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Is Trade Harming America’s Middle Class?

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Here’s a letter that I sent several days ago to the New York Times:

Central to Daniel McCarthy’s conservative case for Trump’s policy of so-called “America First” protectionism is the claim that “open trade policies” are impoverishing America’s middle class (“The Case for Trump’s Tariffs and ‘America First’ Economics [2],” March 9). The data do not support this claim.

The U.S. Census Bureau collects yearly data on the percentage of U.S. households in each of nine different inflation-adjusted annual-income categories, with the lowest category containing households annually earning less than $15,000, and the highest category containing households annually earning $200,000 or more. (These figures are all in 2016 dollars.) These data allow us to compare the percentage of U.S. households in each category today to the percentage in each category in the past – say, in 2001, the year China joined the WTO.

While from 2001 through 2016 there was a slight increase in the percentage of households earning less than $15,000 annually (up 0.6 percentage points from 10.6 in 2001 to 11.2 in 2016), in each of the other six household-annual-income categories of less than $150,000, the percentage of U.S. households has slightly declined. But in each of the top two categories – $150,000 to $199,999, and $200,000 and up – the percentages are significantly higher. The percentage of American households that earn annual, inflation-adjusted incomes of $150,000 or more has risen from 10.7 in 2001 to 13.6 in 2016.*

The American middle class, if it is disappearing, is disappearing – contrary to Mr. McCarthy’s implication – not into the lower class, but into the upper class. And because both imports [3] and exports [4] have both risen as a percentage of U.S. GDP since 2001, it is reasonable to give at least some of the credit for ordinary Americans’ rising prosperity to Americans’ increased participation in the global economy

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

* Click on Table H-17 found at the bottom of this link [5].

….

Many flaws other than the one I flag above mar McCarthy’s essay.

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