Merry Christmas to those 800 or so workers in Indiana who are keeping their jobs because our bold and different president-elect, Donald Trump, did some jaw-boning and more with an air conditioning plant.
Stay here, he said, as he growled about outsourcing work to Mexico, and the plant mostly did. It also happened to get about $7 million in tax breaks from the state government and still sent some 600 jobs to Mexico. It is no doubt hoping earlier bad publicity has been superseded by more recent and positive front-page impressions.
So unhappy New Year to those who lost out and to millions more who are going to get cheated out of jobs if reckless, intervening Trump should stick to punitive plans about other companies moving jobs across borders. He wants to stick them with a 35 percent tariff on the products they ship back to America, and, of course, it is consumers who will pay that tax.
To compensate for that tariff, the companies would have to raise prices, but it doesn’t end there. A company outsourcing manufacturing work does so to stay profitable and maybe even expand. If it keeps those jobs here or takes them abroad and pays the tariff, the business could struggle mightily, it might have to lay off more people, and it could be forced out of business.
If, on the other hand, Trump and Congress leave them alone, they may do well with their offshoring, create other jobs here that go to Americans and help the economy boom. Trade in general serves us. The NAFTA agreement with Mexico and Canada, which has cost jobs, as Trump has said, has produced far more jobs, as he hasn’t said. Our manufacturing sector is actually doing very well. The thing that has mostly caused fewer jobs is technology replacing humans.
Free markets work. They need rule of law to make them work, and some regulations are obviously necessary to keep the worst temptations in tow. But too much governmental intervention through overregulation, high corporate taxes and wild and wooly trade interference keep the best from happening. Innovation is thwarted. Entrepreneurship is defeated. The economy gets hit with more costs.
Trump is on to this, at least in some ways. His plan is to deregulate where regulations smash enterprises. He wants to lower the corporate tax from the highest in the world — 35 percent federal — to 15 percent. That should unleash a vigorous new competitiveness that would spur job growth. Through such actions, Trump could lower the need for offshoring and provide his promised job growth.
What he must avoid is trade protectionism, which would raise prices and cost jobs and maybe even initiate a disastrous trade war. Trade would never happen if there were not mutual advantages, and the fear of trade deficits is akin to fear of Christmas gifts. We get something we want for our money — that’s the point of money — and the dollars come back to us as purchases of treasury bonds or investments, which also create jobs.
Imports, it ought to be remembered, keep products cheap. Because of cheap, Chinese-imported goods at Wal-Marts, consumers save literally billions of dollars, and prices, it ought to be kept in mind, are as important to purchasing power as wages. Wal-Mart is also the biggest private employer in the country, offering some 1.3 million jobs.
Those are jobs, of course, that do not pay much because they do not require intricate skills. Partly because of trade, there is nowhere near the demand for unskilled labor as there used to be, but the answer to that is not to eliminate jobs through coercive government pay demands, but to have more vocational training in high schools and to take advantage of community colleges.
Trump’s bravado has its virtues, but it should be focused on what works.
Contact Mr. Ambrose at firstname.lastname@example.org.