My intrepid Mercatus Center colleague, Veronique de Rugy, writes realistically about the state of the American economy. Three slices:
For one thing, for all the talk of job losses and economic decline, it’s worth remembering that the unemployment rate is a very low 4.1%, and real wages (those adjusted for inflation) have been growing. If anything, manufacturing is suffering a labor shortage, with more than 600,000 open jobs in the sector.
It’s also worth noting that U.S. manufacturing output, even adjusted for inflation, is near all-time highs. While about 5% below its December 2007 peak, it’s up 177% compared with 1975, the year America last ran an annual trade surplus. Industrial production — manufacturing, mining and utilities combined — is higher than ever. That’s hardly a collapse.
A principal source of confusion is the difference between jobs and output. Yes, the number of workers in manufacturing has declined dramatically — from around 19 million in 1980 to about 13 million today. But that didn’t happen because America stopped making things. It happened because we got incredibly good at making things.
Productivity in manufacturing has surged thanks to automation, technology and global supply chains. Just as we now produce more food than ever with just over 1% of Americans working in agriculture (down from around 75% in 1800), we produce more manufactured goods with far fewer workers. That’s not economic decline; it’s progress.
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High-tech manufacturing has boomed in other parts of America, creating jobs in aerospace, semiconductors, pharmaceuticals and advanced machinery and services. These jobs command much higher wages than manufacturing jobs used to. Output of computer and electronics products has grown 1,200% since 1994. Motor vehicle output is up well over 60%. America and its workers excel in these industries, where we have significant comparative advantages.
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“America doesn’t make anything anymore” is a powerful talking point, but it’s false. We make plenty, including some of the most complex, high-valued goods in the world, from aircraft to pharmaceuticals to advanced electronics. Our workers don’t make many T-shirts or toasters; other countries can do it more cheaply. And the more successfully we produce and export advanced machinery, the more foreign goods we can afford to import.
With Trump back in the White House and his trade actions even more erratic and belligerent, foreign importers of US goods are seeking more dependable alternatives. Soybeans are just an example. Chinese importers are looking to South America as an alternative for chicken and pork and may turn to Australia for sorghum, barley, and wheat. It’s also not just Chinese importers. Other countries on Trump’s harassment list, including Canada and Mexico, are targeting US agricultural products for retaliatory tariffs and eyeing diversifying their sources of imports.
At the same time, American farmers staring down reduced access to foreign markets are also facing higher production costs due to the US tariffs on imported agricultural inputs. Steel and aluminum tariffs mean higher prices for farm equipment. Canada is by far the largest supplier of potash to the US, which means higher fertilizer prices.
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Looking for a good example of government waste, fraud, and abuse?
The time the Trump administration is spending upending global trade is a waste, the rationale for it is a fraud, and forcing taxpayers to cover the damage is downright abuse.
Beijing used its state-owned enterprises to retaliate against Trump’s 2018 tariffs.
J.D. Tuccille reports on the harm that the cronyist Jones Act inflicts on Alaska. A slice:
Over a century ago, Congress passed the Merchant Marine Act of 1920, better known as the Jones Act, mandating that “No merchandise…shall be transported by water…between points in the United States…in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States.” There’s more to it, but the nationalistic law, intended to protect American shipping, effectively barred transporting goods between American ports in foreign-built and foreign-flagged vessels. That means North Slope natural gas can be transported to Alaska’s populated south only in American tankers. If you can find any. You can’t.
“LNG carriers have not been built in the United States since before 1980, and no LNG carriers are currently registered under the U.S. flag,” the U.S. Government Accountability Office (GAO) reported in 2015. And, while you’d think that demand—not just in isolated states like Alaska and Hawaii, but also territories like Puerto Rico—would drive supply, there’s a huge hurdle. “U.S. carriers would cost about two to three times as much as similar carriers built in Korean shipyards and would be more expensive to operate,” the GAO added.
Jeffrey Miron and Jonah Karafiol point out that “tariffs won’t stop fentanyl smuggling.”
