It isn't Halloween yet, and the election is more than a year away -- but the silly season for economic ideas is already well under way. In the face of a Herbert Hoover-like loss of 2.7 million jobs since the start of the current Bush Administration, politicians of both parties are filling the air with plans to spur employment, particularly in hard-hit manufacturing. Unfortunately, most of the ideas being floated could further drain the Treasury, raise interest rates, violate trade agreements -- and even destroy more jobs.
In a frantic bid to curry favor with anxious voters, pols are targeting enemies they say are stealing American jobs. A bill backed by House Armed Services Committee Chairman Duncan Hunter (R-Calif.) imposes a 65% U.S.-content requirement on weapons bought by the Pentagon. Yet both the generals and arms makers insist that a Buy America rule would only lead Europeans -- who supply lots of the components and purchase many of the high-tech weapons -- to stop buying. The result: shorter production runs, higher unit costs, and fewer jobs.
Other dubious ideas -- ostensibly aimed at eliminating America's $500 billion trade imbalance -- would hobble manufacturers. Democratic hopeful Senator John Edwards (D-N.C.) wants a higher tax rate on U.S. companies that move production abroad. But doing so can be crucial to selling into low-wage markets. Procter & Gamble Co. can't make Clairol in Cincinnati, ship it halfway around the world, and stay competitive in China.
The bipartisan Blame Asia movement wants other nations to help close the U.S. trade gap. Presidential candidate Senator Joe Lieberman (D-Conn.) would give Japan, Taiwan, South Korea, and China 90 days to stop "manipulating" their currencies or face higher U.S. tariffs. And on Oct. 20, President Bush jawboned Japanese and Chinese leaders to raise the value of the yen and the yuan.
Pricier currencies would boost import prices and get Americans to buy more Chicago and less Changsha. "But do we really want the Chinese to stop buying Treasury bonds, which is how they maintain their currency's rate?" asks William A. Niskanen, chairman of Washington's Cato Institute. A buyer's strike in Asia could lead to higher interest rates in the U.S.
Democratic Presidential candidates like to blame unfair trade practices for job losses. Howard Dean would renegotiate NAFTA to add stronger labor and environmental protections. Not a bad idea -- if he could persuade Mexico to give up its low-wage and low-regulatory trading edge. Representative Dick Gephardt (D-Mo.) has a deceptively simple-sounding idea: Use the World Trade Organization to impose an "international minimum wage." Never mind that no country would cede such sovereignty.
What's the common theme? They're all "window dressing," says former Labor Secretary Robert B. Reich. "They run the gamut from the cynical attempt to create the impression of doing something to things that will only at best have a marginal effect." And with the economy rebounding, they may be largely irrelevant. Still, whatever happens to the economy, expect the silly season to drag on -- at least till Nov. 2, 2004. He isn't often mentioned in the same breath as Ronald Reagan or Pat Robertson. But Howard Dean, the socially liberal former Vermont governor, has one thing in common with these conservatives: He's raising more of his campaign cash from small donors than from the big boys.
A report from the nonpartisan Campaign Finance Institute, affiliated with George Washington University, finds that 22% of Dean's money comes from givers of $1,000 or more, 54% from contributors of less than $200. No major candidate since Robertson (1988) and Reagan ('76, '80, and '84) has done that.
In contrast, two self-styled Democratic populists, trial lawyer-turned-senator John Edwards and staunch union ally Dick Gephardt, rely on big donors. Overall, 88% of Edwards' cash and 78% of Gephardt's come from high-dollar gifts. Even "man of the people" preacher Al Sharpton took in 84% from large donors. Buoyed by the eventual success of economic sanctions against Libya, Congress is gearing up to squeeze Syria for its support of terrorists and interference in Lebanon. The likely outcome: bans on most trade and all U.S. investment in Syria. But these unilateral sanctions are likely to be less effective than the multilateral restrictions on Tripoli.