Cato Institute’s Simon Lester on China, Trade, and Tariffs

I had the opportunity to speak to Simon Lester of the Cato Institute. Mr. Lester (@SNLester) is an expert in international trade policy and international trade law. Don’t believe me? Well, he is the associate director of the Herbert A. Stiefel center for trade policy studies at the Cato Institute. He is a lawyer and has practiced law with a focus on international trade law. He has been a legal affairs officer at the appellate body secretariat of the world trade organization. In 2001 Mr. Lester founded the international trade law website worldtradelaw.net. He’s published several law journal articles regarding international trade. So I’d say he’s an expert on international trade policy and international trade law!

A few of the specific topics we discuss:

  1. What is fair trade? We use the phrase a lot, but we should be clear about what we mean.
  2. Are trade deficits good? Bad? Indifferent? Why?
  3. Is China actually abusive in its trade conduct?
  4. Are tariffs the best way to respond to China’s behavior?
  5. What other strategies and tactics does the US have at its disposal?
  6. Are there national security implications to being heavily reliant on a foreign power for our supply chain?

Check out the links below to listen to this episode wherever you listen to podcasts!

Here are some of the articles I read to get ready for this interview:

https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-confronting-chinas-unfair-trade-policies/

https://www.cato.org/publications/policy-analysis/disciplining-chinas-trade-practices-wto-how-wto-complaints-can-help

https://www.marketwatch.com/story/pompeo-criticizes-chinas-trade-practices-as-he-touts-us-investment-in-asia-2019-08-01

https://www.cato.org/multimedia/events/trade-pandemic-traditional-issues-new-concerns-optimal-policy-responses

Economic Effects of the Pandemic Shutdown with SMU Professor Nathan Balke

Photo by NeONBRAND on Unsplash

This episode of the Personal Responsibility Lawyer was especially fun because I got to reconnect with Nathan Balke, one of my favorite economics professors from my undergraduate days at Southern Methodist University.

Unless you’ve been under a rock, you know that a huge part of the US economy has been shut down by shelter in place orders in nearly every state. The idea behind this is to limit human interactions, which then at least theoretically limits the transmission of the novel coronavirus. It makes sense, at least in theory.

But what are the costs? And how do we make fiscal policy–both in Congress and at the Federal Reserve–that minimizes the long term damage of shutting down.

The purpose of this discussion isn’t to debate whether the economy should shut down, how long it should remain shut down, or whether the economic cost is worth the public health benefits. The purpose is to discuss how to anticipate and mitigate the economic damage that the shutdown has caused and will continue to cause.

(Links to this episode of the Personal Responsibility Lawyer podcast below!)

Re-Open the Economy: Stop Corona-Geddon

Photos from Unsplash by Edwin Hooper, Brian McGowan, and Thom Mast

We are currently a country obsessed with the novel coronavirus pandemic, and with good reason. Things are shut down and the government has hit the “off” switch on most of the economy. Many of the conversations are some variation on “wow this is crazy.” Some are pointing out that this can’t go on forever. And it can’t.

The daily briefings from President Trump and state governors focus almost exclusively on where we are now with respect to infections, deaths, and a few other evolving metrics. Someone must start planning how the economy reopens. Not only do we need a plan, we need to tell the American people what the plan is. The anxiety that is building and people will boil over soon. Closing the economy is more than an economic crisis. It’s a humanitarian crisis in which depression, addiction, suicide, child abuse, and literally God-knows-what-else are going to skyrocket. We can emphasize the danger of the virus all day, and the lives it will take; it’s not wrong to do so. But we must also recognize that shutting down the economy will also cost lives.

Too many are casting this as a false choice of either (a) shutting everything down until the virus is cured or controlled, or (b) going on as if COVID-19 doesn’t exist. It’s a false choice and we need to think through complex problems as if we have something above the sixth grade education.

With all of this heavy on my mind, I have developed a plan to reopen the American economy in a manner that seeks to balance the risks of the virus running rampant with the risks associated with a total economic shut down. We must be clear – there are risks involved, and some people are going to get terribly sick and some people are going to die. I don’t like that. I’m also clear-eyed enough to recognize and openly acknowledge that it will happen no matter what we do. That’s why pandemics are bad – because there are no good, easy, or happy solutions.

So, here’s the plan:

PART 1: Economic shut down. That’s where we are now.

  • We can sustain this for a while, but not long.
  • We have to massively ramp up production of PPE and ventilators, and create temporary hospital space to deal with a spike in COVID-19 serious illness. There are probably other items that get less media coverage that are also essential; I don’t claim this list is exhaustive.
  • While I’m generally against massive government spending, this is the exception. The government has to hand out money to businesses that it required to shut down.
    • I don’t like this huge spike in government spending, but I consider it the less bad of the options, which seem to be this huge spike in government spending, or a very real likelihood of an extended and horrible Depression. Either one will cause massive increases in the federal debt.
    • This doesn’t necessarily remain replace all of the revenue of the closing businesses, but enough to keep them open and paying their employees and contractors. Businesses are simply not going to be profitable while shut down, but we have to keep them from going under so that they cannot resume business when we can reopen the economy. Congress kind of did this, but they also threw in a lot of stupidity just so we don’t forget who they really are.
  • During the shutdown of Part 1 (this really should’ve started long ago, but where we are where we are) massive investments into testing capability must occur. In order for the re-opening to be sustainable when we get to that, we need the testing to help keep things under control.
    • Testing for infections, so everyone with symptoms can get tested.
    • Testing for antibodies so people can know if they have been infected and develop some immunity. This is important for later phases to determine who can go out safely in case of further outbreak. We don’t fully know the level of immunity acquired by having and overcoming an infection, but this will also help and determine how much immunity one acquires.

PART 2: Begin reopening the economy. I don’t believe it’s wise to simply flip the switch from “Off” to “on.” In Part 1, only “essential” businesses could operate. In Part 2, the scope of businesses that can operate can and must widen. Frankly, I’m not sure the best way to define the expanded scope – I need to bring in some higher levels of expertise than what I have a loan. I do have some thoughts though

  • Restaurants should probably be permitted to reopen on a limited basis, enforcing significantly lower occupancy rates to maintain greater distances between members of parties not dining together.
    • People should probably be encouraged to wear masks. I know there is some debate about the efficacy of masks. Asian countries have apparently embraced masks for some time under certain circumstances. At the least, it seems logical that a mask stops droplets from sneezes or coughs from spreading widely and causing the spread of infections. Wearing a mask out seems weird to me, but we are all going to have to get over some things.
    • Airlines and other air travel should probably largely reopen while enforcing greater-than-normal distancing, and perhaps masks.
    • People in specific high-risk categories based on age and/or underlying health issues should be encouraged to stay home to the greatest extent possible. Those who can reasonably telecommute for their jobs should do so. For those who cannot perform their jobs without close interactions with others (I’m thinking primarily of restaurant wait staff here, but I’m sure the list is much longer than that), we (i.e., the government should replace their income for them to stay home while the virus remains a significant threat.
    • Even if we view this only as a one-dimensional, money-based decision, the financial cost of replacing their incomes is probably not a lot greater than the cost of lengthy hospitalizations.
    • I do not believe that people in high-risk category should be forced to stay home against their will. I’m willing to except that different people have different risk tolerances, and different people react differently to being cooped up in their homes without much to do.
  • Schools: I am torn about when to re-open schools. There are several issues involved that make this one of the more complicated decisions in this plan. There are reasons to believe that, since kids seem mostly unaffected by COVID-19, having them together at school is a minimal risk. There is also some thought that children, while not affected directly, can be carriers and therefore opening schools exacerbates the spread. Aside from the spread of disease, a high percentage of health care workers have school age children, so when school is closed it’s hard for them to get to work, and we obviously need all hands on deck in this environment. So, in short, I need more expert guidance on this issue.
  • Churches: Because I’m concerned about government imposition on religious freedom, I’m inclined to permit churches to gather in Part 2. However, I would encourage large congregations not to hold normal services. If they insisted, I would encourage requiring several feet between non-related persons in the pews. Personally, I do not think I would attend a church during Part 2. I’m just very hesitant to impose my decisions—especially with respect to religion—on others.

PART 3: As the virus remains controlled, and if it remains controlled, we start to relax distancing requirements and permit all businesses to re-open without distancing requirements. This is a return to normalcy. We start ending programs paying people to stay home.

  • At any point – during Parts 2 or 3 – we may have to go back a step or even two if the virus starts spreading again.
  • Permit mass gatherings like sporting events, concerts, etc., i.e., things where you can’t really enforce social distancing rules.

I anticipate several objections to this plan, so I will address a few:

  • This plan may not save lives.
    • Yes. Sadly. It’s possible it will cost lives. Show me someone with a plan that has much certainty embedded, and I’ll tell you the one who devised the plan is some combination of dishonest and misguided.
    • To anyone who says we should shut down everything “if it just saves one life!” I say, well, what about the lives it costs? That’s a real question that should be somberly considered if we think seriously about difficult problems.
  • A lot of the things you tell us we should do are weird and they make us uncomfortable.
    • Absolutely. I agree.
  • Risk of government programs becoming permanent.
    • Yes, I agree wholeheartedly with this concern. We need political will on this issue when the crisis passes.
    • It’s rare for a government program to ever be truly temporary. It’s almost as rare for a government program to do anything but get bigger.
  • Government budget.
    • The budgetary issue troubles me greatly, to say the least. It was a huge problem before COVID-19, and this is making it a lot worse.
    • This is exactly why we shouldn’t already have been spending like drunk-for-decades sailors.
    • But for right now, we have a choice between two bad options – (1) spend a lot, or (2) likely economic Depression. Under either one of these scenarios, the budget will spin further out of control than it already is.

There also some caveats worth mentioning. The first caveat, referenced above, is that this is not a plan that makes everything better. We are dealing with a terrible, horrible, very bad situation. You don’t just take those and make everything nice and neat. You deal with problem. Everyone is going to suffer to some extent as a result of this whole thing. Please don’t take anything that I say—or that anyone says—as some sort of realistic Messianic promise. Also, please don’t take the fact that I put forward a plan

Second, this plan has LOTS of holes to be filled. It is the beginning of a plan, really. I devised it myself without consultation with experts, or even with other people thinking through the question (other than a couple of brief conversations). That means this is a good starting point, but not yet a well thought out and implementable plan. Putting more meat on the bones of this skeletal plan requires a lot more expertise needed than what I can access immediately.

Finally, my point in creating a plan—as someone who holds neither elected nor appointed office nor any position of authority to implement a plan to reopen the economy—is to try to get people thinking about solutions. Fortunately, I’m not the only one, and I’m far from the biggest voice thinking seriously about this. While I was putting pen to paper (literally, but I’m a bit old school), I stumbled across the plan published by the American Enterprise Institute a few days ago. You can find it here. It’s much more comprehensive than mine, but very similar. I haven’t yet gone through it with a fine tooth comb to determine if there are parts on which I disagree, but I have read enough to recommend it to you.

I eagerly anticipate feedback on what I’ve put together. Tell me where it’s wrong. Tell me what it’s missing. Help me refine it. If enough of us demand that the politicians start planning for this, they’ll start planning for it, and also announcing the plans so we can plan our lives accordingly.

Photo Credits for above: Photo by Edwin Hooper on Unsplash, Photo by thom masat on Unsplash, and Photo by Brian McGowan on Unsplash.

How Do We Re-Open the Economy After COVID-19?

We have never had such a huge part of the American economy shut down immediately, without warning, and without an end in sight. What do we do now? How do we get ready to re-open? How do we limit the damage to the economy without risking excessive coronavirus carnage? Has Congress’s relief package provided much relief? Rob Henneke of the Texas Public Policy Foundation and I dive into these questions and more.

What is Socialism, Anyway?

If you’re paying any attention at all, you have heard the word “socialism” thrown around a whole lot more in the last few years than ever before. At least, you’ve heard it more frequently without an expletive before it. In fact, the current leader in the contest for the Democratic Party nomination for President is a self-described and unapologetic socialist (that’s Bernie Sanders, Senator from Vermont, if you have been living under a rock for a long time–which I can understand but I don’t encourage!).

But what does that really mean? The vast majority of us—I think—abhor the idea of socialism, but do we really know what it is? And a common critique (for good reason) of socialism is that it will utterly destroy an economy, and/or lead to outright communism. Is that true? Wait! What IS communism?

And hold it: isn’t socialist paradise found in Norway and Denmark? Shouldn’t we learn from them and imitate?

I dive into these questions and more with James Harrigan and Antony Davies, both Distinguished Fellows with FEE, the Foundation for Economic Education. James is a political scientist who leads the Center for the Philosophy of Freedom at the University of Arizona. Antony Davies is an economics professor at Duquesne University. They have both written a lot of scholarly articles and also in the popular press about these topics.

Together Antony and James host the very popular podcast Words and Numbers. Follow Antony on Twitter. Follow James, too. Finally, they have a Facebook group for Words and Numbers.

I hope you enjoy this interview. If you do, please do me a massive favor and leave me a 5 star review on iTunes or Spotify or wherever you listen to podcasts. And if you really want to be my hero, Tweet it or post it on Facebook or whatever social media you prefer. Thanks!