From Salon: How did we get here? Largely by way of Bill Clinton, Barack Obama and the big GOP victories of 1994 and 2010

The author puts the 2016 election in some historical context - going back to 1992 when Democratic presidents started playing to the political middle. He argues the results - including Democratic embrace of free trade, which it had opposed - re positioned the party in a "neo-liberal" direction creating the opportunity for the Republican Party to get the support of the disaffected blue collar whites that seem to be the reason for Trumps victory.

- What is neo-liberalism?

Neoliberalism is a policy model of social studies and economics that transfers control of economic factors to the private sector from the public sector. It takes from the basic principles of neoclassical economics, suggesting that governments must limit subsidies, make reforms to tax law in order to expand the tax base, reduce deficit spending, limit protectionism, and open markets up to trade. It also seeks to abolish fixed exchange rates, back deregulation, permit private property, and privatize businesses run by the state.

Liberalism, in economics, refers to a freeing of the economy by eliminating regulations and barriers that restrict what actors can do. Neoliberal policies aim for a laissez-faire approach to economic development.

- Click here for the article.

Let’s begin by rewinding to 1992. After 12 long years of Ronald Reagan and George H.W. Bush, Bill Clinton was elected president with Democrats in charge of both houses of Congress. Trifectas like that had once been commonplace. Throughout most of American history, it was more common to have them than to have divided government. But from 1968 up until Clinton’s 1992 election, only Jimmy Carter’s four years in office had seen a unified government. So Clinton’s trifecta was a big deal, and he was ambitious to get things done. Unfortunately, one of those things was NAFTA.

In fairness, Clinton didn’t dream up NAFTA. Ronald Reagan did. He didn’t negotiate or sign it. Bush did. But he did get it passed through Congress, twisting scores of Democrats’ arms as a symbol of his “pragmatism” in moving the Democrats back to the so-called center. (It’s worth recalling that billionaire H. Ross Perot, who ran for president as a pragmatic centrist independent, opposed NAFTA as one of his central campaign planks.)

The irony here was twofold: First, in the real world, Democrats clearly occupied the political center during the Reagan-Bush years, dominating the House as well as a majority of state legislative bodies and retaking the Senate in 1986. What’s more, NAFTA was deeply unpopular with the Democratic base and their representatives. In the House roll call vote, Democrats opposed the treaty, 156 to 102, while Republicans overwhelmingly supported it, 132 to 43.

From the Texas Tribune: Trump Calls NAFTA a "Disaster." Texas Republicans Beg to Differ.

There's a split among Republicans on the agreement.

- Click here for the article.

Caught between the anti-globalist tirades of their presidential standard bearer and their state's close trade ties with Mexico, Texas congressional Republicans are straddling a tricky political line when it comes to talk of renegotiating the North American Free Trade Agreement.

Republican nominee Donald Trump called NAFTA a “disaster” and backed renegotiating the pact in a policy speech in Detroit on Monday. Barring a better deal, he said, the United States should withdraw from the 22-year-old agreement that lowered trade barriers between the United States, Mexico and Canada.

Texas grassroots conservatives also want to abandon the deal. The Republican Party of Texas' 2016 platform demands “immediate withdrawal from the North American Free Trade Agreement.”

But when The Texas Tribune reached out to each of the 27 Republican members of the Texas congressional delegation, not one joined in Trump's call for renegotiating the treaty. None agreed to be interviewed, three responded with written statements and the others either did not respond or declined to comment.

“NAFTA is responsible for increasing trade between Texas and Mexico by almost 110 percent since 2004,” Rep. Will Hurd, R-San Antonio, said in a statement.

From the NYT: On Trade, Donald Trump Breaks With 200 Years of Economic Orthodoxy

The author sees evidence that he wants the US to adopt mercantilism - the economic system that Britain used way back in colonial days. This marks a radical change in economic policy. It would also drastically increase governmental control of the economy.

- Click here for the article.

. . . Mr. Trump is bringing mercantilism back. The New York billionaire is challenging the last 200 years of economic orthodoxy that trade among nations is good, and that more is better.

He is well on his way to becoming the first Republican nominee in nearly a century who has called for higher tariffs, or import taxes, as a broad defense against low-cost imports. And there is a good chance he would face a Democratic opponent, Hillary Clinton, who has expressed fewer reservations about trade, inverting a longstanding political dynamic.

Among Republican standard-bearers, “There’s nobody since Hoover who talked this way about trade,” said I. M. Destler, a public policy professor at the University of Maryland and the author of “American Trade Politics,” a history. For most of the last century, Mr. Destler said, such skepticism about trade had been relegated to the fringes of the Republican Party.Continue reading the main story

Mr. Trump’s mercantilism is among his oldest and steadiest public positions. Since at least the 1980s, he has described trade as a zero-sum game in which countries lose by paying for imports. The trade deficit with China, which reached $366 billion last year, makes America the biggest loser. “Our trade deficit with China is like having a business that continues to lose money every single year,” Mr. Trump told The Daily News in August. “Who would do business like that?”

From Vox: The Trans-Pacific Partnership, explained

We won't be able to fully discuss the proposed deal, but a walk through these slides should give us some familiarity with it.

- Click here for it.

The Battle over the Tariff and the Second Party System

For 2305 students that have reached the section on political parties.

Here are links that describe the role that conflict over tariffs played party politics in the 19th Century. Remember that before the United States opted to support free trade, it protected its economy from, foreign competition - but not all sectors of the economy supported that policy.

- The Second Party System.
- The Whig Party.
- Slavery or Tariff?

The latest on the trade deal

Some random items for 2305 students. These might help put the bill making process in some context.

- Senate Hands a Victory to Obama on Trade Pact.
- Senate advances fast-track trade bill for Obama.
- Boehner: Trade process has been 'bizarre'.
- Ted Cruz Flips on Fast-Track.
- Obama's Fast-Track Bill Inches Another Step Forward.

From Michael Lind: Free Trade Fallacy

Lind walks through the transition from America's commitment to protectionism to free trade.

- Click here for more on Michael Lind.

- Click here for the essay.

And a brief snippet:

. . . the US protected and subsidised its industries while it was a developing country, switching to free trade only in 1945, when most of its industrial competitors had been wiped out by the second world war and the US enjoyed a virtual monopoly in many manufacturing sectors. The revival of Europe and Japan by the 1970s eliminated these monopoly profits, and the support for free trade of industrial-state voters in the American midwest and northeast declined. Today, support for free-trade globalism in the US comes chiefly from the commodity-exporting south and west and from US multinationals which have moved their factories to low-wage countries like Mexico and China. Like 19th-century Britain, 21st-century America tells countries that are trying to catch up: do what we say, not what we did.

Has the United States always promoted free trade?

In a word, no.

Until the end of World War 2 the United States actively protected domestic industry through tariffs in addition to a series of policies collectively known as the American School of Economics, which can be traced back to policies initiated by Alexander Hamilton.

The simple reason for the switch was that prior to the end of the war, the economy United States was still relatively small - albeit growing. Protecting emerging industries from larger, more powerful competitors was politically necessary. After the war - thanks to the needs of war production coupled with the destruction of its economic competitors - the United States was the world's dominant economy and did not have to worry about foreign competition. It was in a better position to turn the tables and dominate those economies that it has previously feared. It was also in a better position to establish and dominate international trading organizations in order to ensure that the rules it established would benefit domestic industry.

That said, it is still commonly pointed out that the United States still protects domestic industry, often due to the political pressures that those industries can place on elected officeholders. Economic policy is not set by economists immune from public pressure, but by politicians subject to removal from office in each and every election.

- 25 American Products That Rely On Huge Protective Tariffs To Survive.

For background:

- Economic Nationalism.
- American School.
- American System.
- Tariffs in United States history.

Some historical milestones - I'll add some commentary later:

Protectionist Period:

1789 - Tariffs of 1789.
1791 - Alexander Hamilton's Report on Manufactures.
1812 - War of 1812.
1816 - Tariff of 1816.
1828 - The Tariff of Abominations:
1842 - Tariff of 1842.
1844 - James Polk elected on a platform that opposed high tariffs.
1860 - Republican Party platform includes support for high tariffs.
1861 - The Morrill Tariff.
1905 - Taft-Katsura Agreement.
1913 - the Underwood Tariff - AKA - Revenue Act of 1913. The establishment of the income tax reduced the need for tariffs.
1922 - Fordney–McCumber Tariff.
1930 - The Smoot-Hawley Tariff.
1934 - Reciprocal Tariff Act.

Free Trade Period:
1944 - The Bretton Woods Conference.
1944 - World Bank.
1944 - International Monetary Fund.
1948 - General Agreement on Tariffs and Trade.
1986 to 1994 - Uruguay Round.
1994 - Marrakesh Agreement.
1994: North American Free Trade Agreement.
1995: World Trade Organization.

The Department of Commerce has a list of all the free trade agreements the United States has. It states that there are 14 in force with 20 countries.

- Click here for them.

What is free trade and what is the point of it?

I'll start posting now items relate to the Trans Pacific Partnership, as promised. Since the agreement promotes free trade, it's not unwise to define what that means and how it differs from alternatives.

Here's a quick definition from Investopedia:

The unrestricted purchase and sale of goods and services between countries without the imposition of constraints such as tariffs, duties and quotas.

Along with a justification of it:

Free trade is a win-win proposition because it enables nations to focus on their core competitive advantage(s), thereby maximizing economic output and fostering income growth for their citizens. Free trade enables nations to concentrate their efforts on manufacturing products or providing services where they have a distinct comparative advantage, according to the theory first espoused by economist David Ricardo two centuries ago. A free trade policy should enable a nation to generate enough foreign currency to purchase the products or services that it does not produce indigenously.

Free trade allows nations to concentrate on what they do best. It is then assumed that that increases overall wealth in the nation better than if it made everything itself. Countries that engage in free trade with other nations control their economies less than those that do. Free trade might then be best described as what it lacks than what it has. It protects its domestic businesses less than other nations meaning that it is less likely to impose protective tariffs and duties. But nations that engage in free trade are more likely to see outside forces disrupt internal institutions.

It is closely related to the ideas put forward in classical economics, which held that government should disrupt the economy as little as possible. The wealth of a nation had less to do with how much gold it had, or how much it did on its own, but in the value of the trade it could engage in.

Some definitions:

- Protectionism: These are trade policies which seek to protect domestic businesses and workers that might be harmed by external competition.
- Protective Tariff: A duty imposed on imports to raise their price, making them less attractive to consumers and thus protecting domestic industries from foreign competition.
- Tariffs: A tariff is a tax on imports or exports.
- Subsidies: A form of financial aid or support extended to an economic sector (or institution, business, or individual) generally with the aim of promoting economic and social policy.

For more:

- Library of Economics and Liberty: Free Trade.

What is the Trans-Pacific Partnership?

An effort to grant the president "fast track trading authority" for the Trans-Pacific Partnership failed in the United States House of Representatives Friday. This vote allows us to dig into number of related issues covered in GOVT 2305, so The following few posts will cover them.

Before digging into that, here's a good question:

But what is the Trans-Pacific Partnership?
- Vox: What is the Trans-Pacific Partnership?
- NYT: The Trans-Pacific Partnership Trade Deal Explained.
- OnTheIssues: Background on Free Trade.

What conflicts exist over the TPP?
- Common Dreams: TPP, Peace and Conflict: It’s Not about Trade, It’s about How We Trade.
- Huffington Post: Cutting Through the Noisy TPP Debate.
- Esquire: The Trans-Pacific Partnership Debate Hits the House.
- Washington Post: Is TPP trade deal a massive giveaway to major corporations?

From the NYT: Left and Right Align in Fighting Obama’s Trade Agenda

For our discussion of ideology - areas where each side works together. In this case the conflict over free trade seems to straddle parties:

- Click here for the story.

An odd marriage of convenience between liberal Democrats and Tea Party Republicans is squeezing President Obama on his ambitious trade agenda, forcing the White House and top Republicans to fight a two-front war on an international economic effort the president hopes to secure before he leaves office.

An alliance between the likes of Representatives Louie Gohmert and Dana Rohrabacher — two of the House’s most conservative members — and Rosa DeLauro and Louise Slaughter — ardent liberals — is unlikely enough. But as the political fringes expand on each end, they are challenging another strange-bedfellows alliance between Mr. Obama and Republicans like Representative Paul D. Ryan and Senator Orrin G. Hatch, who have joined together in a push to secure “fast-track” trade promotion authority before the administration completes a major trade agreement with 12 partners along the Pacific Rim.

For more on the Trans Pacific Partnership, click here.

The Energy Department approves liquid natural gas terminal in Freeport

Fracking has allowed the US to become an energy exporter. Japan - which is relying less on nuclear power due to problems associated with the tsunami - is expected to be a major consumer.

There's an interesting conflict over whether increasing natural gas exports is a good idea. Producers and free trade supporters are in favor of it, and environmentalists oppose it. But some petrochemical companies that use natural gas are concerned that increased exports will increase the cost of natural gas, a cost that will impact their business.

The story refers to the Energy Information Administration (see Wikipedia also) as a source for current gas prices and forecasts for natural gas production based on how many additional terminals are authorized. Wikipedia describes is as a member of the Federal Statistical System of the United States the "decentralized network of federal agencies which produce data about the people, economy, and infrastructure of the United States."

Their specific task of the EIA is the responsibility for " collecting, analyzing, and disseminating energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment."

- Here's information about the rulemaking process in the DOE.
- And here's the decision by the DOE to authorize the Freeport Terminal. They concluded that arguments that the LNG permit did not violate the public interest.

The story mentions the Senate Committee which oversees the Energy Department and offers this:

Senate Energy and Natural Resources Committee Chairman Ron Wyden (D-Ore.) said that the Energy Department “will be making export decisions on a case-by-case basis” in a way that is “consistent with my belief that a measured approach on exports will provide the greatest advantage for the U.S economy.” Wyden said the department should “assess the market impacts of each export decision after it is announced, to ensure American consumers are not harmed by large-scale exports.”

“This decision is a victory for those who believe free trade is good for the American economy,” said the committee’s ranking Republican member, Sen. Lisa Murkowski (Alaska).