More on free trade and unemployment statistics

My blogging last night was a republication of my comments at Larry Kudlow's Money Politic$ blog. I made three follow-up comments tonight:

The first is to one of the regular trolls:

IMPT, it's amazing how you hurl accusations of "spinning" and "being selective" in citing data, then turn around and do the same thing yourself. That's pure hypocrisy, besides the fact that, even if Larry has a "weak" argument, you have none at all.

The fact remains that Bush's steel tariffs were incredibly mild. Bad in principle, yes, but they added only a few dollars to the end cost of a refrigerator, and $100 to a new car (about 0.6%). You can't say the same thing about your beloved Schumer and Graham's tariffs, which will target a lot of cheap foreign textiles and disproportionately affect the poor. You cannot compare Bush's steel tariffs to 27% across-the-board textile tariffs that will make BVDs, shirts and other Chinese-made cotton goods surge by far more than 0.6% in price.

By demanding "all right or all wrong," you're effectively comparing someone who stole an apple with Dennis Kozlowski (who today was finally convicted). Both are wrong, and nobody is arguing otherwise, but the degrees are far different.

You still cannot admit that Larry criticized the Bush tariffs. Remember that LKMP started only last year, so you can't rely on just here. So here you go, I'll do you a favor. Have you ever done a little research on what someone said, or do you always act like a New York Times op-ed writer?

"But as Newt Gingrich showed in 1994, it helps enormously when Republicans have a positive national message that clearly distinguishes them from Democrats. Going on the offensive with a pro-growth message and pro-investor tax cuts would draw more voters than a defense of second-year Bush mistakes -- a longer-than-expected list that includes tariffs on steel and a free-spending education bill." August 22, 2002

"What's more, after getting off on the wrong foot with steel and lumber tariffs, the administration won trade promotion authority in Congress and is now embarked on a tariff-ending global free-trade plan that has economic growth written all over it." January 2, 2003

"The steel tariffs were stupid, although they'll hopefully be repealed in the next few weeks." Nov. 11, 2003

"For some reason, the dollar fell on this good employment news. But not even an incredibly strong report on factory orders (non-defense capital-goods orders jumped 34 percent at an annual rate over the past three months) could halt the dollar's falling momentum. Nor could the president's decision to end steel tariffs (although this was a strong pro-growth move on its own merits)." December 12, 2003

You're the one spinning, "pal." You just don't have a clue about the accusations you hurl. Heaven help the justice system if prosecutors approached cases like you're doing here.

The second is to a very reasonable fellow, expanding on what I'd said about free trade:

Unbeliever, Walter Williams has said some enlightening things about why "unfair" trading practices are misnamed. I used to think retaliatory tariffs and other punitive measures were justified, but Dr. Williams puts it this way: if you and another person are at opposite ends of a canoe, and the other shoots a hole in his end, why do the same to your own? That's what retaliatory tariffs do.

Let the Chinese dump all the cheap textiles they want. Let the French sell us all the subsidized wine they want. (Although with the exception of Chateau Margaux, Lafite-Rothschild and other premiere cru, I prefer a more reasonably priced Australian wine, or a crisp New Zealand sauvignon blanc.) It doesn't hurt the buyer if foreign companies "dump" their products, facilitated by money from their own governments. That nation is only hurting itself: their citizens pay higher taxes to support the subsidies, and meanwhile we get goods for cheaper than we can make.

Some protest that a nation will raise its prices once our domestic industries are out of business, but this has never happened. It is true that our domestic industries have disappeared, but if you read what Ed Leamer of UCLA has written, technology destroys far more jobs than trade competition.

The situation is akin to this: an elderly person can hire one of two high school boys to mow the lawn. The first asks $X per hour. The second offers to take the job for $(X-1) per hour, even though that isn't worth his time; he can afford to because, secretly, his parents really want him to have that job, and they'll cover that $1 per hour difference. So the second boy is hired. The employer (who is a purchaser of labor) benefits. The hired boy, of course, benefits, but his family is left worse off.

Frederic Bastiat wisely wrote in his "Candlestick Petition" that if someone can sell us the same or equivalent product for a cheaper price, regardless of how, then the seller is giving us the difference as a "gratuitous gift." A gift, in the strictest sense, is something that you give to someone with no reciprocal benefit. If the Chinese subsidize their industries, they're only shooting their own end of the canoe. It still costs their total economy the same amount to produce the good, but we get the goods for less than we should. Why is that a bad thing?

The third is to someone more reasonable than IMPT, but he still believes the myth about people dropping out of the labor force:

LFC, what "average rate" are you talking about? From when to when? If you're talking about the current rate of 66.1%, that's a percentage, not an average. Right now we're beginning a new upswing in the labor rate, after a bottoming out early this year. Yet at the same time (check bls.gov) we still added net jobs to the economy. That's what's driving unemployment down, not people becoming "discouraged" and giving up finding work.

You should pull up more than just the default data. For example, look at everything, 1948 to today. Notice that we had lower civilian labor force participation during times of extremely low unemployment, like 1952. It goes to show that one indicator isn't the end-all-be-all, which I never claimed anyway. But it disproves Krugman's myth of "discouraged" workers.

monkeydarts is absolutely correct to question how can people afford to become "discouraged" and just drop out of the workforce. If they can afford to do that, and stay out of the workforce permanently (so excluding those who drop out of college because of job opportunities, get laid off, and return to college), they're not long-term Several decades ago, people couldn't afford to be discouraged. Today, with generous unemployment insurance benefits, people can afford to be picky about a new job. Check out this Econopundit entry, where Steve Antler discussed unemployment (including my comment that Krugman is confusing cause and effect).