Economy

Krugman Destroys the 'Junk Economics' of Trump — And Romney

Mitt Romney's Trump attack was rich considering his own spotty history.

Photo Credit: via YouTube

Paul Krugman explores the rift in the Republican Party that was exposed by Mitt Romney's strongly worded attack on Donald Trump in Monday's column, and finds that, surprise!, both men are "talking nonsense"  when it comes to economics.

On the bright side, at least they are having a real debate, unlike the reality show embarrassments that have passed for debates during the Republican primaries.

Trump earned Romney and other members of the Republican establishment's ire by deviating "from free-market orthodoxy on international trade," Krugman writes.

Attacks on immigrants are still the central theme of the Republican front-runner’s campaign, but he has opened a second front on trade deficits, which he asserts are being caused by the currency manipulation of other countries, especially China. This manipulation, he says, is “robbing Americans of billions of dollars of capital and millions of jobs.”

His solution is “countervailing duties” — basically tariffs — similar to those we routinely impose when foreign countries are found to be subsidizing exports in violation of trade agreements.

Mr. Romney claims to be aghast. In his stop-Trump speech last week he warned that if The Donald became president America would “sink into prolonged recession.” Why? The only specific reason he gave was that those duties would “instigate a trade war and that would raise prices for consumers, kill our export jobs and lead entrepreneurs and businesses of all stripes to flee America.”

This is pretty funny if you remember anything about the 2012 campaign. Back then, in accepting Mr. Trump’s endorsement, Mr. Romney praised the businessman (who was already a well-known “birther”) as someone with an “extraordinary ability to understand how our economy works.” But wait, it gets better: at the time, Mr. Romney was saying almost exactly the same things Mr. Trump is saying now. He promised to — you guessed it — declare China a currency manipulator, while attacking President Obama for failing to do so. And he brushed off concerns about starting a trade war, declaring that one was already underway: “It’s a silent one, and they’re winning.”

More important than Mr. Romney’s awkward history here, however, is the fact that his economic analysis is all wrong. Protectionism can do real harm, making economies less efficient and reducing long-run growth. But it doesn’t cause recessions. He spends the remainder of his column clearing up lingering confusion about protectionism and the Great Depression, declaring that protectionism was a result rather than a cause of the downturn. Actually, if one policy did cause the Depression, it's the one that the other genius in the race, Ted Cruz, advocates restoring, the good ole gold standard. So it seems there is plenty of nonsense to go around in the GOP.

 

China's and the rest of the world economic woes these days are a cause of concern, Krugman concludes, but untangling the problem would require honest thought, without the xenophobic ideas that foreigners are the cause of all of our problems.

 

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