Hoover

Another Hoover on trade?

by Fran Smith on September 15, 2009 · 1 comment

in Economy, International, Trade

President Obama’s slapping of tariffs on tires imported from China is the latest in a series of protectionist moves by the U.S. that threaten the world trading system, risk retaliation by the U.S.’s largest foreign creditor, and ultimately harm consumers.  A Wall Street Journal editorial today titled “A Protectionist President” points out that Obama’s trade stance could be following in the disastrous footsteps of President Hoover.

The reality is that without the U.S. leading by example, the world trading order is likely to deteriorate into every country for itself. This is especially dangerous amid a global recession in which world merchandise trade volume fell by roughly 33% from the second quarter of 2008 to June 2009. Reviving trade flows is crucial to restoring global growth.

Mr. Obama may not intend to start a trade war, but then Hoover didn’t set out to pick one either. His political abdication is what made it possible, however, and trade passions once unleashed can be impossible to control. On his present course, President Obama is giving the world every reason to conclude he is a protectionist.

The Chinese have said they may retaliate on the tire tariffs by restrictions on U.S. chicken and auto parts.  That indeed could escalate to the detriment of U.S. manufacturers and producers and the jobs they maintain.  But U.S. consumers, especially lower-income consumers, could face immediate and substantial increases on lower-cost tires, many of which come from China.  Some tire distributors estimate that the cost of a $50 tire could rise to $85.  Since U.S. manufacturers mainly produce higher-priced tires, this protectionist move will do virtually nothing  for U.S. jobs in the tire industry, except perhaps appease the trade unions, especially the United Steelworkers, which have been clamoring for more protection.

Hoover and the Great Depression

by Ryan Young on August 31, 2009 · 1 comment

in Economy, Regulation

One of the oddities of U.S. history is that Herbert Hoover is regarded as a free-market president. He grew federal spending by 52% in just four years. Engaged in massive deficit spending. Created the Federal Home Loan Bank. And the Reconstruction Finance Corporation. Signed the Smoot-Hawley tariffs into law. And the Agricultural Marketing Act. And so on. Free-market, he was not.

The Hoover myth is showing some cracks, fortunately. Where most civics textbooks would blame Hoover’s laissez-faire policies for the Great Depression, a new paper by UCLA’s Lee Ohanian fingers Hoover’s labor market interventions.

I’m personally convinced the Depression was more of a monetary phenomenon than a fiscal one. But Ohanian is surely right that Hoover’s dictating to companies what wages shall pay their workers was a net negative for the economy.

It’s certainly possible to blame Hoover’s policies for the Great Depression. Just not on the grounds that those policies were free-market. People shouldn’t have to read obscure academic journals to find that out.

Stimulus Ignites Job-Killing Trade War With Canada

by Hans Bader on May 15, 2009 · 1 comment

in Economy, Employment, Energy, Environment, Global Warming, International, Odds & Ends, Politics as Usual, Stimulus to Nowhere, Trade

The $800 billion stimulus package pushed through by Obama has ignited a trade war with Canada, reports the Washington Post. In response to vague “buy American” provisions in the stimulus, “A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts — the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.”

A trade war is also underway with Mexico, thanks to a provision in the stimulus package that blocked a measley 97 Mexican truckers from U.S. roads. That minor NAFTA violation “caused Mexico to retaliate with tariffs on 90 goods affecting $2.4 billion in U.S. trade,” destroying 40,000 American jobs.

Obama’s protectionism echoes Herbert Hoover’s protectionism, which helped spawn the Great Depression. President Hoover signed the Smoot-Hawley tariff, which helped turn a recession into the Great Depression by triggering a trade war with other countries.

Unemployment is now even higher than what Obama predicted it would be without the stimulus. The White House now admits that there will be no job growth until 2010. The Congressional Budget Office repeatedly predicted that the stimulus would shrink the economy “in the long run,” but increase it in the short run, i.e., by the next election.

But so little of the stimulus money has gone into sectors of the economy where unemployment is high (like construction and transportation) that it seems to be doing nothing for the economy even in the short run. The $100 billion it pours into education — a sector where unemployment is very low, and where the U.S. also spends more per capita than almost every other country — appears likely to be wasted. Only 5.9 percent of the stimulus will go to transportation, a small amount compared to the amount of money it showers on state governments, which are using it to continue to provide lucrative pension and health benefits for state employees, whose wages continue to rise much faster than private sector workers.

Obama is following in Herbert Hoover’s footsteps on taxes and spending. In the Great Depression, Hoover raised marginal tax rates to 63%, and went on a deficit spending binge. Similarly, Obama has proposed higher marginal tax rates, which will produce another $1.9 trillion in tax increases. One of Obama’s own advisers now says that “the barrage of tax increases proposed in President Barack Obama’s budget could, if enacted by Congress, kill any chance of an early and sustained recovery.” He compares Obama’s tax increases to those that deepened the Great Depression.

Hoover imposed regressive taxes that burdened consumers, like the Revenue Act of 1932. Obama is now doing the same thing through his proposed $2 trillion cap-and-trade carbon tax. Obama privately admitted to the San Francisco Chronicle (which didn’t report it) that under his “plan of a cap and trade system, electricity rates would necessarily skyrocket.” As Obama admitted, that cost would be directly passed “on to consumers” — just the way Herbert Hoover’s 1932 excise tax increase was. Although the tax’s supporters claim it will cut greenhouse gas emissions, it may perversely increase them and also result in dirtier air. It is also chock full of corporate welfare, regional favoritism, political pay-offs, and give-aways to special interests.

Obama Follows in Hoover’s Footsteps

by Hans Bader on April 1, 2009 · 3 comments

in Bailout Watch, Deregulate to Stimulate, Economy, Energy, Environment, Global Warming, International, Politics as Usual, Regulation, Stimulus to Nowhere

During the Great Depression, Herbert Hoover damaged the economy, and impoverished the American people, with costly, artificial attempts to stimulate the economy through increased government spending, financed by heavy taxes like the Revenue Act of 1932.

Obama is now doing the same thing through his proposed $2 trillion cap-and-trade carbon tax. That tax fulfills his prediction in 2008 to the San Francisco Chronicle (which didn’t report it) that “Under my plan of a cap and trade system, electricity rates would necessarily skyrocket.” As Obama admitted, that cost would be directly passed “on to consumers” — just the way Herbert Hoover’s regressive excise taxes were in 1932. Although the tax’s supporters claim it will cut greenhouse gas emissions, it may perversely increase them and also result in dirtier air.

The $2 trillion that Obama’s proposed “cap-and-trade” carbon tax on energy use and utility bills is expected to raise is far more than the $646 billion the Administration earlier estimated. That’s at least $3,100 per family per year.

Obama is also emulating Herbert Hoover’s protectionism. Hoover signed the Smoot-Hawley tariff, which helped turn a recession into the Great Depression by triggering a trade war with other countries.

Similarly, the bill incorporating Obama’s carbon tax contains protectionist measures that will likely trigger an economically-destructive trade war. Indeed, Obama already started a trade war through a provision in his $800 billion stimulus package that blocked a measley 97 Mexican truckers from U.S. roads. That minor NAFTA violation “caused Mexico to retaliate with tariffs on 90 goods affecting $2.4 billion in U.S. trade,” destroying 40,000 American jobs. (Even before that, the Congressional Budget Office admitted that Obama’s stimulus package would actually shrink the economy in the long run).

The $2 trillion raised by Obama’s cap-and-trade carbon tax may be dwarfed by the money it siphons from consumers to well-connected corporations that have learned how to game cap-and-trade schemes.

In the Great Depression, President Herbert Hoover raised marginal tax rates to 63%, and went on a deficit spending binge. Similarly, Obama has proposed higher marginal tax rates, which will produce another $1.9 trillion in tax increases.

In spite of its massive size, Obama’s carbon tax won’t begin to pay for all his spending increases, such as a budget that will generate $4.8 trillion in increased deficits, Obama’s trillion-dollar toxic-asset program, and his $800 billion, economy-shrinking “stimulus” package, all of which contradict Obama’s campaign pledge of a “net spending cut.”

Obama’s carbon tax, like the tobacco tax increase he already signed into law, is a violation of his campaign promise not to raise taxes in “any form” on anyone making less than $250,000 per year.