent it over. These provisions are significant because they use tax dollars to create 33 percent more U.S. factory jobs, something that is, again, important to voters, 68 percent of whom told the Mellman Group & North Star Opinion Research in November in a national survey conducted for the Alliance for American Manufacturing that they were worried that the country had lost too many manufacturing jobs.

In addition—and President-elect Trump knows this from the response he gets at his rallies—Buy American policies are very popular. Seventy-four percent of voters say large infrastructure projects financed by taxpayer money should be constructed with American-made materials and American workers. And those who voted for President-elect Trump agree more strongly – 79 percent of them say American-made should be given preference over the lowest bidder.

This is a very big deal to iron and steel producers and workers in the United States. Far too many mills are closed or partially shuttered because of unfairly traded imports, and more than 16,000 steelworkers across this country have been laid off over the past year.

China is the main culprit, but there are others. China produces so much steel now that it has managed to inundate the world with more steel than anyone needs. It is dumping steel on the world market at such low prices that no one can compete. As a result, producers from places as far flung as Mexico, the U.S., Canada, India, the U.K. and Spain are shutting down and throwing workers out of their jobs.

China props up that excess steelmaking capacity with methods that are illegal under the terms of the agreements it entered into to gain access to the World Trade Organization and Permanent Normalized Trade Relations with the United States. If steel is sold domestically, a country can provide steel firms with subsidies like exemptions from utility payments and taxes, interest-free loans and free land. But those free market-warping subsidies violate international trade agreements when the steel is exported. That’s what China is doing. And it’s killing American steel companies and American jobs.

When Ryan eliminated the permanent Buy American provision in the Water Bill, essentially saying it’s fine to import illegally subsidized Chinese iron and steel for taxpayer-financed water projects, he was also saying it is fine to bankrupt American steel companies and destroy American jobs.

If the United States is reduced to buying steel from China to build its military tanks and armor, that’s okay with Ryan, as long as he maintains a great relationship with the lobbyists for the foreign steelmakers. They pushed him hard to drop the Buy American provision through Squire Patton Boggs, a Washington, D.C. lobby and law firm employing Ryan’s predecessor Speaker John Boehner and numerous former top GOP aides.

He got hit with a tweet storm after he chose Chinese jobs over American jobs, though. Buy American supporters and members of the Congressional Steel Caucus began pointing out on Twitter just how good #BuyAmerica is for American jobs and the economy and cited @realDonaldTrump, the President-elect’s Twitter handle on every Tweet, which means his account was alerted.

This came from Ohio Sen. Sherrod Brown:

.@RealDonaldTrump: Tell @SpeakerRyan to put #BuyAmerica back in Water bill. American tax dollars for American jobs.”

And steelworkers wrote protests on Ryan’s Facebook page and hundreds called Ryan and his anti-American-made congressional crew.

Ryan responded. Sort of. He restored one-year Buy American language to the bill. Nothing like the permanent provisions achieved in other federal laws, but it does keep the jobs for 12 months and the issue alive until President-elect Trump can take on Ryan mano-a-mano on Buy American after the inauguration.

Ryan has made clear his anti-American preference, so this will be a royal rumble. But the Speaker should beware. The last time the President-elect stepped into the ring with a heavyweight, it was with the ring’s owner, World Wrestling Entertainment CEO Vince McMahon, a former professional wrestler. And McMahon left bald and defeated.

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72 comments

  1. Altandmain

    Perhaps the only good thing to come our of Trump is that he might energize a populist base to support manufacturing. The Trump base really needs to push hard on this matter.

    The only other is that Trump is less likely to get involved in a war with Russia.

    Otherwise I would suspect that he has long betrayed his promises. He won’t be addressing corruption like he promised during the election. He’s already stuffed his cabinet with cronies. The good news is that elements of his base are already crying foul. Let’s hope that they can win on this one.

    On the left, the battle with the Establishment Democrats is a serious challenge for real change. They have learned nothing from 2016, the election of Trump and how popular Sanders was. Either that or they have no desire to admit they know, but won’t admit the truth.

    1. St Jacques

      There are some flecks of gold there. Along with those you mentioned, the end of the TPP, (&TTIP and TISA and anything with ISDS provisions I hope). The other thing is TRRRRRUMPPPPP! is ideologically very flexible and can fly kites to test out ideas in public and, then do an about face without even so much as a blink of an eye. I think he is actually very clever, and he listens even when he’s not listening. Now be so kind as to not wake me up from this sweet delusion.

  2. KK

    Nothing will change because nothing can change: if you have mixed all the ingredients for a sponge cake and baked it in the oven, can the children elect a leader to change it into a chocolate cake?

    1. ambrit

      You forget that the ultimate strategy is to destroy the sponge cake utterly and start over from scratch. Desperate people do not always act “rationally.” If the general public come to see the Trump administration as having betrayed them, they do not have to switch to the Democrat team. That’s the Neo Democrat’s mistake. TINA is not an “inevitable” strategy. The Dems tried TINA with the “inevitable” H Clinton, and lost.
      To torture your analogy somewhat, the ‘sponge cake’ can become fertilizer for helping to grow something new.

      1. PlutoniumKun

        +1. If Trump badly lets down his base, then the likelihood is that they will turn to an even nuttier and more dangerous strand of the right, not liberal Dems. Thats why its absolutely vital that the left presents a coherent and popular alternative.

        1. aab

          That, or even fewer people go to the polls, destabilizing and delegitimizing the system further without providing a path to productive change. The cake analogy is really only useful within the context of electoral choice in our system. We’re only being offered box mix Red Velvet cake vs. box mix Devils Food cake. So whether you need protein, or fermented cabbage, or calcium, or just want coconut cake, you are SOL — you can’t make any of those things from those two box mixes, and those two box mixes both have too many toxins and too few nutrients for the body politic to survive on.

          1. PlutoniumKun

            I think thats the big question mark. Will angry disappointed voters just give up voting? Or will they keep picking non-mainstream choices until eventually they succeed. I suspect the former, but there is no doubt the establishment fears the latter.

            1. cocomaan

              Will angry disappointed voters just give up voting?

              I think the answer probably lies in other democracies that stagnated. So if we can find some of those, we have a historical lesson.

              I actually don’t think the powers that be want to have low turnout. It starts to delegitimize the system. It’s bad for everyone.

            2. Lune

              Recent history gives us an answer: the Republican base has been upset with the establishment since GWB. But their voter participation hasn’t declined. They channeled it into the tea party, and ever-crazier politicians, to the extent that the ‘first wave’ of tea party outsiders are now being chased out be even crazier second and third wavers.

              Remember that Newt Gingrich was the original barbarian at the gate. And now he’s almost a centrist statesman compared to the people being supported by the Republican base. And Paul Ryan was chosen by Mitt Romney precisely because he was a tea party darling when elected, and now he’s considered a RINO as the base continues its walk into insanity.

          2. Vatch

            or even fewer people go to the polls, destabilizing and delegitimizing the system further

            The CEOs of giant corporations and the billionaires who own the United States don’t care how many people actually vote. They just want their privileges to be preserved, and that is far more likely with low voter turnouts.

            1. witters

              Why? Does lower voter turnout reduce the choice from one or other on the neol-liberal candidates? Why doesn’t high vote turnout in such circumstances provide a ‘legitimatcy’ that isn’t there? I suggest there is indeed a critical mass below which the whole shebang is so obviously illegitimate the thing can’t stand. We are on the way to finding out. And in general, across the 1st world, voter turnout is reducing. See Peter Mair, “Ruling the Void”.

              Now off to moderation.

              1. Vatch

                Sorry it took me so long to respond. Sometimes I forget that I’ve posted a comment to a particular thread.

                If the people who don’t vote in the election are mostly people who are discouraged, then that probably means that the voters are more satisfied with the status quo, and will support the incumbents, who usually support the ultra-rich. Ferguson, Missouri, is the poster child for this phenomenon. They’ve had elections in which the turnout was less than 15%. The people who run the town don’t care whether this makes their rule appear to be illegitimate or not; they only care that they are able to continue ruling. Recently, in April, 2015, the voter turnout was nearly 30%, and this dismal percentage was considered a success!

          3. fco

            however, you can slice that sponge cake into thin layers, lightly brush it with the liqueur of choice, layer it with fair trade organic chocolate ganache, and voila, a chocolate cake to die for! Bon Appetite and Let them eat cake.

            1. ambrit

              That’s for the Masters fco. We toiling masses, and now even the toadying class, have to settle for Oreos. (And now that the Oreo has been replaced by a Twinkie…)

        2. readerOfTeaLeaves

          +100
          Beautifully stated.

          And FWIW, I’m not sure what ‘left’ or ‘right’ actually mean anymore.
          Fundamentally, we need new ways of thinking about economics.

          If those manufacturing plants are all owned by offshore, or tax haven veiled interests, there’s no guarantee that the workers will still get a fair pay for their work. What we need are manufacturing skills, but also more equitable business structures.

          1. different clue

            But at least Buy American will preserve a body of skills and skilled people who can work towards more equitable bussiness structures. If there is no bussiness, there will be no bussiness structures, equitable or otherwise.

      2. MyLessThanPrimeBeef

        Two way to get fertilizer from that sponge cake.

        1. Destroy it

        2. Eat it and wait a few hours. (Faster this way?)

    2. Katharine

      Unsatisfactory metaphor. A cake is a finished product. Politics is an ongoing process, with continually changing policies. If it were true that nothing could change, we might still have strong unions–or be living in a state of nature with no government or civilization at all.

  3. Joe Jordan

    One aspect left out of this analysis that I would like to see incorporated is the argument Robert Brenner makes in “The Economics of Global Turbulence.” The gist of the book is a (drawn-out) citing of statistics that confirm a classical Marxist ‘declining profit rate’ argument that after factories become efficient enough, and this seems particularly true for commodities like steel, there is really not a good way to bring back employment in that sector. Basically, it seems as if a few dozen Chinese steel factories can supply all of the steel for the whole world. This would imply that even if we slapped tariffs high enough on Chinese steel to cause the introduction of new plants in the US, it would still not actually produce that many jobs. Whether it makes sense to take the Marxist analysis one step further and say that few jobs = few profits is perhaps debatable, but the core of the analysis seems sound to me and so I wonder how much effect a buy American campaign could really have in high capital industries like steel.

    1. Steve H.

      Joe Jordan, this is a perspective rather than an answer: Viewing the benefits solely in jobs (or profits) is insufficient. Strategic resources like steel require not only factories but skills. If domestic production goes to zero, so does motivation for not only research to new processes, but retention of base knowledge.

      When we put the metal roof on this fall, our supplier talked about Chinese steel panels being lesser quality, as well as the coating on them. As they degrade faster than expected, new roofing will be required, driving further demand. If Chinese subsidize steel for export beyond the normal bezzle/vig level, the sector becomes unsustainable. The payoff is can be in monopoly control, or in strategic timing. From “Unconditional Warfare“:

      “Even though they are the same ancient territorial disputes, nationality conflicts, religious clashes, and the delineation of spheres of power in human history, and are still the several major agents of people waging war from opposite directions, these traditional factors are increasingly becoming more intertwined with grabbing resources, contending for markets, controlling capital, trade sanctions, and other economic factors, to the extent that they are even becoming secondary to these factors.”

      Also:

      “this is because the monopolizing of one type of technology is far more difficult than inventing a type of technology.”

        1. readerOfTeaLeaves

          I’m really glad to see someone reiterate this point, which Yves has made repeatedly the past few years:

          Strategic resources like steel require not only factories but skills. If domestic production goes to zero, so does motivation for not only research to new processes, but retention of base knowledge.

          It’s not simply the quality of materials, and I personally have nothing against the Chinese. (Rather the opposite: I have huge admiration for what they have accomplished.) However, without people working in manufacturing, there are entire categories of knowledge that get lost.

          I could make a solid case that one of our current problems is too many business schools, too much financialization, and too many lobbyists: all of those people are thinking about abstractions and not enough practical hands-on understanding of how the world actually works.

          I sometimes think that I’ve learned more about economics from planting, hoeing, weeding, and harvesting my veggie garden than I’ve learned from university coursework. Economics is fundamentally complex and unpredictable; like gardening, you just have to keep at it and hedge your bets and pay attention.

          Basically, we have a whole bunch of people who have never assessed the quality of their soil, so — Paul Ryan being a classic case! — they don’t grasp the elemental reality that you can’t grow a crop in depleted soil. Good manufacturing policies are like building up your humus (soil, related to the work “humility”). And good business policies are like having good seeds, or good plant cuttings; they come from good stock, and if well cared for have a chance to produce ongoing prosperity.

          Okay, off my soapbox…. (Can hardly wait for the Gardening Catalogs to start arriving next week! ;-)

      1. sharonsj

        Everyone knows that the Chinese cut corners in all aspects of manufacturing, construction, food production, etc. So why would we continue to buy their crappy products? I will not buy any food or pet food from China. I refuse to buy new clothes; I buy in thrift shops. And I do my best to avoid buying any new Chinese-made appliances and electronics. I would rather buy second-hand at a greatly reduced price and then junk it than keep buying a lousy new product over and over again. If more people stop buying Chinese crap, then perhaps things would change.

    2. PlutoniumKun

      I think a key problem in steel is that the Chinese (and India) have been squeezing every last bit of product out of old outdated mills in order to keep prices down. China has some of the most high tech mills in the world side by side with Mao era backyard mills, still churning it out. Its these old mills which are responsible for some of the worst pollution this winter as the government has revved up yet another construction boom. Its long overdue to shut down a lot of this capacity. The Indians are somewhat notorious for buying up old mills in Europe and elsewhere and basically working them to destruction, then walking away when they can’t squeeze out any more profit.

      So I think the steel industry at the moment is not a competitive industry in the classic supply and demand sense. If the US were to seriously pursue an ‘American first’ policy that would be a major shock to the industry. I’ve no idea how much capacity remains in the US industry, but I’d suspect it would in the short term be very profitable in the short term if there was a big shortfall. But that would I think be short term, and wouldn’t necessarily change long term trends in profitability.

      But environmentally, it would be great if an American first policy led to a big shutdown in steel capacity elsewhere. Thats assuming the Chinese and Indian didn’t opt for a hugely expansionary policy to compensate.

    3. Lune

      I would only agree with this if the playing field were level. That is, if Chinese mfg’ers comply with the same environmental, safety, and labor regulations that the U.S. does, and still manages to provide lower cost goods, then perhaps we should let them do it. (NB: I don’t care about the govt incentives; the U.S. has an industrial policy called defense that comprises a larger GDP than any other country in the world).

      But even then, the theory of comparative advantage only works as long as the trade balance is zero. That is, it’s fine to give up steel production if you can find something else to export that you do better. Even a zero profit producer provides value to the local economy from all the wages paid to its employees, and the downstream activity of its local suppliers.

    4. reslez

      Basically, it seems as if a few dozen Chinese steel factories can supply all of the steel for the whole world. This would imply that even if we slapped tariffs high enough on Chinese steel to cause the introduction of new plants in the US, it would still not actually produce that many jobs.

      This seems to be a non sequitur — you appear to have missed a supporting argument that would actually link these two statements. But then so does most of the political establishment when they tell us TINA as if they read it in the Bible.

      If the US is legally required to “buy American” for infrastructure products that’s going to restore some jobs and preserve steel-making know-how domestically. I think Trump’s supporters would be OK with that, even if it’s not huge in terms of jobs numbers.

  4. craazyboy

    “First, the infrastructure spending won’t lead to an increase in fiscal spending, so it will not act as an economic stimulus. ”

    Not quite so. The other problem is private investment is going towards areas of what should be termed as mal-investment. Most damaging is corporate investment off shore – it costs money to destroy American jobs- but the Fed is helping with ZIRP policy making it a little more cost effective to destroy jobs. Then other private mal-investment areas are buying into a overpriced stock market (it’s used stock – companies don’t get the funds for investment), over priced bonds and – every passive investors’ favorite – selling corporate bonds to buy back corporate stock. This is like “black hole” capitalism.

    But the main problem with private infrastructure investment is it usually entails the granting of market monopolies to private entities. This has never ended well and results in price gouging of the consumer, unless there is a well functioning regulating body controlling prices. But we are always told regulation is bad….and the [monopoly]market setting prices is good…and crony capitalists are working in our best interests, even tho it doesn’t always seem that way….

    So we’re in an era where private investment has failed the country. Pouring huge Federal stimulus on top of the current transmission paths leads to some “trickle down”, at best. Really, the most effective thing to do is just steal all the money back. :)

    Trump could get a good start by becoming our “Bankrupter in Chief”. Cancel the F-35, forcing Lockheed into a prepackaged bankruptcy like they did with Government Motors. We’d then have Government Defense Contractor, with the stockholder and bondholder liability gone off the balance sheet. The factories would still be there – just a new and improved cost structure. Then work out a similar approach for health, drugs and education. We’d be amazed how easily our “private sector” collapses if Uncle Sam just stops paying it for a little while. :)

    1. Steven

      @Craazyboy – Like your ideas about “steal all the money back” (I believe M. Hudson calls this ‘claw back’ – of all the money stolen from the public with the help of the Fed after the 2008 financial crisis) and “Bankrupter in Chief”. But I’m hoping you were just being ‘craazy’ and don’t really believe Trump and his cronies want to do ‘good’.

      Let’s hope Trump and the boys from GSachs concentrate on setting up toll booths and Maginot Lines on the nation’s borders when they think infrastructure. That way the damage they do could conceivably be undone in 10 – 20 years. Take a look at http://www.counterpunch.org/2006/06/28/taken-for-a-ride-on-the-interstate-highway-system/ Following the model it suggests would of course require them to think longer term than their take the money and run, short term profit seeking mentality most likely permits, i.e. publicly funded infrastructure which sets the rules for the operation of ‘free markets’ for a century to come.

      For example, they could construct, at public expense, a national power grid anchored at the nation’s largest, dirtiest coal mines instead of the best solar or wind locations. That way coal could again become ‘cheaper’ than wind or solar for decades to come. The general idea here is the construction of infrastructure which offers the possibility of the greatest LONG TERM profit, even at the expense of short term principles like private ownership of public infrastructure.

      1. craazyboy

        I believe Trump has the proven job experience to be our “Bankrupter in Chief”. But, no, I don’t have high hopes he will exercise his strengths in that area.

        I have bad dreams that Trump finds out that he can only hire Mexican labor to build The Wall, because they’re the only ones living in the neighborhood.

        But, as you point out, they can create their own 100 year TINA. Another current example – health care. We can’t have single payer – because “in America we have health insurance companies!”

        1. Steven

          A new acronym is needed for TINA. How about TIANA – ‘there is ABSOLUTELY no alternative’? I just love the stuff “the smartest guys in the room” come up with – for example, erecting tolls booths on everything and then off-shoring, out-sourcing and downsizing the jobs their customers need to be able to pay the tolls!

          1. polecat

            Or how ’bout TATIANA ~ ‘TRUMP ANNOUNCES there Is Absolutely no alternative’

            What so say you .. ‘Comrades ??’

    2. Yves Smith Post author

      The statement is correct as written. No increase in fiscal spending means that the increase in infrastructure spending has come about by cutting spending somewhere else. We’ve separately written at great length as to the problems with privatization, which is what these public-private partnerships would amount to.

  5. DJG

    Even as liberals are still wallowing in psychobabble, we see some ways of handling the Republican elites and the Trump administration, and even handing them some defeats. Ryan is a Republican intellectual (Obama told us so), and someone who is politically weak. Removing Buy-USA language shows exactly who he thinks his constituency is, and it isn’t the good people of Janesville, Wisconsin. If liberals could sense an opportunity, they’d run him over with a steamroller.

    Meanwhile, we will see if it is possible to hang this conundrum on the members of Trump’s cabinet, who are used to being coddled executives and to exporting other people’s jobs whenever they felt like it. Another possible opportunity. (Just don’t look for the DLC wing to lead on this issue.)

    So the predicted fascist regime already can’t get its act together. What we’re seeing is Reagan Redux, and there were plenty of ways of defeating the tactics of that last TV star.

    1. Left in Wisconsin

      Removing Buy-USA language shows exactly who he thinks his constituency is, and it isn’t the good people of Janesville, Wisconsin. If liberals could sense an opportunity, they’d run him over with a steamroller.

      Very interesting comment. I’m not in Ryan’s district but I know many people who are. The district has been gerrymandered to make it easier for Ryan to hold (he still has Janesville but no longer has D-leaning Beloit), but the fact is he is hugely popular despite holding position after position that is contrary to the (economic) interests of his constituents. I wish it were different but my sense is Ryan could go shoot people in Times Square and still be re-elected for as long as he wants.

    2. Kurt Sperry

      “Removing Buy-USA language shows exactly who he thinks his constituency is, and it isn’t the good people of Janesville, Wisconsin. If liberals could sense an opportunity, they’d run him over with a steamroller.”

      Liberals aren’t (or perhaps are no longer) looking for opportunities that benefit the 99%. Conservatives, of course, aren’t either because those politicians work for roughly the same hundred families as the Liberal politicians do. A left-populist would easily win today, Sanders would have landslided Trump. But, of course, left-populism is the one great existential political danger to those hundred families’ wealth piles. Liberalism, conservatism or even right-populism can all be managed and navigated–and indeed exploited. Left-populism, let’s not forget, came really dangerously close to getting the executive this year. Like to the point that the kayfabe was in danger and “the force” was palpably in flux.

      The table is really set for left-populism right now to the extent that any special catalyst or nucleation point could push it into open battle with those hundred families. A battle that will be extraordinarily difficult for them to navigate. All of the anti-democratic cheats combined: the systemic corruption, the gerrymandering, the crooked primaries, the voter suppression and outright electoral fraud, the captive media and so on combined, as impressive as they are, can only tilt the playing field so far. Exceed or surmount the entry barriers, and much of those corruptive infrastructures listed above fall as well. You can only game any putative democracy so far, and while that is a long way, it isn’t ever absolute. It’s like having an impressive system of dikes holding back the ocean, it all can work perfectly up to its engineering limits, but once those physical limits are exceeded, none of it subsequently works as it should. The extreme amount of energy holding the illusion in place only becomes readily–undeniably–apparent when that amount of energy is suddenly insufficient.

      Sanders getting within a whisker of the executive is, I think, one hell of a lot more significant than people know or allow. But I think perhaps the longer it takes for left-populism to prevail, the stronger its momentum will be. I don’t see the devastations of the current bipartisan, globalist neoliberalism empowering any other group as well. Trump will in all likelihood do great damage to right-populism, clearing out the field even more.

  6. Steve H.

    : To be the reserve currency issue, you need to be willing to run trade deficits on an ongoing basis so there is plenty of your currency in foreign hands. That is equivalent to having your domestic demand support foreign jobs, or exporting jobs. [Yves]

    This may indicate that any job growth in the U.S. won’t be from making more stuff (‘buy American’), but rather by restricting immigration (‘hire American’).

    1. John k

      Yes, this is a conundrum. A high import duty makes dollars harder to get to those foreigners that want to save in dollars, so pushes up the price, somewhat negating the duty.
      Immigration roughly doubled in 1990, to current 1 million per year. Maybe 32 million since 1975, 10% of current pop.
      1 million per year current immigration adds up, 10 million since 2006 or, if unchanged, another 10 million by 2026.
      This blog talks of stagnant middle lower class wages since mid-seventies, wonder what effect 32mm immigrants had on wages or 24mm current unemployed or given up looking workers?
      Who do we care about most… unemployed here or unemployed over there? What, exactly, is wrong about a wall, or drastically reducing immigration? Once somebody gets citizenship their family members get priority… is this good policy for the bottom 50%? We do know that corps would like to further drive down wages, explaining her hopes for open borders.
      And what about students? Is it good policy to educate foreigners instead of locals? Who wants to explain their reasons to locals turned away? To their families? (To influence future foreign leaders? Really? Xi was educated here… would you say he is therefore our good buddy?) so who is hurt, and who is helped, if we end or reduce student visas?

      What is the progressive position on America, or Americans, first? I would say that when unemployment is truly low we could allow some immigration, when we expand our universities to account for pop growth we could allow some foreign participation.

      No more foreign adventures. We are already confronting Russia big time… sack the neocons at state and war departments and CIA. Slash armaments spending. End the useless wasteful f35, redirect spending to infra. Withdraw ‘tactical’ nukes surrounding Russia.

      Enforce steel and other violations of WTO agreements with great vigor. Maybe a tariff would catch the attention of those assuming they have unfettered access to our markets and therefore have no need to cooperate in other ways. I doubt our tariffs would lead to a trade war… exporters desperately need our markets because their own unemployment terrifies them and or because austerity has killed their own. (We can explain that unemployment is, for the first time in decades, beginning to terrify our own pols.)

      Support Brexit with guarantee that existing trade agreement remains in place. the sooner the euro disaster crashes and burns the better.

  7. Ranger Rick

    I fully expect a fight to come over labeling and country of origin laws. The automobile industry already stretches the definition of “made in America” to its breaking point for tax purposes.

    1. John Wright

      I spent some time looking for American made tools in the local Sears store.

      What surprised me was the socket ratchets, that used to have “Made in the USA” stamped in them now had no country of origin shown. “Made in China” is only on the packaging.

      I found, and bought, some pliers and tin snips that were still made in the USA (and marked on the product as well) so it appears if a product is not marked “Made in USA” one should assume it is imported.

      At the local salvage yard, I found a sharpening stone that had cynically printed on the packaging “Distributed with Pride in the USA” on it while being made in China.

      It is difficult to find American manufactured products at the retail level. Even the iconic American brand Vise-Grip tools moved from DeWitt, Nebraska to China, and I don’t imagine the wages were very high in Nebraska.

      1. jrs

        And even then if all you have is a “made in the U.S.A.” label there is no certainty it isn’t produced by prison labor (made in the U.S.A.!), many companies use it, but not every industry.

      2. inode_buddha

        I deal with tools for a living. what has happened is the apex group has bought up rights to the classic USA brands and offshored the lot. dozens of brands all held by private equity. as an industrial/plant mechanic, myself an all coworkers can verify that everything
        has crapified. I now go exclusively on eBay for functional antiques.

    1. ambrit

      “Cheap” masks the decline in an American’s wages, and also the decline in their standard of living. I’ve found that “cheap” imported tools are inferior in the main. So, “cheap” helps Americans to delude themselves that the “American Dream” is still alive.

  8. Grizziz

    The article lacks the names of the offending agents. What are the names of the iron and steel importers and their chief executives and/or principal owners.
    In order to fight you need to know who to fight.

  9. Lune

    “First, the infrastructure spending won’t lead to an increase in fiscal spending, so it will not act as an economic stimulus. ”

    To add to craazyboy’s comment, this isn’t the full picture. If Trump’s policies incentivize private money towards infrastructure spending that has a higher GDP multiplier effect than other activities like corporate share buybacks, then the net macroeconomic result will be equivalent to stimulus even without an increase in direct fiscal spending.

    That said, I’m not a fan of public/private partnerships for precisely the reasons you mentioned. But in this new administration, we may have to be content with the crumbs :-) (plus, when the public/private investments inevitably go bankrupt they’ll be socialized at only twice the cost of building it with public funds in the first place…)

    1. reslez

      > If Trump’s policies incentivize private money towards infrastructure spending that has a higher GDP multiplier effect than other activities like corporate share buybacks, then the net macroeconomic result will be equivalent to stimulus even without an increase in direct fiscal spending.

      I don’t think this is likely, primarily because the “PPP” projects are going to erect tolls on major infrastructure. Tolls function as regressive taxes and are going to act as a decelerator pedal on the economy, diverting money from people who would spend it productively into the pockets of politically-connected rentiers. Does it net out better than dumping the same amount of private resources into stock buybacks? Not if you believe in rational market theory. I mean at least a new road or bridge exists that didn’t before, but the economics of private ownership are going to quickly extract even more. If they couldn’t, the investors would have done the buyback instead.

      1. Lune

        Agreed that the tolls function as a regressive tax, discouraging something that’s ostensibly a good thing (efficient transportation). I’m not saying I’m a fan of PPP projects.

        You make a good point about if the returns of PPP projects were less than a stock buyback, the corporation would choose the buyback. But that rests on 2 assumptions:

        1) Rational markets (as you mentioned). I don’t believe in rational markets. Even if you do, stock buybacks are affected by severe agency issues: CEOs paid in stock options want to goose the short-term stock price regardless of whether it’s healthy long-term for the company, because it’s healthy for the CEO. Witness how IBM is slowly eating itself by taking on loans in excess of free cash flow to finance share buybacks.

        2) You must also believe that infrastructure projects will capture all positive externalities, or at least a higher percentage of those positive externalities than a share buyback. What I mean is this: a stock buyback operates in a closed system: you buy back your own shares, and 100% of the benefit goes to the current owners of the shares. Plus any future returns are still shared solely among the remaining owners. No positive externality is “lost” or uncaptured by the entity doing the buyback.

        The problem with infrastructure, and why private companies don’t do it, is because the positive externalities aren’t monetized as well. Tolls are an attempt to do this but even they don’t capture everything. For example, most subway systems run at a “loss” when only counting ticket revenue. Yet they enable high density construction that increases a city’s property taxes. That’s a positive externality that’s not captured by the subway system’s revenue, and is only partially made up by transfers from city coffers.

        So even private infrastructure investments that return less than a stock buyback would be beneficial to the public because (I’d assert) they generate positive externalities for the public, even after tolls and other attempts to capture that external value. So if Trump incentivizes such programs by offering to provide a higher return than a stock buyback, as long as it’s not too high, and as long as those subsidies don’t come from programs that generate better value (both are big if’s with Trump :-), it can still provide more value to the public and the economy than a stock buyback.

        (PS. before this is all dismissed as tortured explanations of a Trump supporter: I was a rabid Bernie supporter and then worked to elect Hillary after she won the primary. And I wanted Obama to do a much bigger fiscal stimulus in 2008/2009. But now that the election is over, I’d rather have Trump give out corporate subsidies for infrastructure projects than for Deutsche Bank to manipulate LIBOR again).

    2. Yves Smith Post author

      Huh? What do corporate stock buybacks have to do with fiscal spending? Nada. That is apples and oranges.

      You seem to be putting your fingers in your ear re the fiscal impact issue. There will be no fiscal multiplier because this is not fiscal spending. It’s going to be privately financed with tax gimmies of various sorts. To the extent those tax gimmies reduce tax revenues (the intent is not much, that’s the whole point of doing it this way), they’ll be paid for with cuts in spending elsewhere.

      You have a fiscal multiplier effect ONLY with actual fiscal spending. This is not that. All those studies that folks like Summers cited to support infrastructure spending are irrelevant to how Trump is planning to do this.

      1. John k

        Bank loans also injects money into private sector. Most spending likely to be gov backed loans, immediate effect similar to fiscal deficits, though negated when loan paid back over time.

      2. Lune

        I’ll take privately financed infrastructure spending over privately financed corporate buybacks. All I’m saying is the former is more beneficial to the economy than the latter (even if public fiscal spending would be better than either).

        Are you saying that private spending doesn’t have variable effects on macro-economic growth based on what it’s spent on e.g. corporate buybacks vs. infrastructure spending, or dividend payouts vs capital goods investment to increase productivity?

  10. Lune

    “That American-job-creating, buy-American thing is supported by 71 percent of the American public”

    Is that the same 71% of the public that’s made WalMart the largest employer in the country? Buy American is a great concept in general but a terrible policy to pursue individually in the face of cheaper imports. That’s why Donald Trump hires illegal immigrants to clean his hotels, and Pat Buchanan drove a Mercedes.

    The only way to do it meaningfully is by law and trade restrictions. And I doubt Trump cares to do the hard work of passing those types of laws (while overcoming entrenched bipartisan opposition). Much easier to pay a few companies to temporarily keep a few jobs around and then take a victory lap.

  11. susan the other

    Ryan stands to lose everything with old tricks like this. He has been a toady all of his career. Now whatsa slimy toad to do?

    1. McKillop

      A person such as Ryan may be a toady but toads should not be denigrated by too close a comparison to many politicians. .
      The word was used to refer to people who, sarahsiverman-like but with toads rather than puppies, licked the arses or other body parts of the animals for shock effect and money.
      Without fawning , to you I mean no offense – only a defense of toads (which are not slimy -and loathsome only to a few people).

  12. laura

    In 1989, California suffered a major earthquake and the bridge between Oakland and San Francisco was deemed unsafe. The Legislature requested that the rebuild use only US Steel. Governor Schwarzenegger vetoed that and so China sourced the steel.
    Guess what, it delayed rebuilding and the new span is considered to be unsafe. . . . In a future quake.

  13. Pat

    You would think that the government “buying American” would not be so controversial. Not only does that give the corporations more responsibility to do it right, it is also the right thing to do for many reasons.

    1.) It employs Americans.
    2.) It employs Americans, who can use that paycheck to buy things in America, providing even more employment for Americans who can then go and…
    3.) It employs Americans, who pay taxes on those wages. Taxes that go to building things in America, like infrastructure, or educating our children, or yes feeding our hungry.
    4.) It employs Americans, who for the most part have no reason to want to sabotage those things, build back doors into them, or yes copy the plans so they can be made cheaper in another country.
    5.) It is the right thing to do.

    I’m sure others can come up with other additions to the list, but to me it is a no brainer. But of course it is a no brainer for most voters, it is only our corrupt elected officials currying favor with foreign and multinational corporations that have a conflict of interest who refuse to admit it.

  14. RBHoughton

    The message I take home from this is that Congress has no care for the electorate, being assured that each member can buy the votes he needs to preserve his job and perks when the time comes.

    The two factions have conspired to replace democracy with their own agendas while the population is ‘nose to the grindstone’ seeking for the means to survival and too busy to act concertedly in their own interests. It isn’t what the Founding Fathers intended.

  15. Rajesh

    But China is in for a hard landing precisely because of these policies that give them foreign currency but maybe not enough of it to generate a long term return on investment. Free land and utilities aside…if wages are a substantial factor, from a moralistic standpoint is it wrong to give the job to the low cost worker provided there is no greedy fat cat on the other side. Whenever we discuss wage differences between peoples and countries there are always some sort of oblique references to a BAD GUY who is profiting from this. Why can’t it be about merit? You are willing to perform a task expecting less from society in return thab the other worker and hence you got the job.

  16. Gaylord

    Retrain workers and incentivize new ventures in higher value products such as solar, wind, batteries, carbon sequestration, etc. by providing low-interest government loans to individuals and to companies that perform these functions. Start WPA II to rebuild the power grid and railroads, repair & retrofit bridges, etc. Enhance FEMA to deal with the coming storm (already here) of abrupt climate change. Bernie would have striven to do all of these. Shame, shame on the Dems !

    1. Heron

      …Which was exactly what Clinton ran on, and what Obama tried to get pushed through when first elected. Yet, because people and the media are foolish and forgetful, both of them have become in the mind of many the very embodiments of the “betrayal” you cry shame on. Pols can’t accomplish things if you refuse to support them, and that includes not only voting them into office, but sticking by them in their policy fights.

      Though admittedly, Obama and the Dem leadership hamstrung themselves by dismantling the grassroots orgs they built in 2008 after winning the election, which only exacerbated the huge lack in voter-engagement infrastructure between the Dems and Rs that the Democratic party has allowed to grow since the 70s, so I think most of the blame for weak lefty engagement in policy fights lies on their end for not building the needed infrastructure.

      1. tegnost

        No Clinton did not run on those things, she ran as “not trump”, as wall streets bestie, as the MIC’s handmaiden and as globalizations darling. Being forgetful is one thing but willfully re writing history as you do here is disingenuous. Recall to me when Obama tried to push through infrastructure? My recollection is that he stood between the banksters and the pitchforks and gave the bankers everything and the pitchforks nothing. Also, “by dismantling the grassroots orgs they built in 2008 after winning the election” the orgs were there before the election and were based on the “hope and change” theme which as we all but the blindest partisan can see in hindsight as the biggest bait and switch ever played. Obama had a mandate and both houses of congress and did nothing but reconstruct the system by bailing out the worst offenders. QE forever as well as the ACA has created the massive and growing class divide. It was a betrayal. Steal from the poor and give to the rich. Clinton ran as the better republican, she just like trump was set to privatize what ever she could, cut Social Security just as Obama tried to do, succeeding in only chained CPI but hey he had the right idea, no? I say they hamstrung themselves by governing for too small a sliver of the population, and screwing over vast swathes of the remainder. Clinton lost and deserved to lose, I had to be cajoled into voting for O in 2012, 2016 was way too late. More like Pols can’t accomplish things if they refuse to attempt them. Foolish and forgetful? Maybe you are…I remember well, eleventy dimensional chess and all

      2. Pat

        Yes, the Democratic Leadership dismantled both the expansion of the DNC that occurred under Howard Dean and the framework Obama’s campaign set up among young voters. Deliberately. You see majorities in Congress were too inconvenient. All those people who voted for “hope” and “change” wanted that. And Obama and Pelosi and Reid and Schumer and most of all the Clintons couldn’t do that and keep their promises to the big donors they really represented. It is why Single Payer was taken off the table. It is why reconciliation was only used to pass a health insurance company bail out and forestall real health care reform. It is why no bankers were prosecuted and the government not only turned a blind eye to the banks massive foreclosure fraud, they actually set up a system to wring a few more payments out of underwater desperate home ‘owners’ while the banks got around to robbing them. It is why the so-called stimulus was largely more tax cuts for corporations already paying the lowest percentage in taxes in at least half a century. Oh, with a cynical little payroll tax cut for the plebes whose real purpose was to make it so Social Security finally did contribute to the deficit (the difference between workers’ required contribution and what they paid was actually put on the books as coming from the general fund). And then before that weak tea even had a chance to work they declared victory and ‘pivoted’ to the deficit. Which precluded doing anything for the masses who needed all those programs you seem to think Obama was trying to pass and was unable to get past his majority Houses of Congress. (Here’s a scenario for you – he uses the House to pass all those programs you mentioned in their budget along with a huge program earmarked in the Defense budget to rebuild the bridges, the railroads AND the electrical grid because their deteriorating state is clearly a target for Terrorists!!. The Senate refuses because 60 votes. It goes to reconciliation and voila it only needs 51, and passes. I didn’t see them try that did you?)

        Clinton didn’t even bother to run on ‘Hope” even as she played the game that Obama was brilliant and wonderful and only the big bad Republicans stopped him from being even greater. I do think she ran on more than Tegnost did. Sure the top of her platform was “I’m not the boogey man over there”, but it also included “I’m a woman!” and “I’m experienced, I’m qualified, and dammit who cares that people don’t like me, it should be mine!” Whether it was cynical or just the honesty of a tired candidate, Clinton offered little, citing incremental changes or the possible, although some of the big programs they produced some details on sounded good at least until you thought about it with any real logic. But it was all ‘more of the same’ and where else are you going to go.

        1. Pat

          I should also add, that it might not have been so hard to both relieve the Post Office of its burden to fund its pension fund 75 out, give it a few new functions like rural internet and Post Office Banking and protecting it from the assholes who have been trying to destroy it for years, but that might have stopped Diane Feinstein’s husband from making a killing with property the Post Office was forced to sell.

          (I fully admit I worry for the Post Office in the Trump administration. It has as many people gunning for it as Education and Social Security and far fewer defenders.)

  17. Heron

    The author makes the mistake of taking Donald at his word. Donald doesn’t actually care about making or protecting jobs in the US; see the complete farce that was the Carrier deal. Donald’s going to push bog-standard Republican policies(like the graft giveaway you mention) and rely on right-wing media to sell it via misrepresentation to Republican and “low-information Independents” for him.

    Relatedly, the author makes the mistake of thinking Republican voters really care one way or another about the economy. This Atlantic Article on Elkhart is instructive. Partisanship proceeds reality, until such time as reality becomes too intolerable to ignore anymore, as it tends to do. Unfortunately, things have to get REALLY BAD before humans will reach that point.

    Much of the Middle Atlantic coast is positively drowning in an opioid crisis right now, all of it avoidable, all of it predicted by the relevant gov and law enforcement officials, and all of it the result of Republican efforts to block common-sense pharmaceutical regulations going back to the Clinton admin, yet that region is not only continuing to vote for the very Republicans doing this to them, but voting for them in ever greater numbers.

    1. tegnost

      Looks like reality became too intolerable to ignore. Laying the opioid crisis at the republicans door looks alot like more of the same pointing at the mote in another’s eye and ignoring the beam in your own. If you are asserting that Clinton had some concrete plan for these things you should have spoken up before the election, but you can still inform me what those plans were because in all my queries for hillary supporters to give one reason to vote for her no one ever answered the call. Just “not trump”, but apparently you are going to enlighten me…As for taking trump at his word, do you not remember public position/private position Clinton?

  18. Dave

    Lots of what ifs and maybes here.
    My New Years resolution is to take the time to search out American made products whenever possible.
    Also to buy from small shops or look them up online, then order them through the small shop and pay cash of course.

    If I can’t find them new plenty of American made stuff in thrift shops.

    http://americansworking.com/

    Google “made in the usa products” for a large selection of products and some other guidelines.

    Don’t forget to search for “Problems-[product name]”

  19. Ep3

    “That means they will be in places with moderate to high population density….and not in the smaller communities that are struggling from the loss of factory jobs.”

    Actually Yves, they will also go to communities that vote republican and have republicans that contribute large amounts of money to republican campaigns.
    Where a state like Michigan has the worst roads in the country (it’s a national joke! And we won’t mention drinking water is an infrastructure item as well), because it is a largely minority & democratic state. It will continue to receive less funding and less national attention which pushes to demand fixes to the problems.

    Another thing Yves. I understand US steel workers are being hurt by China’s dumping. And I believe I understand that steel is being used as an example for the overall campaign of buy American. But US steel companies were destroyed 40 years ago, by Reagan. The companies that exist now are shells of the mega powerhouses that were US Steel and Bethlehem steel. Are we truly fighting for real jobs? Or are these jobs that are nothing like what steel workers had 50 years ago (full retirement, paid health insurance, middle class wages. Now it is $10 an hour, pay 50% of health premiums, 3% match on a 401k plan)? And are we fighting for the abandoned and broken communities that were destroyed when their steel plant closed?

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