Paul Krugman Profile picture
Jul 30, 2019 14 tweets 3 min read Read on X
OK, obviously I need to weigh in on Elizabeth Warren's trade proposal. I've been a huge fan of her plans so far. This one, not so much, although some of the critiques are overdone 1/ medium.com/@teamwarren/tr…
The truth is that this would have been a bad and destructive plan if implemented in, say, 1980. At this point it's still problematic, but not disastrous (this is going to be a long tweet storm) 2/
Background: the way we currently do trade negotiations is that professionals negotiate out of public view, but with input from key business players. Then Congress gets an up or down vote on the result 3/
This can sound like a process rigged in favor of special interests. But it was created by FDR, and its actual intent was largely the opposite. It took away the ability of Congresspeople to stuff trade bills with goodies for their donors and districts 4/
And while business interests certainly got a lot of input, it was set up in a way that set different groups against each other — exporters versus import-competing industries — and this served the interests of the general public 5/
Without this system we wouldn't have achieved the great opening of world markets after World War II — and that opening was a very good thing overall, especially for poor countries, and helped promote peace 6/
So what has changed? The key point is that the system pretty much achieved its goals; we're a low-tariff world. And that has had a peculiar consequence: these days "trade negotiations" aren't mainly about trade, they're about intellectual property and regulation 7/
And it's not at all clear that such deals are actually good for the world, which is why I was a soft opponent of TPP 8/ krugman.blogs.nytimes.com/2015/03/11/tpp…
So what Warren proposes is that we partially unravel the system FDR built, making trade negotiations more transparent and giving Congress a bigger role in shaping the deals. This sounds more democratic, but that's a bit deceiving 9/
Mainly it would substitute one kind of special interest distortion for another. That would have been a clearly bad thing when trade deals were actually about trade. Today, I think it's ambiguous 10/
Warren would also expand the criteria for trade policy to include a number of non-trade goals, like labor rights and environmental protection. Here again there are arguments on both sides 11/
On one side, the potential for abuse would be large — we could be slapping tariffs on countries for all kinds of reasons, turning trade policy into global power politics, which would be really bas for smaller, weaker countries 12/
On the other hand, there are some cases where trade policy will almost surely have to be used to enforce some common action. If we ever do act on climate change, carbon tariffs will be needed to discipline free riders 13/ krugman.blogs.nytimes.com/2009/06/29/cli…
Overall, this is the weakest Warren plan so far. (Still waiting to hear from her on health care! Harris has taken point there, and done it well) But it's not bad enough to change the verdict that she's the strongest contender on policy grounds 14/

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More from @paulkrugman

Jun 13
This was a bit cryptic, so a quick explanation 1/
Imports are about 14 percent of US GDP. Federal income tax revenue (not including payroll taxes) is about 8 %. So you might think replacing it would require a tariff rate of 8/14 or around 57 percent. But ... 2/
Tariffs would raise the cost of imports to consumers, so we'd import less, which would mean you need a higher tariff rate. But this reduces imports further, meaning a still higher tariff, and so on 3/
Read 6 tweets
May 21
The Fed survey of economic well-being is out; some changes at the margin, but the basic story remains that Americans say they're doing mostly OK, their local economy isn't too bad, but the national economy is terrible 1/ Image
Consistent with polling. Here's Quinnipiac on Wisconsin voters 2/ Image
And here's WSJ on swing states 3/ Image
Read 4 tweets
Feb 17
With the recent rise in consumer sentiment, time to revisit this excellent Briefing Book paper. On reflection, I'd do it a bit differently; same basic conclusion, but I think partisan asymmetry explains even more of the remaining low numbers 1/ briefingbook.info/p/asymmetric-a…
The Michigan sentiment index has two components: current conditions and expectations. It's kind of legitimate to have partisan diffs on expectations, if you think your party has better policies. It's the gap on current conditions that's startling 2/ Image
Michigan doesn't provide partisan breakdowns every month until 2017 (hence the limited range of that chart). A quick and dirty approach is to use annual averages, with whatever months they do provide for each year, which lets us push back to 2006 3/
Read 7 tweets
Feb 10
Recent economic news has been extremely good. But there's a strange meme among some D consultants that Biden shouldn't boast about it, because it seems out of touch — that people aren't feeling the good economy. But they are! 1/
The venerable Michigan survey has rocketed up lately 2/ Image
It's true that consumer sentiment is still weaker than you might expect given the economic numbers. But that's largely partisanship. Using Civiqs numbers, Democrats have more or less fully accepted the good news 3/ Image
Read 7 tweets
Feb 2
Immigration is looming larger in the campaign, partly because it's becoming harder for Republicans to run against Biden on the economy. But there's a strong case that immigration has been a key part of Biden's economic success 1/
Inflation has come down so easily in part because of strong labor force growth. How much of that growth can be attributed to foreign-born workers? All of it 2/ Image
Some people might look at that and say that foreigners have stolen 3 million jobs from Americans. But we have full employment, indeed a very tight labor market. Look at what the Conference Board survey says 3/ Image
Read 6 tweets
Jan 26
A tale of two inflation measures. Some analysts are still citing the blue line, when they should be citing the red line. This is professional malpractice 1/ Image
Using annual core CPI puts you way behind the curve, for 2 reasons. First, annual: even core CPI was 4.6 in the first half of 2023, 3.2 in the second half. Second, known lags in official shelter prices lagging far behind market rents 2/
So annual CPI creates a spurious impression of stubborn inflation, with a difficult last mile to cover. PCE puts a lower weight on shelter, and on a shorter-term basis tells us that we've already traveled that last mile 3/
Read 4 tweets

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