“Hang on a minute!” they’re sputtering in New Delhi. The biggest purchaser of Russian oil is China, which has binged on $158.7 billion worth of the stuff in the past 2½ years. That has put $39.4 billion more Chinese dollars than Indian ones into Mr. Putin’s war chest. Yet Mr. Trump has whacked India, not China, with Russia-related sanctions. This is part of a confounding pattern of trade warfare in which the president is notably more aggressive toward nonadversarial countries—allies and partners like Canada, Mexico, the European Union, Japan, South Korea and now India—than he is with most U.S. adversaries.
David Henderson revisits Jagdish Bhagwati’s splendid 1988 book, Protectionism.
One might start by noting, as many Cato writers have over the years, that the concept of a presidential mandate is almost completely notional, even in landslide elections, let alone the sort won by Trump against Kamala Harris, in which the popular vote margin was 1.5 percent. Some of Trump’s voters, for sure, did back his position favoring mass deportations; others warmed instead to his talk on tax cuts, energy development, and staying out of overseas wars. Does he have a mandate for every issue he spoke about, for only some, or what? The divination of mandates inevitably depends on the discretion of each interpreter.
Reason‘s Eric Boehm isn’t surprised that the increasingly blurry line separating the private from the public – a blurriness only further encouraged by the Trump administration – fuels cronyism. [DBx: Trump’s collectivism is surely less ‘woke’ than is the collectivism that awaits us Americans when the Democrats return to power, but it’s collectivism nevertheless. And its collectivism of any sort – collectivism regardless of the language it uses and irrespective of the particular groups that it favors and those that it oppresses – that should be rejected.]
There are, he [Mankiw] says, five ways to “stop this upward trajectory” of debt: extraordinary economic growth, government default, large-scale money creation, substantial cuts in government spending and large tax increases. The probability of each is low.
Extraordinary growth? The internet managed to “revolutionize” work and leisure without igniting extraordinary economic growth. Coming innovations (e.g., artificial intelligence, biotechnologies) will be life-changing but are unlikely “to establish an entirely new growth path.”
Government default? The United States “is not immune to the political and economic forces that can make default an attractive option.” When Franklin D. Roosevelt took the nation off the gold standard, many U.S. bonds had clauses ensuring their value in gold bullion. FDR abrogated those clauses. Although the Supreme Court upheld (5-4) his power to do this, it was, Mankiw says, “without doubt” a default.
In 2016, candidate Donald Trump, in an exchange with a reporter, was asked how he would handle the national debt. He answered: “renegotiate” it. “You go back and you say hey, guess what, the economy crashed, I’m going to give you back half.” Trump, Mankiw notes, has shown “that he is willing to expand the Overton Window (the range of policies and arguments deemed acceptable in political discourse). Remember this exchange the next time someone says that a default on U.S. government debt is unimaginable.”
Large-scale money creation? This would be intended to fuel inflation, which is slow-motion repudiation of debts. Bondholders are paid back in dollars worth much less than those they used to purchase the bonds.
Thanks to Alan Reynolds for endorsing Phil Gramm’s and my book, The Triumph of Economic Freedom.
