It’s not the economy; it’s the stupidity

Not long ago, one of my readers complimented me on offering logical arguments on a variety of topics without resorting to ad hominin attacks. Is calling someone ignorant or stupid an ad hominin attack?

I learned long ago that, while often thought of as synonymous, stupidity and ignorance are different. Ignorance is a lack of knowledge, which need not be pejorative. It becomes stupidity, however, when it is allowed to persist despite an awareness of its detrimental consequences. I’m afraid Trump’s ignorance of basic economics has transcended into stupidity; and unfortunately, almost the entire cast of Congressional Republicans suffers from the same affliction.

I’m restricting my attention to Trump’s tariff policy, which is based on the fallacious claim that, somehow, the US has been treated badly by our trading partners – i.e., that we’ve been suffering from unjust and unfair trade practices imposed upon us by our trading partners without our consent. Nothing could be further from the truth, but if you say it often enough. . . . The reality is that free international trade – i.e., trade derived in the absence of any form of coercion -- has and always will be mutually beneficial. That is, unless both parties see themselves better off by trading, it won’t happen. This isn’t rocket science. Like much of economics, it’s just common sense. Somehow, however, logic and critical thinking about this issue appear to have no place in White House decision making.

Thus far, the tariff policy has crashed stock markets at home and abroad thereby wiping out trillions of dollars of wealth; and wealth matters. It’s an engine for consumption, investment, and innovation, and when wealth is eliminated, we all suffer. If that lost wealth isn’t recovered shortly, the decline we’ve experienced will have profound consequences.

Long ago, Milton Friedman introduced an important but hard-to-measure concept of permanent income. He hypothesized that households determine their level of consumption, not based on income they currently earn but rather based on a conceptual level of income that they see as likely being realized over a more extended period. The way I think of it, it’s not just income, but it’s also wealth and expectations about future wealth that play a role in determining spending levels for both households and businesses. Given the size of the stock market decline thus far and the broad dependence of equities in aggregate savings, it’s inconceivable that consumption and business investment won’t scale back in response to the diminished wealth that we’ve experienced – especially when coupled with the massive and indiscriminate downsizing of the federal workforce that’s happening concurrently.

A large portion of Americans feel palpably poorer today than they did a week ago, but even those with little or no exposure to the stock market will feel the brunt of the diminished wealth as businesses and consumers become more cautious about their spending habits; and that’s likely to persist for as long as Trump continues to hold the economic reins to our country without constraint.

Trump’s pronouncements that we’re experiencing short-term pain that will serve as a prelude to a booming economy is either lies or bluster, but they’re void of sound economic thinking. We’ve crossed a line when, as justification for raising tariffs, Trump fabricated contrived measures of tariffs that the rest of the world had been imposing on the US that have no basis in fact. Or consider the statement of press secretary, Karoline Leavitt, who declared tariffs to be tax cuts! How can you trust anything this White House has to say when such nonsense is put forth without any embarrassment, let alone correction.

Republicans in Congress ignore these developments and continue to insist on trusting Trump’s gut; but they do so at our peril. (I say Republicans, because Democrats get it, but without Republican crossovers, they’re powerless to do anything about it.) Just about the entire cast of Republicans in Congress has abandoned their oversight responsibility and in so doing enabled Trump to wreak havoc and destroy wealth without limitation. They bear responsibility for sitting by as he trashes our economy and degrades the critical norms and institutions that have largely been the basis of America’s exceptionalism. History won’t judge them kindly. What would you expect when stupidity supersedes critical thinking?