For the economists on the board. (Ben Stein opinion on changing trade agreements)

Bamabuzzard · Apr 5, 2016

http://www.mediaite.com/tv/sheer-idiocy-ben-stein-goes-ballistic-on-trump-for-horrifying-economic-ignorance/

In this video of Ben Stein undressing Donald Trump's opinion on the economy he makes a statement that going into trade agreements and "fixing them" would cause a massive recession. I assume he is referring to NAFTA seeing that is the main trade agreement that Donald Trump and Bernie Sanders have said they would go into and "fix" if they were president.

I'm not an economist and don't claim to be one. But what I've read about NAFTA in more than one business article is that NAFTA has cost our country approximately 700,000 manufacturing jobs since its inception. These jobs either haven't been replaced or have been replaced by lower paying, lower level jobs.

So here's my question. Why would going into these type trade agreements and putting us at more of an advantage cause a massive recession? I'm truly asking because I don't know.

TIDE-HSV · Apr 5, 2016

Bamabuzzard said:
http://www.mediaite.com/tv/sheer-id...c-on-trump-for-horrifying-economic-ignorance/

In this video of Ben Stein undressing Donald Trump's opinion on the economy he makes a statement that going into trade agreements and "fixing them" would cause a massive recession. I assume he is referring to NAFTA seeing that is the main trade agreement that Donald Trump and Bernie Sanders have said they would go into and "fix" if they were president.

I'm not an economist and don't claim to be one. But what I've read about NAFTA in more than one business article is that NAFTA has cost our country approximately 700,000 manufacturing jobs since its inception. These jobs either haven't been replaced or have been replaced by lower paying, lower level jobs.

So here's my question. Why would going into these type trade agreements and putting us at more of an advantage cause a massive recession? I'm truly asking because I don't know.

To me, this is a straw man by both candidates. Remembering Perot and his "sucking sound," those jobs didn't stay in Mexico at all, or many didn't. They went on hopscotching to the next cheaper worker population, usually in SE Asia, leaving Mexico about where it was. I don't think these types of trade agreements really accomplish much in the long run...

Tide1986 · Apr 5, 2016

I assume the thought process is that prices will rise (possibly dramatically) without an offsetting rise in wages, which would reduce consumer spending which would then cause a recession.

The rise in prices would be caused by the higher cost of employment to produce the imported goods domestically or by the higher cost of imported goods due to tariffs.

Tidewater · Apr 5, 2016

Bamabuzzard said:
http://www.mediaite.com/tv/sheer-idiocy-ben-stein-goes-ballistic-on-trump-for-horrifying-economic-ignorance/

In this video of Ben Stein undressing Donald Trump's opinion on the economy he makes a statement that going into trade agreements and "fixing them" would cause a massive recession. I assume he is referring to NAFTA seeing that is the main trade agreement that Donald Trump and Bernie Sanders have said they would go into and "fix" if they were president.

I'm not an economist and don't claim to be one. But what I've read about NAFTA in more than one business article is that NAFTA has cost our country approximately 700,000 manufacturing jobs since its inception. These jobs either haven't been replaced or have been replaced by lower paying, lower level jobs.

So here's my question. Why would going into these type trade agreements and putting us at more of an advantage cause a massive recession? I'm truly asking because I don't know.

Comparative advantage.
The bottom line is this: the US has very productive workers (on the basis of GDP/man-hour worked), much, much more productive than Chinese (or Indian) workers. In fact, Indian workers once demanded protection from "over-productive" American workers.
By reducing trade barriers, and getting our trade partners to trade freely, we gained an advantage over our competitors in several fields, fields in which we are especially good. I posted on this forum recently those commodities we export (e.g. chemicals, transportation equipment like train engines, food, oil and oil products, medical machinery). If you were working in those fields, business took off.
If you were working in one of those fields in which the Mexicans have an advantage, it was terrible.
The bottom line question is, if we were to re-erect trade barriers, it would hurt the US, but, given our size, it would hurt us less than Mexico. So, philosophically, would you be willing to let me chop off your left hand if, in exchange, I were to chop off both your neighbors legs? Does that sound like a good deal to you?

Bamabuzzard · Apr 6, 2016

I'll reiterate, I'm not an economist and don't know every scenario regarding if you "pull this string" it will cause these ten "strings" over there to do this or that. But does anyone agree (or I guess disagree) that if we don't find a way to bring back many of the manufacturing jobs that have left our country, the middle class is going to continue to shrink closer to the working poor? Or is bringing back manufacturing jobs really not as big a deal as some of us think it is?

TideEngineer08 · Apr 6, 2016

Tidewater said:
Comparative advantage.
The bottom line is this: the US has very productive workers (on the basis of GDP/man-hour worked), much, much more productive than Chinese (or Indian) workers. In fact, Indian workers once demanded protection from "over-productive" American workers.
By reducing trade barriers, and getting our trade partners to trade freely, we gained an advantage over our competitors in several fields, fields in which we are especially good. I posted on this forum recently those commodities we export (e.g. chemicals, transportation equipment like train engines, food, oil and oil products, medical machinery). If you were working in those fields, business took off.
If you were working in one of those fields in which the Mexicans have an advantage, it was terrible.
The bottom line question is, if we were to re-erect trade barriers, it would hurt the US, but, given our size, it would hurt us less than Mexico. So, philosophically, would you be willing to let me chop off your left hand if, in exchange, I were to chop off both your neighbors legs? Does that sound like a good deal to you?

Well I'm right handed and my neighbor is continually walking onto my property and stealing food, clothes, and sleeping in my garage. Chop away.

Displaced Bama Fan · Apr 6, 2016

BamainBoston said:
It's also a fallacy to assume that those jobs would still be here if NAFTA wasn't in place. My problem is not with free trade deals; my problem is with the failure to take action against cheaters. Trump is absolutely right on one thing--China devalues its currency, giving their manufacturers an unfair advantage. If you can beat us on labor costs, so be it. We'll benefit from cheap goods. But when we let another nation cheat it causes the same kinds of imbalances as tariffs and taxes.

Just nuke 'em. Curb population growth, pollution, bring back manufacturing jobs state side, military threat...too many wins.

Gr8hope · Apr 6, 2016

Displaced Bama Fan said:
Just nuke 'em. Curb population growth, pollution, bring back manufacturing jobs state side, military threat...too many wins.

Soooo.....DBF, you are really Donal Trump incognito. That explains a lot.

Displaced Bama Fan · Apr 6, 2016

Gr8hope said:
Soooo.....DBF, you are really Donal Trump incognito. That explains a lot.

Well, I never voted Democrat...oh wait, I did when Guy Hunt won the governorship. I voted for Graddick in 86 when I was 19 so the ticket would be split.

Displaced Bama Fan · Apr 6, 2016

BamainBoston said:
I think you've hit on the appeal of Trump and the glaring hole in Republican politics. Republicans are right--free trade is good. But they miss several important things.

1. If you are the only one free trading, it's like unilaterally disarming. Sure, you save some money in the short run, but eventually you get crushed by the guy who kept his guns. We open the door to China, it floods our economy with cheap goods--which, in the short run, is good for consumers because it keeps prices down--but then they've gutted us and we've lost great companies and great jobs.

2. Free trade is the ultimate capitalist endeavor. The free market, at the macro level, benefits us all. But someone always loses. What about those people? Sure, the textile industry in Alabama was inefficient and could not compete. It was a dinosaur, doomed to collapse. Might even be good for us, twenty years down the road. But what about the people who just lost their jobs? What about the town that lost its center? Do we ignore them? As they collapse into poverty and decay? As their schools get worse and the community becomes a prime target for heroin and meth?

You ask what can be done. At the very least, we need to eliminate the barriers to success that we impose. That means regulatory reform. It means permitting reform. And it means tax reform. If a company leaves our shores to move to Ireland or the UK because it will save billions on its taxes, that's not the company's fault; it's ours.

Our country should be the most attractive place in the world to start a business. Sure, our labor costs are higher, but so is our productivity and our workforce education. We could make the changes we need to make, and we could do it in a bipartisan manner. But it will take leadership from the very top. Obama, whatever he may be, is not that kind of leader. Unfortunately, I don't know that any of the people left on the stage on either side are.

Great points BnB!

bama_wayne1 · Apr 6, 2016

I am not an economist. That being said, there are costs put on US companies by regulations, that our foreign competitors do not have. OSHA and EPA cost companies here big money. Now, if we believe that these issues are important enough to wrest industry from our grasp with increased costs, shouldn't we REQUIRE the importers to manufacture under those standards? Textiles was taken from the south and given to Asia and India with that being two of the major factors. As previously stated in this thread they may have taken a waltz through Mexico to get there but the main reason textiles couldn't compete were regulations not labor. This I know because I was a corporate cost accountant for one of those firms for many years.

Bamabuzzard · Apr 6, 2016

BamainBoston said:
I think you've hit on the appeal of Trump and the glaring hole in Republican politics. Republicans are right--free trade is good. But they miss several important things.

1. If you are the only one free trading, it's like unilaterally disarming. Sure, you save some money in the short run, but eventually you get crushed by the guy who kept his guns. We open the door to China, it floods our economy with cheap goods--which, in the short run, is good for consumers because it keeps prices down--but then they've gutted us and we've lost great companies and great jobs.

2. Free trade is the ultimate capitalist endeavor. The free market, at the macro level, benefits us all. But someone always loses. What about those people? Sure, the textile industry in Alabama was inefficient and could not compete. It was a dinosaur, doomed to collapse. Might even be good for us, twenty years down the road. But what about the people who just lost their jobs? What about the town that lost its center? Do we ignore them? As they collapse into poverty and decay? As their schools get worse and the community becomes a prime target for heroin and meth?

You ask what can be done. At the very least, we need to eliminate the barriers to success that we impose. That means regulatory reform. It means permitting reform. And it means tax reform. If a company leaves our shores to move to Ireland or the UK because it will save billions on its taxes, that's not the company's fault; it's ours.

Our country should be the most attractive place in the world to start a business. Sure, our labor costs are higher, but so is our productivity and our workforce education. We could make the changes we need to make, and we could do it in a bipartisan manner. But it will take leadership from the very top. Obama, whatever he may be, is not that kind of leader. Unfortunately, I don't know that any of the people left on the stage on either side are.

I don't know what the means should be but I do know what the end needs to look like and you've hit it on head. In the short term we as consumers have gotten cheaper prices (and consequently cheaper quality as well). But in the long term many of these same consumers buying these products have less and less money to buy with, because their middle class paying jobs have been shipped overseas. I know so many people who have lost their factory jobs and they've had to replace them with less quality jobs. That $20/hour job that is now sitting across the ocean somewhere has been replaced with a $12/hour job. These people have to start downsizing, selling off recreational type assets, even selling their homes to move into something smaller and less expensive. It is a complete shift downward in lifestyle and discretionary income. Take millions of people who this has happened to and add up the lost wages and it starts heavily impacting the economy.

One of my buddies runs a restaurant and has said before "The family guy who used to walk in on a Friday night with a $20-$28/hr wallet now walks in with a $12-$15/hr wallet. That is if he walks in at all anymore."

bama_wayne1 · Apr 6, 2016

BamainBoston said:
I think you've hit on the appeal of Trump and the glaring hole in Republican politics. Republicans are right--free trade is good. But they miss several important things.

1. If you are the only one free trading, it's like unilaterally disarming. Sure, you save some money in the short run, but eventually you get crushed by the guy who kept his guns. We open the door to China, it floods our economy with cheap goods--which, in the short run, is good for consumers because it keeps prices down--but then they've gutted us and we've lost great companies and great jobs.

2. Free trade is the ultimate capitalist endeavor. The free market, at the macro level, benefits us all. But someone always loses. What about those people? Sure, the textile industry in Alabama was inefficient and could not compete. It was a dinosaur, doomed to collapse. Might even be good for us, twenty years down the road. But what about the people who just lost their jobs? What about the town that lost its center? Do we ignore them? As they collapse into poverty and decay? As their schools get worse and the community becomes a prime target for heroin and meth?

You ask what can be done. At the very least, we need to eliminate the barriers to success that we impose. That means regulatory reform. It means permitting reform. And it means tax reform. If a company leaves our shores to move to Ireland or the UK because it will save billions on its taxes, that's not the company's fault; it's ours.

Our country should be the most attractive place in the world to start a business. Sure, our labor costs are higher, but so is our productivity and our workforce education. We could make the changes we need to make, and we could do it in a bipartisan manner. But it will take leadership from the very top. Obama, whatever he may be, is not that kind of leader. Unfortunately, I don't know that any of the people left on the stage on either side are.

Guess where the MOST EFFICIENT TEXTILE PLANT IN THE WORLD was in the 1990's? If you guessed Alabama you would be CORRECT. That was published in Textile World magazine but I can't remember the issue. I was the cost accountant there. We had the fastest weaving operation for flocking substrates with efficiencies in the 95-96% range. Some may have been antiquated but not all.

Tide1986 · Apr 6, 2016

bama_wayne1 said:
Guess where the MOST EFFICIENT TEXTILE PLANT IN THE WORLD was in the 1990's? If you guessed Alabama you would be CORRECT. That was published in Textile World magazine but I can't remember the issue. I was the cost accountant there. We had the fastest weaving operation for flocking substrates with efficiencies in the 95-96% range. Some may have been antiquated but not all.

I spent a few years in the early 90's working at the research center in Spartanburg, South Carolina for a major American textile firm. I bet you can guess who it was.

Tidewater · Apr 6, 2016

Bamabuzzard said:
I'll reiterate, I'm not an economist and don't know every scenario regarding if you "pull this string" it will cause these ten "strings" over there to do this or that. But does anyone agree (or I guess disagree) that if we don't find a way to bring back many of the manufacturing jobs that have left our country, the middle class is going to continue to shrink closer to the working poor? Or is bringing back manufacturing jobs really not as big a deal as some of us think it is?

I believe we do have manufacturing jobs, just in sectors in which the US has an advantage. For example, Boeing built a new plant in South Carolina starting in 2009.

The flip side is this. In the town I grew up in, we had a DuPont plant, a Thiokol plan (made carpetbacking), a shipbuilding company, and a metalcrafter factory (made brass doorknockers, brass candlesticks and brass trivets). These plants employed thousands. Not outrageous wages, but enough to make a decent living, maybe enough extra to spend a week at Myrtle Beach each summer. Now the former employees (and their children) do not work in airplane manufacturing. They live on welfare and the "lucky" ones get a disability determination and they don't work at all. Many of the others, especially the young, cook meth at home. Free trade has sucked hard for them.

Now, we could easily raise import tariffs, and start making stuff in the US that we currently import, but our trading partners would reciprocate. And that $100 BluRay player made in China you bought last month? Would you be willing to pay $250 for the same player? Would you be willing to pay $2,500 for your American-made iPhone?

Bamabuzzard · Apr 6, 2016

Tidewater said:
I believe we do have manufacturing jobs, just in sectors in which the US has an advantage. For example, Boeing built a new plant in South Carolina starting in 2009.

The flip side is this. In the town I grew up in, we had a DuPont plant, a Thiokol plan (made carpetbacking), a shipbuilding company, and a metalcrafter factory (made brass doorknockers, brass candlesticks and brass trivets). These plants employed thousands. Not outrageous wages, but enough to make a decent living, maybe enough extra to spend a week at Myrtle Beach each summer. Now the former employees (and their children) do not work in airplane manufacturing. They live on welfare and the "lucky" ones get a disability determination and they don't work at all. Many of the others, especially the young, cook meth at home. Free trade has sucked hard for them.

Now, we could easily raise import tariffs, and start making stuff in the US that we currently import, but our trading partners would reciprocate. And that $100 BluRay player made in China you bought last month? Would you be willing to pay $250 for the same player? Would you be willing to pay $2,500 for your American-made iPhone?

How much of that increased cost could be mitigated if our government didn't suffocate American companies with regulations and taxes that aren't applied to importing companies? I'm not saying there aren't ANY manufacturing jobs here but when a news organization runs a weekly experiment to where they go into homes and pull out everything in the house that isn't made in America and the only thing left in the house is a lamp? We have a problem. Again, I'm not smart enough to know what the solution is. But I don't think what we have now and where it seems we're headed is the best we can do. If it is then we're really not as "great" as we think we are.

tidegrandpa · Apr 6, 2016

Tidewater said:
I believe we do have manufacturing jobs, just in sectors in which the US has an advantage. For example, Boeing built a new plant in South Carolina starting in 2009.

The flip side is this. In the town I grew up in, we had a DuPont plant, a Thiokol plan (made carpetbacking), a shipbuilding company, and a metalcrafter factory (made brass doorknockers, brass candlesticks and brass trivets). These plants employed thousands. Not outrageous wages, but enough to make a decent living, maybe enough extra to spend a week at Myrtle Beach each summer. Now the former employees (and their children) do not work in airplane manufacturing. They live on welfare and the "lucky" ones get a disability determination and they don't work at all. Many of the others, especially the young, cook meth at home. Free trade has sucked hard for them.

Now, we could easily raise import tariffs, and start making stuff in the US that we currently import, but our trading partners would reciprocate. And that $100 BluRay player made in China you bought last month? Would you be willing to pay $250 for the same player? Would you be willing to pay $2,500 for your American-made iPhone?

If I could keep more of my check without having 30% confiscated to pay the 50% who can't or won't work, and yes I would pay it or do without.

chanson78 · Apr 6, 2016

Bamabuzzard said:
How much of that increased cost could be mitigated if our government didn't suffocate American companies with regulations and taxes that aren't applied to importing companies? I'm not saying there aren't ANY manufacturing jobs here but when a news organization runs a weekly experiment to where they go into homes and pull out everything in the house that isn't made in America and the only thing left in the house is a lamp? We have a problem. Again, I'm not smart enough to know what the solution is. But I don't think what we have now and where it seems we're headed is the best we can do. If it is then we're really not as "great" as we think we are.

So pull that thread a bit. All of a sudden companies do come back, they now enjoy some new regulatory and tax leeway and they build a grand plant to show that they are good ol' American companies. The issue is that the technological advances in robotics and supply chain management, are increasingly cutting the typical blue collar jobs out of the economy. Heck they are cutting the white collar jobs out of the economy in many areas. It is all well and good when people say that raising the minimum wage to 15$ an hour will incentivize McDonalds to employ their new fandangled burger flipping robot, but the same point can be said about all repeatable tasks. At some point the cost of hiring someone who has to take off and gets sick and now has to have health care, is prohibitive compared to "Super Robot 2000".

All that is to say I really don't know what is going to happen. My gut belief is that if you aren't in the business of making or programming or repairing the things that are replacing humans, you are replaceable and it is only a matter of time before it happens.

Warm fuzzy article to brighten your day: http://www.businessinsider.com/bill-gates-bots-are-taking-away-jobs-2014-3

Relevant quote.

Bill Gates via Business Insider said:
"Software substitution, whether it's for drivers or waiters or nurses … it's progressing. ... Technology over time will reduce demand for jobs, particularly at the lower end of skill set. ... 20 years from now, labor demand for lots of skill sets will be substantially lower. I don’t think people have that in their mental model."

Direct link to chart linked in the above article showing probability of your job being replaced by a robot in 20 years: http://www.businessinsider.com/jobs-that-will-be-lost-to-robots-2014-1

Tidewater · Apr 6, 2016

tidegrandpa said:
If I could keep more of my check without having 30% confiscated to pay the 50% who can't or won't work, and yes I would pay it or do without.

Looking at the human wreckage almost every day (in the town where I now live), I'd be willing to pay more for stuff. I'd pay more for metal crafters' brass fixtures if the men and women who used to work there could have their jobs back. (By the way, the company closed and moved its ops to China. I have not bought anything from the company since they moved.)

CrimsonNagus · Apr 6, 2016

Bamabuzzard said:
I don't know what the means should be but I do know what the end needs to look like and you've hit it on head. In the short term we as consumers have gotten cheaper prices (and consequently cheaper quality as well). But in the long term many of these same consumers buying these products have less and less money to buy with, because their middle class paying jobs have been shipped overseas. I know so many people who have lost their factory jobs and they've had to replace them with less quality jobs. That $20/hour job that is now sitting across the ocean somewhere has been replaced with a $12/hour job. These people have to start downsizing, selling off recreational type assets, even selling their homes to move into something smaller and less expensive. It is a complete shift downward in lifestyle and discretionary income. Take millions of people who this has happened to and add up the lost wages and it starts heavily impacting the economy.

One of my buddies runs a restaurant and has said before "The family guy who used to walk in on a Friday night with a $20-$28/hr wallet now walks in with a $12-$15/hr wallet. That is if he walks in at all anymore."

Don't forget the constant increase in cost for stuff like food and healthcare that continue to chip away at the middle class income as well. 4 years ago I was laid off from one job and I took a 10,000 pay cut to get the job I have now. That's not as hard hit as some folks but, it made a huge difference for my family. Now, 4 years later and not a single raise in sight, I'm making even less because health insurance goes up each year, price of food continues to go up (even though gas prices have gone down but, they'll never lower your food cost). Oh, I'm making the same dollar amount I was making 4 years ago but, the cost of living keeps going up yet the middle class isn't getting any increase in wages (greedy companies just don't care).

For the economists on the board. (Ben Stein opinion on changing trade agreements)

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