How Does a Trade War Help?
Trump's Tariffs Do Nothing to Address Americans' Real Concerns
Despite Trump’s surrender today on global tariffs, tremendous damage has been done to America, even if he succeeds in his goal to reduce our trade deficit, which seems highly unlikely. More importantly, none of Trump’s schemes address the fundamental issue for most Americans – America is too damn expensive. Just to be clear – it’s not toasters or T-shirts or toys that are too expensive. Most are made in China and are dirt cheap. The things that are too expensive are among most important in our lives – housing and health care.
Trump wants to bring manufacturing back to America. Good luck with that. And do we even want that? Manufacturing currently accounts for around 10% of our exports. Why? Because America is a huge consumer market and most of our manufactured goods are sold to our domestic market. If manufacturing came back to the U.S. (and it would likely take decades), American consumers would end up paying lots more for these goods. And it probably wouldn’t create many new jobs since robots would be doing most of the labor.
America’s middle class is shrinking and our working class is stretched thin not because of our trade deficit, but because the basics of life—housing and heath care - are increasingly out of reach. In 1960, median household income amounted to about a third of the typical home price. By 2022, income was about 17% of the typical home price. It wasn’t just homeownership that has been hit hard, renters are also struggling. Nearly half of renters pay 30% of their income for housing, while nearly a quarter of renters pay 50% or more.
The housing market is based, like any market, on supply and demand. Until the 1970’s, home construction was able to keep pace with population. But beginning in the ‘70’s, construction slowed. Today, we have about 425 homes per 1,000 people, compared with other developed countries that have as many as 600 per 1,000. Because we have built so few new homes, the supply cannot keep up with the demand for housing and prices have put most homes out of reach for many Americans.
Why did this happen and what can we do about it? The answer is that there are currently few incentives to build houses and lots of incentives to prevent new construction. Zoning restrictions, cumbersome permit processes, burdensome environmental regulations and NIMBYism have all contributed to the dwindling housing supply. While all these rules and regulations have a role to play, it is important to balance these interests against the crying need for more housing. There are many steps that the Trump administration could have taken to increase the supply of housing and make it less expensive – starting a trade war was not one of them.
The other big ticket item for Americans is health care, where costs have been skyrocketing and many families are one health crisis away from catastrophe. Despite excessive costs, Americans’ health is poorer than most develop countries, in part because many Americans delay or skip treatment because of the cost. So what should be done? Meredith Rosenthal, a professor at the Harvard Chan School of Public Health, offered a couple of solutions in a recent interview. Short-term solutions include government subsidies for copays, as well as capping prices that hospitals and providers charge.
However, the biggest threat of affordable health care, according to Rosenthal, is the consolidation of the health care industry. Big corporations buying up hospitals and physician practices creates medical monopolies which gives them the power to drive up prices. If the federal government used antitrust laws already on the books to limit the unlimited power of the medical monopolies, it could help reverse out-of-control pricing by reducing administrative costs, regulating drug costs and emphasizing preventive care.
Clearly, raising tariffs on our allies, as well as China, doesn’t do anything to address these pressing concerns of Americans. Despite Trump’s promises to bring down prices and help the middle class, his tariffs will only make life in America more expensive while ignoring the clear message from voters in 2024. Our country is facing trying times, which makes it even more important for Democrats to stand up for the real challenges facing Americans and against Trump’s waging a trade war based on phony economic theories.
Hoyt Hilsman is an author, journalist and Chair of the United Democratic Headquarters in Southern California