Democratic Candidates Lean Too Far Left on Economic Issues
By Daniel Hartsoe ’09
News Staff Writer
With the primary season nearing its indecisive conclusion, candidates from both major parties have begun to spar over the economy. While Republican John McCain continues to advocate a policy of free trade abroad, Democrats Hillary Clinton and Barack Obama have started down the dangerous road to economic populism and protectionism.
Some of the populist rhetoric of both Clinton and Obama is primarily due to the still-unresolved race for the Democratic nomination. Since the base of the Democratic Party is generally composed of union workers and liberals skeptical of capitalism, both candidates have been forced to drift to the left on economic issues in order to remain competitive. Both Obama and Clinton have stepped up their criticisms of NAFTA (the North American Free Trade Agreement) and other free trade agreements of the Bush and former Clinton administrations, and have blamed the current economic downturn on “greedy” capitalists. This characterization of the private sector highlights some common misconceptions of our economy prevalent in the Democratic Party.
The first of these misconceptions is that the government should discourage, or even prohibit, American companies from “outsourcing” labor. Industrial workers concerned about losing their jobs and “concerned citizens” anxious about toxic toys from China have demanded that our free trade agreements should be amended to include increased labor and environmental standards for our trading partners. Some in the party, such as Senator Clinton, want to take a “time-out” from some of our trade deals to ensure that international competition is fair for all. These arguments are flawed for one simple reason: trade is always good for both parties involved. Since South Korea makes cars more efficiently than the U.S. does, and since the U.S. makes computers more efficiently than South Korea does, if we trade some of our computers for some of their cars, both nations will benefit. The same is true of domestic trade—if I want to build houses, and my friend Nick wants to farm, why should I have to grow my own food, and he have to build his own house? This would be both a restriction of our liberties and inefficient. Yet the Democrats support just this kind of restriction on international trade. Trade with a nation like South Korea would benefit both their consumers and our consumers, and would lead to economic growth for both nations. The next president must make decisions based on the interest of the whole country, and not just a key constituent such as industrial workers.
This leads to another misconception: that our trade deficit with China has hurt the economy. In any transaction, there is a balance of payments—one party gets something, and the other party gets something of a perceived equal value. Running a trade deficit means that U.S. consumers are buying more than U.S. workers (generally the same people) are producing—they are “getting more bang for their buck.” On top of this, foreign investment in the economy is greater than American investment in other countries. This is derived from the fact that, when America imports more than it exports, more dollars leave the country than enter. These dollar bills can only be used in the U.S., so citizens and businesses in foreign nations whose goods we buy invest their money in the U.S. economy. A trade deficit provides great values for consumers, and leads directly to long-term growth in the economy through investment.
These two common misconceptions of Democratic voters have steered the debate on trade policy away from the economically rational course and towards populism and protectionism. If Senators Obama and Clinton continue to act on their supporters’ fears, they will do no service to the economy as President.
