Here’s a letter to the Wall Street Journal:
Editor:
Flaws aplenty infect Oren Cass’s defense of Donald Trump’s proposal to impose a ten-percent across-the-board tariff (“Why Trump Is Right About Tariffs,” October 27). Not the least of these flaws is Mr. Cass’s – like Mr. Trump’s – obliviousness to the inherent tension between tariffs meant to raise revenue and tariffs meant to protect domestic producers. It’s true that one of Congress’s first acts was to impose a tariff. But that tariff was meant to raise revenue. No revenue is raised on imports discouraged by tariffs. It’s astonishing that Mr. Cass ignores this reality.
Equally astonishing is Mr. Cass’s ignorance of the state of the American economy today. By asking rhetorically “Does making things matter?” he sneaks in a fallacy as if it’s a fact. In fact, Americans do today make things. Manufacturing output is now very near the all-time high that it hit on the eve of the financial crisis. Further, as reported by Colin Grabow, “In 2021, [the U.S.] ranked second in the share of global manufacturing output at 15.92 percent – greater than Japan, Germany, and South Korea combined – and the sector by itself would constitute the world’s eighth‐largest economy. The United States was the world’s fourth‐largest steel producer in 2020, second‐largest automaker in 2021, and largest aerospace exporter in 2021.”* Therefore, it’s unsurprising – except, perhaps, to Messrs. Cass and Trump – that U.S. industrial capacity is also today near its all-time high.
Mr. Cass is further mistaken when he asserts that “large, persistent trade deficits are bad for America.” America began running an unbroken string of annual trade deficits when I was a senior in high school. This year I reached the retirement age of 65. Over the course of these 48 years, real wages have increased significantly, real per-capita GDP has risen by 141 percent, and the percentage of American households earning annual incomes of at least $100,000 in 2022 dollars has nearly doubled, from 18.8 in 1976 to 37.5 in 2022, while the percentage earning less than $35,000 per year fell from 30.8 to 23.3.** Mr. Cass is likely surprised by these facts because, contrary to his belief, U.S. trade deficits do not necessarily mean that Americans are disgorging assets to foreigners. In reality these ‘deficits’ instead are a sign that global investors are increasing the size of America’s capital stock, one happy result of which is to increase worker productivity and, hence, workers’ wages.
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* Colin Grabow, “The Reality of American ‘Deindustrialization’,” Cato Institute, October 24, 2023.
** See “Historical Income Tables: Households,” Table H-17, United States Census Bureau.
