American Account: We now know the election’s loser — free trade
One thing has changed in the battle for the presidential nominations. Until now, all eyes were on the Republican side, both because it became clear early on that Jeb Bush’s $100m war chest could not buy the nomination and because Donald Trump proved a master at garnering media attention. In the Democratic race, Hillary Clinton was considered a certain winner over socialist Bernie Sanders, making that contest a bore. Then came Sanders’s victory in Michigan, in the course of which free trade was consigned to the dustbin of history, a phrase with which Sanders, who honeymooned in Russia, is familiar but for obvious reasons chose not to deploy.
According to some estimates, Michigan has lost about 150,000 manufacturing jobs because of the North American Free Trade Agreement (Nafta). Blame it on the then-president, Bill Clinton, who signed the trade pact into law in 1993. The auto industry was decimated not only by Mexico but by Japan, and misrule by Democratic liberals drove Detroit to bankruptcy. The city was once home to 1.8m people and the motor industry, the pride of the nation’s manufacturing sector. Then came competition from overseas. Jobs disappeared, the population fell to 700,000, and the average house price sank to about $6,000.
But Michigan voters have not become socialists. The majority were simply unprepared to vote for anyone called Clinton, the name of the destroyer of the state’s manufacturing sector. Hillary’s husband brought ruin, and voters would not return him to the White House, even as First Man. No matter that she is opposed to President Barack Obama’s legacy-seeking Trans-Pacific Partnership (TPP) and last week, in a debate with Sanders, burnished her shiny new protectionist credentials in preparation for Tuesday’s primaries in Illinois and Ohio, where free trade is unpopular. The rust may be coming off the Rust Belt as the jobs picture brightens, but the memory of the suffering lingers.
Cut through the smoke from the gunfire of the candidates’ debates, and we see much of a muchness.
• All candidates are to varying degrees protectionist, and so is a majority of Congress. Trump would do unspecified bad things to companies taking jobs overseas and build tariff barriers higher than his wall with Mexico to disadvantage currency manipulators. Clinton would charge companies that move their headquarters to lower-tax jurisdictions an “exit fee” geared to the amount of tax relief they received while resident in America. TPP RIP.
• All candidates are to varying degrees hostile to the financial community, with Sanders calling for a break-up of the big banks and jail time for malefactors of great wealth, as well as a tax on financial transactions to fund his education plan. Trump is hostile to hedge fund managers and their special tax treatment, while Clinton, more sensible on this as on many other issues, is calling for reforms that include placing insurance-style burdens on banks proportionate to their threat to the stability of the international financial system.
• All candidates are to some extent dissatisfied with the healthcare system, with all Republicans calling for repeal and replacement of Obamacare, Sanders wanting to convert it into an NHS-style system, and Clinton looking to repair what she believes are its flaws.
• All candidates want to ease the cost of higher education. Sanders would offer free tuition at public universities at an annual cost of $75bn. Clinton says: “No family and no student should have to borrow to pay tuition at a public college or university. And everyone who has student debt should be able to finance it at lower rates.” Trump says student loans are “one of the only things the government shouldn’t make money off — it’s terrible that one of the only profit centres we have is student loans”. Details to follow — maybe.
There are two important differences among the candidates. First, Clinton is calling for a de facto ban on fracking and for the nation to convert to 100% renewables to fight global warming, while Republicans promise to remove regulations on the fossil-fuel industries and end efforts to prevent climate change, which they deny is occurring. That may be a hard sell in Tuesday’s primary in often-flooded Florida.
Second, all Republicans propose lowering the tax burden on wealthier Americans, the theory being that this cut will stimulate sufficient growth and generate tax revenues to pay for itself while creating millions of jobs. Ted Cruz is the most radical reformer: he would have a 10% flat income tax rate and substitute a 16% VAT-style tax for all corporate taxes. Sanders and Clinton would increase the burden on the wealthiest to finance infrastructure improvements and a variety of benefits for low and middle earners. No one talks very much about the national debt, now at $19 trillion and rising.
And none of the candidates sees fit to remind voters of the wisdom of our Founding Fathers, who erected a system of checks and balances that will require them to persuade Congress to make an honest man or woman of them by enabling them to deliver on their promises. What comes out of the legislative sausage factory may be far different from what went in.
We will, of course, know more on Tuesday, when more than 350 delegate votes are up for grabs, most of them in winner-takes-all states such as Florida and Ohio. Then the fun heads north, to regions less favourable to Cruz, and to states in which Trump’s typical 40% share of the vote earns him 100% of the delegates. The so-called Republican establishment is hoping that Cruz and John Kasich can deny Trump a majority, allowing party regulars to cobble together support for some compromise candidate at the national convention in Cleveland in July. In which case the millions Trump has brought to the voting booths for the first time will storm out, sending the Clintons back to the White House. Unless, of course, Hillary’s misuse of emails results in an indictment, which is why some call this an “FBI primary”.
Irwin Stelzer is a business adviser
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