OK, so work with me here [1].<\/p>\n
I’m not especially a fan of tariffs. Some of the arguments against them aren’t much better, though. If they go through, they are taxes, yes indeed. And if they don’t – if they are leverage, used to successfully change trade policy, or in some cases safeguard an industry we *don’t* need getting offshored [2], then not so much.<\/p>\n
But this goes way beyond tariffs, so again, bear with me [1]. <\/p>\n
Our economy has extremely healthy fundamentals – and some incredibly nasty endemic problems: <\/p>\n
So – what to do?<\/p>\n
Let me take you back. <\/p>\n
It’s 1982. I was still a Democrat. Probably kind of an obnoxious one, come to think of it.
And the economy had been a basket case for much of my childhood, and all my teenage years and adulthood to that point. The Oil Embargo led to the mid-seventies recession, which led to Stagflation, which led to the Malaise, and of course the Federal Government was spending money like crazy on the “war on poverty”, so inflation crushed economic activity; inflation peaked at over 12% when I was in high school. <\/p>\n
President Reagan’s Fed chief, Paul Volcker, cranked the federal funds rate to *20%*. Mobbed up loan sharks said “dial it back, bub”. It SLAMMED inflation to the mat – but unemployement *soared* to 10.8% [3]. It triggered a VERY sharp recession in 1982 – one that’s still “the big one” to a lot of us. <\/p>\n
The Democrat majority in Congress grew by 26 seats to a majority of *over 100 seats*. IF there’s been a Presidential election in 1982, Reagan would have lost by a landslide. <\/p>\n
But here’s the thing about recessions – if the fundamentals of the economy are healthy, then the sharper the downturn, the sharper the recovery, if you let it [4]. In a year, the economy was gaining almost 500,000 jobs *a month* (and the population was 34 the size it is today), and the longest peacetime boom in history, almost 25 years, kicked off. <\/p>\n
And Reagan rode that economy to the biggest landslide in history. And I made my first Republican vote, for Reagan (and my last Democrat one – for my Mom). <\/p>\n
So – what about last week’s orgy of tariffs?<\/p>\n
Maybe it just means Trump is stupid. Could be [5]. <\/p>\n
Or maybe the whole thing is:<\/p>\n
It’s not just me thinking this: my (Facebook) friend Glenn Reynolds wrote this<\/a> [7]…<\/p>\n\n\n\n