David Henderson — Ominous Inaugural Addresses

If Donald Trump understood trade and immigration, that would not be ominous at all. Because if he made every decision on trade and immigration "to benefit American workers and American families," he would decide to move in the direction of lower tariffs and import restrictions and fewer restrictions on immigration. Remember that "American workers and American families" includes pretty much all Americans, including those who gain from buying cheap imports (which, by the way, is all of us) and those who gain from hiring cheaper labor. The fact of gains from trade and immigration is not controversial in the economics literature. What makes this statement ominous is that Trump doesn't understand trade.

What's ominous is that economists like this don't understand ordinary families problems and the effects on politics in a representative democracy. This election was unusual in that the establishment of neither party was able to prevail precisely because they were not paying attention to this. This is the reason for Brexit, too, and it is also the reason for the disintegration of the Eurozone and the rise of the right in Europe.

Why these pundits don't get is that immigration is not an economic issue as much as a political one and the embedded labor in imports is ersatz immigration.

"Build the wall" is symbolic of this. As I recall, Lou Dobbs was the first to pick up on this, although it may have been Pat Buchanan that was first. Both was mocked for it as was Donald Trump, but DJT parlayed it to victory — unless you believe the lame excuse that "Putin did it."

These establishment types are clueless about reality and can only see the world through their models based on restrictive assumptions that make them worthless in application to political economy and policy formulation.

Econlog
Ominous Inaugural Addresses

David Henderson, research fellow at Stanford University's Hoover Institution and is also associate professor of economics at the Naval Postgraduate School in Monterey, California