Whenever you listen to Donald Trump speak about trade, as he did Tuesday in Pittsburgh, always keep in front of your mind that he is peddling a con.
He slams recent trade agreements by “the politicians,” and promises to negotiate “great deals,” but he never explains what will be in those great deals.
He claimed Tuesday they will benefit “our workers,” but he didn’t mention his statement from seven months ago that “wages [are] too high. We’re not going to be able to compete against the world.”
In Pittsburgh he slammed “powerful corporations” and “the people who rigged the system for their benefit” who “will do anything – and say anything – to keep things exactly as they are” … then a few minutes later complained the system wasn’t rigged enough: “We tax and regulate and restrict our companies to death.” (Trump has previously declared he would begin trade negotiations by unilaterally slashing corporate tax rates.)
He also lamented outsourcing: “Our politicians have aggressively pursued a policy of globalization – moving our jobs, our wealth and our factories to Mexico and overseas.” But in 2005, he was defending outsourcing for it “creates jobs in the long run”:
We hear terrible things about outsourcing jobs—how sending work outside of our companies is contributing to the demise of American businesses. But in this instance I have to take the unpopular stance that it is not always a terrible thing.
I understand that outsourcing means that employees lose jobs. Because work is often outsourced to other countries, it means Americans lose jobs. In other cases, nonunion employees get the work. Losing jobs is never a good thing, but we have to look at the bigger picture … [A] study found that outsourcing helped companies be more competitive and more productive. That means they make more money, which means they funnel more into the economy, thereby, creating more jobs.
So determining what the opportunistic Trump actually believes is always a challenge. But this reference to American history in the Pittsburgh address struck me as revealing:
Our original Constitution did not even have an income tax. Instead, it had tariffs – emphasizing taxation of foreign, not domestic, production. Yet today, 240 years after the Revolution, we have turned things completely upside-down. We tax and regulate and restrict our companies to death, then we allow foreign countries that cheat to export their goods to us tax-free.
What Donald Trump is doing is criticizing our early 20th century embrace of progressive taxation, and its related reduction in tariff rates.
Trump prefaces the comment by name-checking George Washington and Alexander Hamilton, and their support for American manufacturing. It’s true that they supported tariffs on some imports to get an American manufacturing industry up and running, but as Ron Chernow’s biography of Hamilton notes, the first Treasury Secretary wanted those tariffs to be “moderate in scale, temporary in nature, and repealed as soon as possible.” He also wanted immediate low tariffs on raw materials. Moreover, Washington and Hamilton backed a whiskey tax – to the point of enforcing it at gunpoint – to broaden the new nation’s revenue base and keep tariffs from being excessively high.
Trump’s vision is more in line with Gilded Age Republican President William McKinley. The Republicans in those days were the trade protectionists, protecting the corporate profits of their wealthy donors from foreign competition.
The Democrats were the free traders, led by the legendary economic populist William Jennings Bryan. As explained in Steven Weisman’s book “The Great Tax Wars,” the Nebraskan won his first race for Congress in 1890 by “charging … that high tariffs were protecting the wealthy manufacturers of farm equipment and other goods that farmers needed. He carried the free trade gospel to far corners of the state … ‘When you buy $1 worth of starch,’ he told listeners, ‘you pay 60 cents for the starch and 40 cents for the trust and the tariff.’”
1890 was the year that then-Representative McKinley passed the “McKinley Tariff” in Congress, and the populist backlash was so strong that Bryan was elected and McKinley ousted. But McKinley recovered politically, and six years later he crushed Bryan in the presidential race in part by defending the tariff (and in part by outspending Bryan 12-to-1). Yet populist sentiment against high tariffs, and for progressive taxation in their stead, continued to grow.
McKinley’s 1901 assassination brought to the White House Teddy Roosevelt, a progressive Republican who flirted with tariff reform but didn’t follow through.
It was Roosevelt’s hand-picked successor, William Taft, who enacted a controversial tariff reform package that included a breakthrough: a constitutional amendment to establish the income tax. (Progressives reluctantly accepted it as they wanted to simply enact the tax legislatively. Conservatives backed the amendment thinking that it would never get ratified by the states.)
The tariff compromise was unpopular with all sides and contributed to Taft’s 1912 defeat for re-election. But Taft’s game-changing constitutional amendment was ratified, and Democratic President Woodrow Wilson – who secured his party’s nomination thanks to the populist Bryan endorsing him at the party convention – quickly enacted a progressive income tax, slashing tariffs in the process.
Today, the ideological lines on trade have flipped. But that doesn’t put Bernie Sanders, Elizabeth Warren and other progressive populists on the side of McKinleyesque protectionism.
Today’s progressive populists don’t want to build economic walls, because they are not narrow-minded nationalists. As Sanders explained during the campaign, “fair trade means to say that it is fair. It is roughly equivalent to the wages and environmental standards in the United States.” In other words, he wants to lift up the standards in other countries, not drag ours down.
Progressive populists want fair trade rules that lift up labor, health, human rights and environmental standards across the globe, so we can build an economy that works for everyone, everywhere. What progressive populists oppose are skewed trade rules that allow corporations to profit off weak standards at the expense of the middle class and the poor.
Donald Trump is not a Bernie Sanders populist. He cares not a whit about raising standards at home or abroad. The words “labor,” health,” “human rights” and “environment” were not uttered in his Pittsburgh speech. His embrace of tariffs has nothing to do with Sanders’ vision of higher wages and standards, because he has made it quite clear that he wants lower wages and standards.
Trump’s brand of protectionism doesn’t move America and the world forward. It turns the clock back to the Gilded Age. Don’t buy the con.
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