How can someone understand, but not understand, the same issue?

John Stossel puzzles me. When you first conclude he knows nothing about economics, he writes something spot-on. Then he follows up with ignorance about the same subject.

In that, he reminds of Paul Krugman, who alternately understands, then doesn’t understand, Monetary Sovereignty.

Stossel can do it in two sentences. Here is an article on Reason.com, the Libertarian version of QAnon. Look at the subhead.

Worry About Budget Deficits, Not Trade Deficits
Next year’s $1 trillion federal government budget deficit will bankrupt us. Trade deficits are trivial.

“Federal government’s budget deficit will bankrupt us.” 

Suddenly, the U.S. government will go bankrupt? After world wars, numerous recessions and depressions, now, when the economy is growing rapidly, the federal government is going bankrupt??

.

If Stossel wants to bet that next year’s budget deficit will bankrupt the U.S. government, I will put up every dollar I own that says Stossel is wrong. One wonders why someone, anyone, would make such a foolish statement and expect belief.

Being Monetarily Sovereign, the U.S. government cannot run short of U.S. dollars. Increased federal deficit spending is necessary for economic growth. GDP=Federal Spending+Non-federal Spending+Net Exports

Former Federal Reserve Chairman, Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

I suspect Stossel knows he’s wrong, so I’m guessing he hasn’t moved to another country or exchanged all his U.S. dollars for another currency in advance of a mythical U.S. bankruptcy.

He’s just promulgating the usual Libertarian BS that has been wrong for at least 84+ years and will continue to be incorrect during his lifetime and beyond.

But wait. He also says, “Trade deficits are trivial.” In that, he is correct.

A trade deficit merely means we give other nations some of the plentiful U.S. dollars we create at the touch of a computer key, and in return, we receive valuable and scarce goods and services.

I run trade deficits with my local Costco and with my cleaning lady. I don’t feel bad about it, though I don’t even have the government’s infinite ability to create dollars.

The more money I have, the more stuff I can buy. The federal government has infinite money.

Maybe Donald Trump is such a powerful communicator and pot-stirrer that other countries, embarrassed by their own trade barriers, will eliminate them. Then, I will thank the president for the wonderful thing he did. Genuine free trade will be a recipe for wonderful economic growth.

But I fear the opposite: a trade war and stagnation—because much of what Trump and his followers say is economically absurd.

“What Trump and his followers say is economically absurd”? Who could have guessed that MAGAs know so little? Could it be possible that QAnon, Fox, Alex Jones, Marjorie Taylor Greene, Tucker Carlson, and Donald Trump are not reliable sources?

“(If) you don’t have steel, you don’t have a country!” announced the president.

Lots of things are essential to America—and international trade is the best way to make sure we have them. When a storm blocks roads in the Midwest, we get supplies from Canada, Mexico, and China. Why add roadblocks?

Steel is important, but “the choice isn’t between producing 100 percent of our steel (and having a country) or producing no steel (and presumably losing our country),” writes Veronique De Rugy of the Mercatus Center.

Trump uses the “you don’t have a country” meme for everything. “If you don’t have a steel industry, you don’t have a country.” “If you don’t have a border, you don’t have a country.” “If you don’t have a wall, you don’t have a country.” “If you don’t have a military, you don’t have a country.” “If you don’t have a strong military, you don’t have a country.”

These are a few of his nonsense statements about the end of America. Ms de Rugy’s response was correct.

Today, most of the steel we use is made in America. Imports come from friendly places like Canada and Europe. Just 3 percent come from China.

Still, insists the president, “Nearly two-thirds of American raw steel companies have gone out of business!”

There’s been consolidation. But so, what? For 30 years, American steel production has stayed about the same. Profits rose from $714 million in 2016 to $2.8 billion last year. And the industry added nearly 8,000 jobs.

Trump loves to cherry-pick, twist, and outright lie about statistics to make his point. A day later, he’ll say the opposite. His followers will swoon at each new version despite its incompatibility with what Trump said yesterday.

Trump says, “Our factories were left to rot and to rust all over the place. Thriving communities turned into ghost towns. You guys know that, right?”

No. Few American communities became ghost towns. More boomed because of cheap imports.

It’s sad when a steelworker loses work, but for every steelworker, 40 Americans work in industries that use steel. They, and we, benefit from lower prices.

Right again, John. Wrong again, Donald.

Trump touts the handful of companies benefiting from his tariffs: “Century Aluminum in Kentucky—Century is a great company—will be investing over $100 million.”

Great. But now we’ll get a feeding frenzy of businesses competing to catch Trump’s ear. Century Aluminum got his attention. Your company better pay lobbyists. Countries, too.

After speaking to Prime Minister Malcolm Turnbull of Australia, Trump tweeted: “We don’t have to impose steel or aluminum tariffs on our ally, the great nation of Australia!”

So, the purpose of tariffs is . . . what? To punish our enemies? To reward our businesses? Or simply increase prices for the American consumer.

Economies thrive when there are clear rules that everyone understands. Now we’ve got “The Art of the Deal,” one company and country at a time.

I understand that Trump, the developer liked to make special deals, but when presidents do that, it’s crony capitalism—crapitalism. You get the deal if you know the right people. That’s what kept most of Africa and South America poor.

But Trump thinks trade itself makes us poorer: “We lose … on trade. Every year, $800 billion.”

Actually, last year’s trade deficit with China was $375 billion. But even if it were $800 billion, who cares? All a trade deficit shows is that a country sells us more than we sell them. We get the better of that deal. They get excess dollar bills, but we get stuff.

Right on, John. We have the infinite ability to create dollars by pressing computer keys. The U.S. government can send dollars into the economy whenever it wants to.

Former Federal Reserve Chairman Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

But we don’t have the infinite ability to create stuff. So, trading dollars for stuff is a great deal for us.

Sadly, when the U.S. government does it, the Libertarians wrongly complain about federal deficits and debt. I wonder whether Stossel will hear about this from his Libertarian pals.

And now we come to the usual Libertarian BS:

Real problems are imbalances like next year’s $1 trillion federal government budget deficit. That will bankrupt us.

It hasn’t happened. It can’t happen. It won’t happen. It’s just that incredible fearmongering by people who know better and should stop now.

Trade deficits are trivial. You run one with your supermarket. Do you worry because you bought more from them than they buy from you? No. The free market sorts it out.

Trump makes commerce sound mysterious: “The action I’m taking today follows a nine-month investigation by the Department of Commerce, Secretary Ross.”

But Wilber Ross is a hustler who phoned Forbes Magazine to lie about how much money he has. Now he goes on TV and claims, “3 cents worth of tin plate steel in this can. So if it goes up 25 percent, that’s a tiny fraction of one penny. Not a noticeable thing.”

Not to him maybe, but Americans buy 2 billion cans of soup.

Political figures like Ross—and Trump—shouldn’t decide what we’re allowed to buy. If they understood markets, they’d know enough to stay out of the way.

Like so many of the people Trump hires, Ross was, shall we say, a questionable character, with many, many claims against his honesty.

The combination of Libertarianism and its attendant economic ignorance, together with economic dishonesty leads to bad (for America) decisions. Cut federal spending and we’ll have the bankruptcy Stossel and the Libertarians predict.

As for John Stossel, he still puzzles me.

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY