Monday, March 5, 2018

The 1975 Surplus






"One of the things our President did not learn at Wharton was how to 'kick the can down the street'. Fixing things is how he rolls. That is why we elected him."


What is all this talk about tariffs, trade wars and deficits? Who cares anyhow? Well for starters, we all should. In 1975, I was freshly out of the Navy, and getting ready to graduate from the University of Minnesota. President Nixon had just resigned, so now we had President Ford. The Shah or Iran was still in power, and South Vietnam had just fallen to the North. Oh, one more thing - it was also the last year we had a trade surplus. A measly one at that. How much? A whooping 12 billion dollars.

Since then, it has been all downhill. Decade after decade of trade deficits. Some years were extraordinary in their size. In 2006 for example, our trade deficit was 3/4 of a trillion dollars. Last year in 2017, it was slightly over 1/2 trillion dollars. With every dollar shipped overseas, that could have been a dollar made in this country. We have ceded many industries to countries who not only exploit workers their workers, but trash the environment and have huge subsidies from their governments. So much so, their government subsidies make our corporate welfare look like child's play.

When President Trump said he was going to slap tariffs on steel and aluminum, Wall Street shuddered. The free traders came out of the woodwork to chastise our POTUS. Why? He is not doing anything he did not say he would do while on the campaign trail. Also, other Presidents have talked in the past about fixing our out of control trade deficit. Blah, blah, blah. 

This Republican President, has once again found his way into the hearts of the unions. The President of the United Steelworkers was interviewed about the proposed 25% tariff on steel. He thought it was like manna from Heaven. For too long, our steel mills have been shuttered while subsidized countries like China have over-produced. In know, I know - China is not our biggest importer. Canada is. But China is the country where their overproduction, depresses the price of steel worldwide. Kind of like what would happen to the price of oil if OPEC opened their spigots all the way.

Hold on kids - the road might get even more bumpy. Trump also mentioned Euro cars might get hit with a tariff. The response from the EU? Fine - we will put a tariff on your bourbon - maybe even your Harley's. Go ahead - more for the rest of us to enjoy at home.

Whenever we let things get too out of control, the "fix" is often times painful. Trump is getting our military modernized. It is going to cost a boatload of money. Why? Ever since the "fix" that Ronald Reagan put in to update and fix our military, we have let our readiness slide. And under Obama, it almost slid off the roof. The same can be said for our trade deficit. Rather than addressing it under the Carter Administration, we just tried to ignore it. Too late. It has turned out to be a cancer eating away at our economy.

Most things the President has done so far, I agree with. This is one of them. One of the things our President did not learn at Wharton was how to "kick the can down the street". Fixing things is how he rolls. That is why we elected him.


1 comment:

  1. Conservatives are striking back after 45 announced last week he planned to raise tariffs on aluminum and steel coming into the US.
    They are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan. The new tax reform law has boosted the economy and they certainly don't want to jeopardize those gains.

    American companies could move their operations abroad and not face retaliatory tariffs.
    This scenario would lead to the exact opposite outcome of the administration's stated objective, which is to protect American jobs.
    It hurts the administration politically because trade wars, protectionism, they lead to higher prices for individual Americans.
    It's basically a tax increase.

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