Forget NAFTA: President Trump Should Work With GOP Congress to Grow the Economy
Politicians don’t “create jobs” in the private sector. But policies do affect economic and job growth, for good or for ill. Alas, policies that grow the economy and help struggling workers aren’t always the policies such voters want. What voters believe is often what matters in electoral politics. Truth can take the hindmost.
Fighting NAFTA is, at Best, a Waste of Time
Wright County, Iowa, for instance, went 2 to 1 for Trump in 2016. Many of its voters were drawn to Trump’s attacks on free trade and trade pacts, like the Trans-Pacific Partnership. But guess who is now suffering since Trump killed that trade deal? Farmers and ranchers in Wright County and other agriculture-heavy parts of the country.
Today, renegotiations begin on NAFTA (the North American Free Trade Agreement). This is because, during his campaign, President Trump called the treaty “worst trade in history.” Every trade deal has costs, and those costs aren’t evenly distributed. But his claim just doesn’t fit the facts. Far more U.S. manufacturing jobs have been lost to automation than to Mexico or Canada. And the U.S. has gained overall from the deal. Pulling out of NAFTA would probably harm the rural states the president wants to help. Many congressional Republicans know this, so Trump’s efforts to renegotiate the deal may go nowhere.
Few of the new rules imposed in the 2010 Dodd-Frank Act will prevent another crisis.
The president is wasting valuable time and energy on NAFTA. Trade wars and tariffs are not the way to grow the economy or the job base, however appealing they may be to some voters.
If President Trump really wants to help struggling Americans, he should focus on the boring stuff that works, and then make the case for it to voters.
A Trillion Dollar Weight on the Economy
Item 1: He should work with Congress to prune back the thicket of regulations that has choked our economy since 2008.
During President Obama’s two terms, business was burdened with over 20,000 new regulations. This added some 572,000 pages to the Federal Register and cost our economy almost a trillion dollars.
Good regulations can protect consumers and the environment, streamline business, and strengthen rather than undercut market incentives. But many of the regulations under Obama seemed designed, not to improve the market, but to shift power to the federal government.
In 2008, the financial sector was already one of most regulated parts of the economy. The financial crisis gave President Obama and the Democrats in Congress an excuse to pile on even more counter-productive rules.
But bad policies and regulations, not a lack of regulation, caused the crisis. Few of the new rules imposed in the 2010 Dodd-Frank Act will prevent another crisis. And by dubbing some banks as “systemically important,” the Act managed to turn “too big to fail” into government policy. That’s just stupid. It tells the largest banks that we will bail them out, no matter what. What could go wrong?
Take another fruit of Dodd-Frank, the so-called Volcker Rule. The details are complicated, but it would, in effect, build a wall between commercial banks like Bank of America and investment banks like Goldman Sachs. The bank lobby has been able to get the rule deferred for years. Critics on the left, like Senator Elizabeth Warren, insist that it needs to take effect now.
Here’s the thing: the lack of the Volcker Rule had nothing to do with the financial crisis. As it was, JP Morgan Chase (a commercial bank) was able to buy Bear Stearns (an investment bank). And Bank of America was able to buy Merrill Lynch. Without such actions, the crisis would have been worse, not better. People as diverse as libertarian economist Tyler Cowen and Bill Clinton have pointed this out.
So why do Warren and others insist on the regulation? Again, it’s all about power, not protection.
To get the economy growing, the president and the GOP Congress need to work together.
It’s the same story with health care. Americans spend so much on health care not because the sector is free and unregulated, but because of huge “third-party payers” that come between customers and providers. That’s why few of us know how much a doctor’s visit really costs. Good policy that harnesses the free market and sets up the right incentives would boost quality and supply and lower the cost of health care. What we got instead, in 2010, was Obamacare. It has made an already bad system far worse.
And now we have a GOP Congress that lacks the nerve to repeal it.
Then we have the onerous red tape that’s supposed to help the environment. Before President Obama took office, our air and water were cleaner than they had been in decades. Most of the rules we added from 2008 to 2016 have not protected the environment, let alone the climate. They’ve just expanded the power of the state. They gave the EPA and other regulators more power over simple choices — like what car to drive or light bulb to use.
So, here’s what has happened since President Trump took office:
- He has made a good start on environmental red tape. In one executive order, he rolled back more than a dozen bad regulations.
- The House passed a major reform of Dodd-Frank, but it has gone nowhere in the Senate..
- Obamacare repeals have failed.
Not everything can be done by the president’s pen or a vote in the House. To get the economy growing, the president and the GOP Congress need to work together. Fights between the White House and Capitol Hill will do little to unburden our economy from bad Obama-era regulations.
Every minute that the president spends on NAFTA is a minute he is not working with Congress on policies that would grow the economy. He needs to focus on what will work, not on what sounds good.