Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Gene Sperling didn't understand trade in his 2005 book
Last week, President Clinton named former Clinton advisor Gene Sperling to replace Lawrence Summers as his National Economic Advisor. So I checked out Sperling's 2005 book The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity to get a feel for his position on trade.
I was dismayed that he was caught up in the free trade vs. protectionism dichotomy, not even realizing that the balanced trade position exists! He made his ignorance clear when he discussed what he considered to be all of the alternatives in the following hypothetical situation:
He correctly analyzed the outcome of the sort of bill, like the one that President Obama and Congress tried to pass in 2010, that would punish companies that outsource:
But the only alternative that he could conceive of to free trade was protectionism. He wrote:
If he knew about the possibility of enacting a balanced trade bill, such as Warren Buffett’s 2003 tradable Import Certificates Plan or our 2011 WTO-legal Scaled Tariff Act, he would realize that he was posing a false dichotomy. Although protectionist proposals result in fewer imports, balanced trade proposals increase American exports and reduce American imports at the same time.
Later he advocated measures to help educate workers for the changing economy, but he missed the fact that when trade is imbalanced, the jobs lost in import-competing industries are not compensated for by jobs in exporting industries. He wrote:
In short, Sperling failed to understand trade in 2005. Unless he has changed, our country will probably have to suffer through several more years of persistent depression before we get a president who understands what John Maynard Keynes explained in his 1936 magnum opus, The General Theory of Employment Interest and Money:
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