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Is Protectionism the Real Problem?


by Anthony J. Ogorek Ed.D., CFP™

This week Barron’s cover story opined that the presidential candidates may be killing the markets. We will not reprise the article but offer our thoughts on why it makes sense to pay attention to much of the senselessness during this presidential primary season, because, to paraphrase James Carville, “you cannot say that what politicians do is insignificant.”

What we are witnessing in the media may appear to be a circus; however, the lack of understanding of basic economic issues is just breathtaking. There is a significant strain of candidates who are promoting protectionist policies. Trade wars help no one since they tend to be a race to the bottom. One of the main contributors to the Great Depression was the impingement of trade. Protectionism is even more deadly today since the world is so interdependent.

The argument for protectionism is that good paying jobs are leaving the U.S., causing a decline in middle class living standards. There are two points here: first, the benefit of foreign trade as well as offshoring of jobs in certain industries is that most consumers pay significantly less for their goods than if they were made exclusively in the U.S. I have yet to meet anyone who was willing to pay more for anything they buy, in order to save domestic jobs.

The most disturbing part of protectionism to me is that it obscures what the real problem has been for America for the past few decades: the economy has simply not grown fast enough to meet the needs of the American public. The reasons for this are many, some which can be controlled, and others not. However, tax policy and regulation are significant determinants of how well the economy performs. They are the rules by which all businesses play. They may not make or break the economy, but they can produce a drag on growth that can diminish the quality of life for all of us.

The nastiness in politics today is an unfortunate sideshow that distracts us from what really needs to be talked about: who has a solid economic plan that can lift our economy out of the doldrums? The candidate who can pull this off should win.


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