11 March 2016

Trump-Schumer 2016? Both parties wrong about trade


How about this for a ticket — Trump-Schumer? That would be a pairing of Republican Donald Trump for president and Democrat Charles Schumer for vice president. It’s the whimsy that a New York Sun editorial used to highlight the ironies of Trump running for president on the Republican line while trumpeting, in trade protection, an idea lately associated with the Democrats.

It’s ironic, to put the best face on it, to read of all the Democrats dismissing Trump as a know-nothing when the Democrats are the party more associated with protection. Senator Schumer, who is in line to lead the Democratic caucus in the upper house, has been over the years particularly egregious on this head.

Back in 2004, Schumer co-wrote a New York Times op-ed entitled “Second Thoughts on Free Trade.” Schumer’s co-author was none other than a firebrand of the far right, Paul Craig Roberts, assistant treasury secretary under President Reagan. Eventually Roberts broke from the supply-side movement, and his emergence with Schumer was, in effect, but one of the announcements.

They wrung their hands over how America was “entering a new economic era” in which “any worker whose job does not require daily face-to-face interaction is now in jeopardy of being replaced by a lower-paid, equally skilled worker thousands of miles away.”

Schumer and Roberts blamed “multinational corporations, often with American roots, that are cutting costs by shifting operations to low-wage countries.” They reckoned that “most economists want to view these changes through the classic prism of ‘free trade,’ and they label any challenge as protectionism. But these new developments call into question some of the key assumptions supporting the doctrine of free trade.”

That kind of thinking prompted the Sun to start referring to the Senator from New York as “Smoot Schumer.” It’s a reference Reed Smoot, the five-term Republican senator from Utah, who with another Republican, Congressman Willis Hawley, won passage of the Smoot-Hawley tariff that helped precipitate America into the Great Depression.

The Depression helped cure the Republicans of their protectionist urges only to give the disease to the Democrats. So the Trump campaign is muddying the waters, particularly since he’s also making a megillah of currency manipulation. This is another Schumer obsession (he got the Senate to pass an anti-manipulation measure last year, though it didn’t make it into law — owing to the arch Republican Barack Obama).

Given all this, the Sun suggested, Trump and Schumer are “made for each other.” The Republicans, it noted, have “more principled, less xenophobic answers to the problems” on which Trump and Schumer “are resorting to demagoguery.” The GOP, the Sun noted, would drop “punitive American tax rates and welcome home trillions in capital being parked overseas by American corporations.”

That would incent Yank corporations to invest at home, while the best thinkers in the GOP — Senator Ted Cruz, for example, but by no means he alone — could work on restoring a proper monetary system. This would involve, among other things, increasing congressional oversight of the Fed and repealing Humphrey-Hawkins, the law that mandated the Fed take on managing unemployment.

Cruz himself has called for the return, ideally, to a currency tied to gold, ending the era of fiat money that began in 1971, when the United States defaulted on its obligations under the Bretton Woods system and closed what was known as the “gold window.” Trump’s talk of currency manipulation suggests he sees the illogic of the fiat era but is unclear in respect of what to do about it.

Could he turn away from the protectionist path? He has several times publicly praised the economist Lawrence Kudlow and suggested that he’s working on a Trump plan. Kudlow is one of the clearest thinkers on the scene — and most experienced. He was one of the first to use the label “Smoot Schumer” to lampoon the Democrat’s protectionism. Maybe he will be the adviser to steer Trump toward a more logical running mate.

Seth Lipsky is editor of the New York Sun.