Posted on 01/29/2009 7:22:27 PM PST by Crazieman
As if the Democratic Porkfest Bill didn’t do enough damage on its own to the long-term prospects for the American economy, the Washington Post reports that it could set off a trade war that would bring the global economy crashing, too. Democratic protectionists loaded up the bill with “Buy American” clauses that shut out foreign producers of steel and iron. Just as in the Depression, however, that will force other nations to close their markets — which will virtually recreate the Smoot-Hawley fiasco that made the Depression exponentially worse:
The stimulus bill passed by the House last night contains a controversial provision that would mostly bar foreign steel and iron from the infrastructure projects laid out by the $819 billion economic package.
A Senate version, yet to be acted upon, goes further, requiring, with few exceptions, that all stimulus-funded projects use only American-made equipment and goods.
Proponents of expanding the “Buy American” provisions enacted during the Great Depression, including steel and iron manufacturers and labor unions, argue that it is the only way to ensure that the stimulus creates jobs at home and not overseas.
Opponents, including some of the biggest blue-chip names in American industry, say it amounts to a declaration of war against free trade. That, they say, could spark retaliation from abroad against U.S. companies and exacerbate the global financial crisis.
This is the end result of the protectionist rhetoric of the Democratic campaign in 2008. And it’s not hard to see why they pursue it. Buy American is a slogan that practically guarantees popularity. What could be more patriotic than looking for the Made in the USA label, especially when taxpayer dollars are on the line?
Nothing, if you don’t mind killing the entire American export sector. We already have large trade deficits, thanks to our massive wealth transfers each year to oil-producing nations based on our unwillingness to pump our own crude. If we touch off a trade war, which this will almost certainly do as it violates all of our WTO and bilateral trade agreements, other markets will close their doors to American products, such as cars and technology. Instead of closing our trade gap, we will explode it, and even those oil imports could get retaliatory tariffs from our two closest trading partners, Canada and Mexico, our two largest foreign suppliers of crude.
We have done this before, and under worse circumstances, which is why this such sheer folly. The Smoot-Hawley tariff act turned a severe but recoverable recession and turned it into a generational depression. Instead of working cooperatively, the major trading nations had to respond to American penalties with more penalties, and the Buy American provisions of the New Deal entrenched those divisions, making recovery impossible. The rest of the world — Europe, Asia, Latin America — would likely shut out the US and trade amongst themselves, and we would lose decades of work in building American economic strength abroad.
America doesn’t need a trade war at this moment in time. We need to ensure our access to as many foreign markets as possible. Protectionism now will take us down a primrose path that we have traveled before, and the end result will be bread lines and 25% unemployment, and worldwide misery.
The real catch 22 of this story, is that republicans inserted demands in the defense bills for years of only allowing buy American. Now they want to whine about it!!!
we are going to get another 1-2 trillion ‘bailout’ and another stimulus this year. Thats about $4+ trillion in DEBT in one single year. Barry O will be President for 3 more of them.
This Presidency needs a title, and the Great Looting of America is mine.
The problem with all this Bailout stuff is that it is just cosmetic for the failed Global economy.
American made products are always a better buy. That money stays in America. When you buy foreign made products...that money is shipped out of America. That doesn’t take a PhD in economics to figure that out
Another big problem with all this Globalism is that most countries block American products from being sold...either thru VAT rebates to domestic producers...or floating currency (Communist China) to make domestic products artificially cheaper. Not only the US is dumped with foreign goods below market cost...US manufactures do not get sold in foreign countries.
In fact, the WTO allows countries to institute tarriffs thru the use of VAT rebates (something a Globalist like Morrissey will never admit...or is too ignorant to find out)
Its bad to use failed free trade deals to argue against the Obama bailout....the lack of merit of the Obama bailout is quite enough
More like the Obamapression
As an American exporter of manufactured goods the government has done damn little for me. I don't owe it anything.
Europe (the EU) is scared because any US effort to protect US products kills their VAT rebate scheme....used to keep US products out of the EU (by subsidizing EU goods thru VAT rebates).
This tarriff system is approved by the WTO..which is why they get away with it.
Actually, I seem to remember hearing the opposite recently: that in the time of Smoot Hawley, the U.S. exported far more than it imported compared to today.
So a trade war then might have hurt us more than a trade war today.
I’ve got a great idea:
If tarrifs on imports is a bad idea—let’s put tarrifs on our exports!
Mine would be "Meet the New Boss, Same as the Old Boss!"
Wow...excellent breakdown.
The Smoot-Hawley Myth is probably the biggest fraud perpetuated by the Free Trader-Globalist cabal.
It did not cause the Great Depression...nor continue it. In fact, it may have prevented the GD from getting worse
At most, trade was only 5% of the US GDP when Smoot-Hawley was enacted. Europe was such an economic basket case that trade between them and the US was slight.
There could be an argument that Smoot-Hawley may not have needed to have been passed...as trade was so small. However, the fear of Europe dumping cheap goods on an American market (when their economies were worse off) was enough to pass S-H
This Smoot-Hawley Myth...using it to argue against ObamaSocialism...is silly...kinda like deporting all Canadians because we have too many Mexican illegals
The issue is not so much one of consumers purchasing foriegn -vs- domestic products as it is one of the danger of retaliatory tariffs and trade barriers which close foreign markets to US products (causing businesses to fail and unemployment to rise). This, like the time of the 29 Crash is a very bad time to start a trade war.
“Those are interesting numbers and could be troubling to some I would expect.”
When the depression is in full swing they will sell it back to us at a healthy profit.
The place to be furring a depression is supplying a basic food producr.
My dad bought a bread route in Los Angeles in 1931 and had saved enough by 1936 to staet the business and build a 2400 sq ft. home in a wealthy part of Los Angeles.
There wasnt much trade going on when Smoot-Hawley was passed...Europe was still an economic mess after WW I...and Germany was floating in and out of economic chaos
Smoot-Hawley did nothing to cause or prolong the Depression....trade was minimal between the US and Europe
This Smoot-Hawley Myth has got to be one of the most aggregious sham’s ever proposed. This has come up only in recent times...esp when the current free trade deals started to look real bad
My great-grandfather made his mark during the depression through the infrastructure and WPA projects that were flooding NJ at the time, and did better in the 1930s than in the 1920s, when he first came here from Poland. Political connections and knowing “where the money was” instead of whining about how terrible everything was came in handy.
Food.
When-ever I think of the depression, I always think of hoarding food. I must have gotten that from my parents who went through it.
But, right now, I'm thinking of converting all my cash to silver, not silver certificates but, silver 'in-my-hand.'
The idea of the dollar just leaving the US and never coming back flies in the face of basic global economic reality. Maybe we should try "import substitution" a la Latin America from the late 1940s-mid 1980s and see where that gets us.
The "third way" leads to the third world.
” I’m thinking of converting all my cash to silver, not silver certificates but, silver ‘in-my-hand”
Keep your eye on what Mexicodoes in relation to silver,
They have gigantic reserves of the highest quality ore in the world and if they start to produce it to carry them through the depression they will keep the market on silver way below where it should be.
I didn't know that. Thanks for the input.
The past five quarters have seen 40pc of the world's wealth destroyed and business leaders expect the global economic crisis can only get worse.
By Edmund Conway in Davos
Last Updated: 5:42AM GMT 29 Jan 2009
Steve Schwarzman, chairman of private equity giant Blackstone, said an "almost incomprehensible" amount of cash had evaporated since the financial crisis took hold.
"Business will be very different," he added.
His comments came on a day of the World Economic Forum characterised by the gloom of its participants and warnings that the crisis will endure for some time. News Corp chief executive Rupert Murdoch kicked off the meetings by warning that the atmosphere was worsening – despite global economic confidence plumbing the lowest depths on record.
"The crisis is getting worse," he said. "It's going to take drastic action to turn it around, if it can be turned around, quickly. I believe it will take a long time."
[SNIP]
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