Economist Channel

An oped on tariffs, for Fox news here. That tariffs are bad is rather obvious to readers of this blog, but perhaps marshaling and digesting things we've known for 250 years is worthwhile.


In a remarkable achievement, President Trump has united the nation’s economists by proposing tariffs on imported steel and aluminum, tariffs designed to reduce imports of those goods. Tariffs are bad for the economy. Tariffs on raw materials, produced by machine-intensive dirty declining industries are worse. Trade is good.

Trade is good. Why? Follow the money. If China sells us, say, a solar panel, what does it do with the dollars? There is only one thing to do with dollars — buy American goods, invest in America, or buy our government debt. Oh, and we also get a nice cheap solar panel.

China might use the dollars to buy, say, wheat from Australia, so it looks like China sells us more than we sell them. But then Australia must use the dollars here in America. Dollars always come home to roost.  So how much more one country sells us than we sell them — the “bilateral trade deficit” — really is pretty meaningless.

The rest of the world sells us more than we sell them. But the rest of the world uses every cent of the extra dollars it gets from that trade to invest in the U.S. and to buy our government bonds. If we sell the whole world exactly as much as they sell us every year — in other words, if there were no overall U.S. trade deficit — we’re the ones who would have to start saving huge much larger amounts of our incomes in order to invest in U.S. companies, give mortgages to people to buy houses, and to fund the governments’ $1 trillion deficits.


Think of it this way: You run a huge “trade deficit” with the grocery store. Why not grow your own food? Well, you’re not very good at growing food. And if you do, the grocer will not have money to buy what you make, or to give to the bank to fund your mortgage.

So, trade is good. And tariffs? Tariffs are not good. Tariffs on steel hurt businesses that use steel, especially those that compete with imported products made of steel. Tariffs hurt consumers, who pay more for steel-using products. But perhaps the greatest damage is to the steel industry itself. Tariffs, like all protection, shield the industry from competition. And industries shielded from competition do not innovate, do not cut costs, do not make better products. Only when the Big Three faced import competition did they start to make better cars, and cut costs.

If it is good for each country to protect its businesses with tariffs, then it is good for each state to do the same, i.e. California should keep out those cheap Arizona surfboards. A key to U.S. prosperity is precisely our Constitution’s firm ban on state politicians’ desire to please local industries with protection. Until the EU came along, the U.S. was the world’s largest free trade area. Hint: Bigger is better.

Why is this so hard to understand? Tariffs, like all protection from competition, are great for the protected business and its workers, at least for a while. If you're a practical businessperson you think the way to get the economy going is to just to replicate for the economy what is good for your business, and hand out protection to everyone. But protection only helps one business at the expense of all the others, and at the expense of consumers, and the damage is worse than the gain. What is good for an individual business is not good, scaled up, for the economy as a whole. Business people and bankers turned policy makers miss that.

Tariffs, like other protections, also help visible, large, and politically powerful constituencies. The larger pain is spread throughout the economy, in ways most of us may not even notice in day-to-day living. But it adds up.

Some of the blame belongs to Congress. The trade laws invite protection. The standard for protection is only that the industry is hurt. Imagine if United Airlines could demand that Southwest pay tariffs – an extra tax at an airport – and in order to do so United needs only to show that Southwest might hurt United’s profits.

The “national security” clause under which the Trump administration is acting is weaker still. Even the defense department doesn’t want this tariff!

We pass populist laws, and then count on administrations not to enforce them. Well, President Trump may help here too, by acting on silly laws and forcing Congress to pass sane laws.

Perhaps some of the blame belongs to economists as well. The words “deficit” and “imbalance” make it sound like something is wrong with trade.

Tariffs do have one thing going for them however – they’re better than quotas! With a tariff, at least we can measure and limit the damage — steel will be 25 percent too expensive. But you can still buy it when you need it. Under a quota, in which countries are only allowed to sell a certain amount, the damage can be much larger and you never even know.

John H. Cochrane is a Senior Fellow of the Hoover Institution and an Adjunct Scholar of the Cato Institute.

Updates:

There is so much good stuff on trade, it's hard to know when to stop. A friend writes

"we blockade wartime enemies to stop the flow of goods, and levy tariffs on ourselves to do the same thing!"

A colleague catches me being mercantilist. What if the dollars stay overseas, he asks? The answer is, Great! We can print dollars cheaper than the Chinese can make solar panels. Working to make exports to buy imports is a cost not a benefit. And if China wants to tax its citizens to send us cheap solar panels, or steel, the proper response is a nice thank you card with flowers and chocolates.

I cannot resist the urge to notice that at the same time we are imposing sanctions on Iran, Russia and North Korea to ... stop them from importing things. So, we are doing to ourselves exactly what we are dong at great expense to these, to hurt them.

A friend urged me to read the comments on Fox. If economists want to understand what we're up against this is a good sobering read. The amazing thing is that most of the commenters seem not to be steel workers or steel executives. They genuinely believe that laws which will force them to pay a lot more for the benefit of a very few, and will actually lower their wages or eliminate their jobs, are a good thing. They might get that banning machines is bad, but if the exact same thing -- produce more at lower cost -- is labeled "China," they don't. The art of rhetoric is understanding your audience's frame of mind, and these comments are a good education for us. Alas, I think explaining trade to the public, which is a bit like explaining why yes the earth goes around the sun from a scientific point of view, is so boring that most economists don't bother. Me included, usually, I must admit.

Once per decade or so it is worth revisiting the famous 1930 economists' letter on Tariffs. (The link, at econjournalwatch.org, has a concise history and links to more.) 1028 economists -- a huge proportion of the number then around -- signed the following, urging President Hoover to veto the Smoot Hawley tariff.

We know how it turned out. No, we did not win that trade war. Well, not until about 1945.

What will this one lead to? I see some hope in that President Trump is at last uniting the country. As Greg Mankiw points out

How often do Jeffrey Sachs and the Wall Street Journal editoral writers agree?

Perhaps, as with DACA, the President using the existing law, which allows and even encourages widespread protectionism, this action will spur Congress to pass trade laws that require a bit more than vague "injury" to industry or "national security" fantasies. But I am straining to find a silver lining.

The darker possibility. Many administrations start with some policy victories -- judicial nominees, deregulation, tax reform -- and then over reach. This may be the start of over reach.

Rereading the letter, it is impressive for stressing simple truths that apparently remain mysterious to many even today. If we buy a good from overseas, the dollar must come back, either as a purchase of American goods or investment in American capital. Conversely that purchase or investment cannot happen if we do not allow foreigners to sell us things. Open trade is important to peace and stability, not just prosperity. It  stresses the final effects on people who end up paying more and working less, not just downstream producers.

Plus ça change, plus c'est la même chose.

The undersigned American economists and teachers of economics strongly urge that any measure which provides for a general upward revision of tariff rates be denied passage by Congress, or if passed, be vetoed by the President. 

We are convinced that increased protective duties would be a mistake. They would operate, in general, to increase the prices which domestic consumers would have to pay. By raising prices they would encourage concerns with higher costs to undertake production, thus compelling the consumer to subsidize waste and inefficiency in industry. At the same time they would force him to pay higher rates of profit to established firms which enjoyed lower production costs. A higher level of protection, such as is contemplated by both the House and Senate bills, would therefore raise the cost of living and injure the great majority of our citizens.

Few people could hope to gain from such a change. Miners, construction, transportation and public utility workers, professional people and those employed in banks, hotels, newspaper offices, in the wholesale and retail trades, and scores of other occupations would clearly lose, since they produce no products which could be protected by tariff barriers.

The vast majority of farmers, also, would lose. Their cotton, corn, lard, and wheat are export crops and are sold in the world market. They have no important competition in the home market. They can not benefit, therefore, from any tariff which is imposed upon the basic commodities which they produce. They would lose through the increased duties on manufactured goods, however, and in a double fashion. First, as consumers they would have to pay still higher prices for the products, made of textiles, chemicals, iron, and steel, which they buy. Second, as producers, their ability to sell their products would be further restricted by the barriers placed in the way of foreigners who wished to sell manufactured goods to us.

Our export trade, in general, would suffer. Countries can not permanently buy from us unless they are permitted to sell to us, and the more we restrict the importation of goods from them by means of ever higher tariffs the more we reduce the possibility of our exporting to them. This applies to such exporting industries as copper, automobiles, agricultural machinery, typewriters, and the like fully as much as it does to farming. The difficulties of these industries are likely to be increased still further if we pass a higher tariff. There are already many evidences that such action would inevitably provoke other countries to pay us back in kind by levying retaliatory duties against our goods. There are few more ironical spectacles than that of the American Government as it seeks, on the one hand, to promote exports through the activity of the Bureau of Foreign and Domestic Commerce, while, on the other hand, by increasing tariffs it makes exportation ever more difficult. President Hoover has well said, in his message to Congress on April 16, 1929, “It is obviously unwise protection which sacrifices a greater amount of employment in exports to gain a less amount of employment from imports.”

We do not believe that American manufacturers, in general, need higher tariffs. The report of the President’s committee on recent economics changes has shown that industrial efficiency has increased, that costs have fallen, that profits have grown with amazing rapidity since the end of the war. Already our factories supply our people with over 96 percent of the manufactured goods which they consume, and our producers look to foreign markets to absorb the increasing output of their machines. Further barriers to trade will serve them not well, but ill. Many of our citizens have invested their money in foreign enterprises. The Department of Commerce has estimated that such investments, entirely aside from the war debts, amounted to between $12,555,000,000 and $14,555,000,000 on January 1, 1929. These investors, too, would suffer if protective duties were to be increased, since such action would make it still more difficult for their foreign creditors to pay them the interest due them.

America is now facing the problem of unemployment. Her labor can find work only if her factories can sell their products. Higher tariffs would not promote such sales. We can not increase employment by restricting trade. American industry, in the present crisis, might well be spared the burden of adjusting itself to new schedules of protective duties.

Finally, we would urge our Government to consider the bitterness which a policy of higher tariffs would inevitably inject into our international relations. The United States was ably represented at the World Economic Conference which was held under the auspices of the League of Nations in 1927. This conference adopted a resolution announcing that “the time has come to put an end to the increase in tariffs and move in the opposite direction.” The higher duties proposed in our pending legislation violate the spirit of this agreement and plainly invite other nations to compete with us in raising further barriers to trade. A tariff war does not furnish good soil for the growth of world peace.

Another duet of headlines with an interesting lesson, both from the Wall Street Journal:

Solar power death wish

Suniva Inc., a bankrupt solar-panel maker, and German-owned SolarWorld Americas have petitioned the U.S. International Trade Commission (ITC) to impose tariffs on foreign-made crystalline silicon photovoltaic cells. 

Solar cells in the U.S. sell for around 27 cents a watt. The petitioners want to add a new duty of 40 cents a watt. They also want a floor price for imported panels of 78 cents a watt versus the market price of 37 cents. 

they’re resorting to Section 201 of the Trade Act of 1974 because they don’t need to show they are victims of dumping or foreign government subsidies. They only need to show that imports have harmed them

California Democrats Target Tesla

The United Automobile Workers are struggling for a presence in Tesla’s Fremont plant, and organized labor has called in a political favor. 

Since 2010 California has offered a $2,500 rebate to encourage consumers to buy electric vehicles. But last week, at unions’ behest, Democrats introduced an amendment to cap-and-trade spending legislation that would require participating manufacturers to get a sign-off from the state labor secretary verifying that they are “fair and responsible in their treatment of workers.” 

The legislation, which passed Friday, is a direct shot at Tesla. The Clean Vehicle Rebate Project has amounted to a $82.5 million subsidy for the company

Both moves ought to pose a liberal conundrum. If you want carbon reduction, you want cheap solar cells, so that more people will buy them. The planet does not care where the solar cells are produced. If you want electric cars, you want cheap electric cars so that more people will buy them.

But those who falsely sold green energy as a job producer, a boon to the economy; not a costly alternative to fossil fuels, a cost that must be borne to save the planet, now face this conundrum.

The deeper lesson here is the corrosive nature of subsidies and protection. Once the government starts subsidizing solar cells and electric cars, there is a quite natural force demanding access to the subsidies. Why should the owners of the Tesla company get largesse from the taxpayers, and not their workers too?

Solar cells are just the latest embodiment of the infant industry fallacy -- that protection from competition will allow an industry to grow and become competitive.  Instead, they become infantile industries, expert and getting protections and subsidies not producing cheap solar cells.

The infrastructure paradox is similar. We need infrastructure. Yet federal contracting requirements, requirements for union workers and union wages, and everything else attracted to federal money being handed out, drive costs up to astronomical levels.

For energy, this is an abject lesson in the wisdom of a simple carbon (and methane) tax in place of all the subsidies and winner-and-loser-picking our government does. (Let's not fight about whether to do it. The point is if we want to restrict fossil fuels and subsidize a move to non-carbon energy, this is how to do it.) Subsidies and protection invite demands for subsidies and protection, not clean energy.

George Shultz and Martin Feldstein, in the Washington Post

If a country consumes more than it produces, it must import more than it exports. That’s not a rip-off; that’s arithmetic. 

If we manage to negotiate a reduction in the Chinese trade surplus with the United States, we will have an increased trade deficit with some other country. 

Federal deficit spending, a massive and continuing act of dissaving, is the culprit. Control that spending and you will control trade deficits.

That's not an excerpt, it's the whole thing. Someday, I will learn to be this concise.

Daniel Hannan, a (soon to be unemployed?) UK member of the European Parliament, writes insightfully about trade in the Saturday Wall Street Journal.

It is telling that neither of the Obama administration’s flagship trade deals—the Transatlantic Trade and Investment Partnership, or TTIP, and the Trans-Pacific Partnership—even had “free trade” in the title. Although they had liberalizing elements, they also contained a great deal of corporatism.

Monitoring TTIP as a member of the European Parliament, I saw plainly enough what was going on: Big multinationals in Europe were getting together with big multinationals in the U.S. and lobbying for more regulation. By combining the most restrictive rules in the EU and the U.S., they aimed to raise barriers to entry and to give themselves an effective monopoly.

There is a deep point here. Our trade treaties have strong elements of managed mercantilism, not free trade, and can serve the interests of global corporations. There is a "better" trade that is also freer trade, and may address some of the political unpopularity of trade deals. Hannan has in mind a very open US-UK bilateral deal, but more deeply states clearly and concisely how better trade deals could work in general

A British-American deal should avoid that danger. How? By focusing on mutual product recognition rather than on common standards. If a drug is approved by the U.S. Food and Drug Administration, it should automatically be approved for sale in the U.K. If a trader can practice in the City of London, he should automatically be licensed to practice on Wall Street. And so on.

A commercial deal, in this case as in any other, should have nothing to do with human rights or child labor or climate change. Important as those issues are, they are separate from the free exchange of products.

... Once Britain no longer has to worry about the protectionism of French filmmakers, Italian textile manufacturers and the rest, we should reach a comprehensive agreement covering services as well as goods. If we make sure that the resulting deal is in the interest of consumers rather than producers, we could revive the whole notion of free trade, which is something the world very much needs just now.

Larry Summers has an excellent FT column, "Revoking trade deals will not help American middle classes." (If you can't access FT, these usually show up eventually on Larry's blog)

The key point: whatever you think of the impact of trade and globalization, trade deals are not responsible for stagnating "middle class" wages.

...the idea that past trade agreements have damaged the American middle class and that the prospective Trans-Pacific Partnership would do further damage is now widely accepted in both major US political parties. 

... the idea that the US trade agreements of the past generation have impoverished to any significant extent is absurd. 

There is a debate to be had about the impact of globalisation on middle class wages and inequality. Increased imports have displaced jobs...

My judgment is that these effects are considerably smaller than the impacts of technological progress... 

But an assessment of the impact of trade on wages is very different than an assessment of trade agreements. It is inconceivable that multilateral trade agreements, such as the North American Free Trade Agreement, have had a meaningful impact on US wages and jobs for the simple reason that the US market was almost completely open 40 years ago before entering into any of the controversial agreements. 

...The irrelevance of trade agreements to import competition becomes obvious when one listens to the main arguments against trade agreements. They rarely, if ever, take the form of saying we are inappropriately taking down US trade barriers. 

Rather the naysayers argue that different demands should be made on other countries during negotiations - on issues including intellectual property, labour standards, dispute resolution or exchange rate manipulation....

In other words, the US was open already in the postwar period. Trade deals ask other countries to take down trade barriers in specific markets, and also to make internal changes, for the US to remain open.

The reason for the rise in US imports is not reduced trade barriers. Rather it is that emerging markets are indeed emerging. They are growing in their economic potential because of successful economic reforms and greater global integration. 

These developments would have occurred with or without US trade pacts, though the agreements have usually been an impetus to reform. Indeed, since the US does very little to reduce trade barriers in our agreements, the impetus to reform is most of what foreign policymakers value in them along with political connection to the US. 

Trade deals are very useful for many countries, including the U.S. When politicians get demands for subsidies, protection, stifling regulation, or lack of needed regulation, they can point to the trade agreement. That's a good argument for multilateral agreements as well -- look at the broad range of countries that has agreed to behave, not just look at our special deal with one country.

The truth too often denied by both sides in this debate is that incremental agreements like TPP have been largely irrelevant to the fate of middle class workers. The real strategic choice Americans face is whether the objective of their policies is to see the economies of the rest of the world grow and prosper. Or, does the US want to keep the rest of the world from threatening it by slowing global growth and walling off products and people?
Framed this way the solution appears obvious. A strategy of returning to the protectionism of the past and seeking to thwart the growth of other nations is untenable and would likely lead to a downward spiral in the global economy. The right approach is to maintain openness while finding ways to help workers at home who are displaced by technical progress, trade or other challenges.

If it works, protection only enriches some Americans at the expense of foreigners and other Americans.  It is a negative-sum game. If you do not think America's role in the world is to try to send a billion Chinese and Indians back to grinding poverty, to benefit a bit selected American workers and businesses, then you ought not to be a fan.

Larry focuses on the TPP, but the trade agenda is now much larger -- a substantial increase in US trade restrictions, including a return to tariffs, industry - by - industry quantative restrictions, even in violation of trade agreements, and so on.

Larry mentions protectionism in the past, but don't get all nostalgic. That was in the far past, last seen in the universally reviled Smoot-Hawley tariff of the Great Depression. Nobody looks back to that nostalgically as part of "Great" America.

Do read the whole essay.

Question: What is an easy way to reduce immigration in to the US (if you want to do that)?

Answer: Buy what they have to sell. If they can make good money at home, they are less likely to want to come here.

Question: Won't we lose jobs?

Answer: What do you think people do with the dollars we send them in return for foreign goods? There is only one thing to do with dollars -- buy American goods,  invest in American companies, or buy US government debt, and the government spends it.

Question: But what about those jobs moving overseas?

Answer: Some jobs do move overseas. But those dollars, flowing back, create new jobs in the US. There are losers. It is true. There are also winners. That is also undeniable. Trade restrictions basically transfer jobs from some people in the US -- new jobs in export-oriented industries or industries fueled by foreign investment demand --  to other people in the US -- old jobs. And they do so inefficiently, making Americans buy more expensive goods overall.

Question: What's another way to reduce immigration in to the US (if you want to do that)?

Answer: Help their homes to be peaceful as well as prosperous. The costs of feckless foreign policy are not just lives and countries ruined, refugees washing up on our and europe's shores, but electoral and political responses.

(Economists. Forgive me for using the misleading "create jobs" rhetoric, in the interest of connecting with non economists. You know what I mean -- create wages, opportunities, businesses, etc.)

When Paul Krugman, Larry Summers,  Sarah Palin, and the Wall Street Journal all agree on something -- that presidential deal-making and strong-arming over plant location is a terrible idea -- it's worth paying attention to.

I think Tyler Cowen did the best job of describing what's wrong with the deal, interviewed on NPR. (Transcript, Highlights and audio link).

(This is an impressive radio interview. I long to be able to express something that quickly clearly and coherently on radio. Tyler must have really prepared hard for it.)

INSKEEP: Don Evans says this is a way for the president-elect to send a strong message to workers and to corporations about what his priorities are. What's wrong with that?

TYLER COWEN: We're supposed to live under a republic of the rule of law. Not the rule of man. This deal is completely non-transparent. And the notion that every major American company has to negotiate person-to-person with the president over Twitter is going to make all business decisions politicized.


INSKEEP: What do you mean it's nontransparent, first of all?

COWEN: We don't know exactly what the company is getting. There's plenty of talk that the reason Carrier went along with the deal was because they were afraid their parent company would lose a lot of defense contracts. So this now creates the specter of a president always being willing to punish or reward companies depending on whether or not they give him a good press release.

INSKEEP: Why don't you explain to me the thing about the parent company, which is United Technologies?

COWEN: Yes, they do a lot of defense contracting. It's at least 10 percent of their revenue. Carrier, from the state of Indiana, was already offered the tax break before the election. They turned it down. Now, all of a sudden, Trump is President. Bernie Sanders is telling Trump to threaten the defense contract of the parent company, and now, all of a sudden, the company takes the deal. And Trump is known for being somewhat vindictive. This, to me, is scary. It indicates an environment where business decisions are now about how much you please the president.

INSKEEP: Now, you just said an interesting thing. Bernie Sanders, a socialist of the Democratic Party, did, a few days before the deal was announced, say that Trump ought to use the leverage of the defense contracts to get United Technologies to change its behavior. We don't know on a factual basis that's actually what happened, but - but you're noting that this is kind of a leftist thing to do.

COWEN: That's correct. Trump and Bernie Sanders, for all of their populist talk, their are actual recipes in both cases lead to crony capitalism.

INSKEEP: What's crony capitalism?

COWEN: Crony capitalism is a system where businesses who are in bed with the government and who give the president positive press releases are rewarded and where companies who oppose or speak out against the president are, in some way, punished.

INSKEEP: David Wessel of the Brookings Institution said on our air the other day that this act reminded him of something that is done from time to time in France - under the socialist government in France. And I'm also thinking of Venezuela, where the late President Hugo Chavez would go on TV and denounce companies and demand that companies do specific things. And of course, the economy there has ended up being a complete mess. Is that - is that a fair comparison at all?

COWEN: Well, we're not close to that point yet, but we're taking baby steps in that direction. And the way you avoid getting to that point is by having people speak out when they see the baby steps.

INSKEEP: If the president-elect gets results, at least some of the jobs - at least for now - are staying in Indiana. Does it really matter how he does it?

COWEN: Well, keep in mind the broader numbers. Since the year 2000, Indiana has lost 150,000 manufacturing jobs. And this, at best, assuming all goes well, saves a thousand of those. So to actually make a dent in the problem, jawboning isn't the way to do it. It's changing economic incentives and making it more cost-effective to hire people in the United States. And none of this really does that.

(If it's not obvious one could add, 1) Every million dollars of tax break Carrier gets to stay in Indiana is a million dollars someone else has to pay instead -- likely a smaller company that hires more people. 2) If the US could, in fact, take jobs back from Mexico, then each such job taken back is one more Mexican who wants to migrate to the US. 3) Capital and current accounts add up. If carrier invests $1 M in Mexico, then US exports must increase by $1M. And vice versa. 4) If it's profitable to build air conditioners in Mexico, then someone else will do it and that Carrier plant is toast anyway.)

Brooks and Shields

Who will defend President-Elect Trump? Surprisingly, Mark Shields, in a very interesting Shields and  Brooks segment on the PBS newshour.

First David Brooks did a great job of slamming the deal, as Cowen did

 The job of government is to be a level playing field where companies compete and make money honestly. And by rewarding one company over another, by getting involved in these sort of petty deals, the first thing you’re doing is encouraging rent-seeking, for companies to make money off government, rather than the honest way. 

And the second thing, it’s — and especially in this administration, it’s an invitation to corruption. If you’re cutting deals with company after company, doing this kind of deal, that kind of deal, inevitably, there is going to be a quid pro quo. There is going to be under-the-table lobbying. 

And it’s just a terrible precedent for our economy and for the administration. 

 But that's easy. Shields, the "left" commenter, had the harder job, defending Trump's action:

I think it is bad public policy. I think it’s a political masterstroke. I think Donald Trump raised this issue during the campaign. When it first appeared, when Carrier showed the gross insensitivity, where it was on YouTube, where they went in and told the 1,000 workers that their jobs were leaving, that the company was leaving, and it was just — it was abjectly insensitive to the workers. And Donald Trump picked that up. It was part of his prairie populism of the time, unlike his Cabinet appointments to Treasury and Commerce.

And I think Donald Trump, this is a masterstroke that he said he would do something, he did it, and it’s been a long time since the president of the United States has made that kind of an announcement.

Is it a coherent national macro-policy? No. But as a micro-act, it’s a very positive act politically. And I think it reflects better upon him and his commitment to these people and their well-being and their survival than an awful lot that’s happened in the past.

I'm almost -- but not quite -- convinced. Shields' narrow window of hope is that this was a one-off, rather brilliant symbolic political act, and that now the Trump administration will focus on serious policy, which mostly means bringing rule of law back to regulation and eliminating interference of this sort.

Yes, presidential politics is not ivory tower economics, and occasionally Presidents have to do something abjectly wrong to garner support for a greater purpose. It's a delicate and dangerous act though -- if this is where we're going, early in an administration is the best time to do some hard things, set in motion policies that actually work, set a high bar against demands for cronyist payouts, and trust that four years of good policy will pay off.

The best hope in this direction is for the President to score some points, and for a loud chorus of serious policy people, from left and right, to denounce any more moves in this direction. This is exactly what has happened.  Really, it gives one great hope that just about every commentator left and right says this is not the way to go.

Shields and Brooks are also nicely consistent. Shields:

I give Barack Obama great credit for the rescue of the United States automobile industry. It saved hundreds of thousands of jobs. 

Unlike, say, Paul Krugman, who has been madly tweeting (correctly) that Carrier is bad policy -- but the same thing done by Democratic administrations such as the auto bailout are of course fantastic ideas.

Peggy Noonan

I was most disappointed in Peggy Noonan, usually excellent, in the Wall Street Journal, and approving of the deal for all the wrong reasons: to her it wasn't just a little political pandering thank you, but the path forward

This is called economic nationalism but whatever its name it suggests a Republicanism in new accord with the needs of the moment...

She went on to tell the story of a related Kennedy escapade. Excerpts:

It was 1961 and the new president, John F. Kennedy, had been trying to signal to big business that they could trust him.. His impulses were those of a moderate of his era: show budgetary constraint, keep costs and prices down, prevent inflation.....

That September Kennedy asked the industry to forgo a price increase. He asked the steelworkers union for wage demands... Early in 1962 his labor secretary, Arthur Goldberg, put together a deal. In the spring the union and the steel companies accepted it. Everyone understood the industry would not raise prices.

A few days later Roger Blough, chairman of the board of mighty U.S. Steel, asked to see the president. He handed him a four-page mimeographed statement announcing his company would raise steel prices $6 a ton. ...
Soon Bethlehem Steel raised its prices. Other companies followed.

Now Kennedy was enraged. Accepting Blough’s decision would undo all his wage-price guideposts. It would also constitute a blow to the prestige of the presidency. And labor would never trust him again.

So he went to war. At a news conference the next day he called the steel companies’ actions “a wholly unjustifiable and irresponsible defiance of the public interest” by “a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility.” He implied they were unpatriotic in a time of national peril. ...

Kennedy ordered the Defense Department to shift its steel purchases from U.S. Steel to companies that hadn’t raised prices. The Justice Department under Attorney General Robert Kennedy launched an antitrust investigation, summoned a federal grand jury, and sent FBI agents to the homes and offices of steel executives. There were rumors of threats of IRS investigations of expense accounts and hotel bills. (my emphasis)

Bethlehem Steel was the first to back down. A week after informing the president of the price increase, Roger Blough returned to the White House to surrender...

I emphasized the paragraph of actions that Kennedy took. Each measure is blatantly illegal and an abuse of power. If you think abuse of the regulatory state and prosecutorial power for political purposes are new dangers, let this remind you just how far back it goes.

Curiously, Peggy seems to get that.

It was a big win for Kennedy but it was a bloody affair, and on some level he knew it. His relations with business never quite recovered. The administration’s brutality left a stain. Robert Kennedy’s ruthlessness inspired the anti-nepotism law that is said, these days, to bedevil the Trump family. A nascent, national conservative movement was embittered and emboldened: Barry Goldwater said JFK was trying to “socialize the business of the country,” and decided soon after to run against him.

... presidents shouldn’t abuse their power—and he did. They especially can’t do it to shore up their own political position, and he did that, too. 

So how does she justify it?

But it’s also true he thought he was right on the policy and that the policy would benefit the American people.

And the American people could tell. His approval ratings, high then, stayed high. People appreciate energy in the executive when they suspect it’s being harnessed for the national good. The key is to wield it wisely and with restraint. But yes, a little muscle judiciously applied can be a unifying thing.

No, Peggy.  Crucially, he was wrong on the policy. No, we do not fight inflation by jawboning companies and unions not to raise prices. That does not "benefit the American people." This isn't fancy economics. Leaders from Emperor  Diocletian to Nicolás Maduro have tried to quell inflation by muscling businesses -- sending police to terrorize businessmen in their homes -- not to raise prices, and it always ends with more muscle and more inflation -- as Kennedy's did.

He may have "thought" he was right. His Keynesian advisers had also forgotten lessons of two thousand years of history and thought jawboning an excellent idea. But this is precisely why we have a rule of law -- so that leaders who "think" they are right about the proper level of steel prices cannot wreck the economy.

Just as Trump's action is abjectly wrong on policy. For just as many thousands of years, leaders have been cutting Carrier-like deals, to just as contrary effect. It is our duty to say that, to undercut the political popularity that presidents can gain by counterproductive policies, especially when the means trample the rule of law.

"a Republicanism in new accord with the needs of the moment" is a Republicanism that works. And the point of "work" is not just to win the next election, or give people things that feel good but impoverish them. The need of the moment is leadership, to channel people's well deserved anger into a productive direction.

I hope Peggy will someday write a piece titled, "the worst sentence I ever wrote," in honor of

"A little muscle judiciously applied can be a unifying thing," 

especially when the "unification" comes by feeding people falsehoods like Carrier deals save jobs, or jawboning lowers inflation.  Just how does this not describe Castro? Or Chavez? Or...well, fill in the blanks.

Source: Wall Street Journal

No matter who wins Tuesday’s presidential election, now ought to be the time that policy makers in Washington come together to tackle America’s greatest economic problem: sclerotic growth. The recession ended more than seven years ago. Unemployment has returned to normal levels. Yet gross domestic product is rising at half its postwar average rate. Achieving better growth is possible, but it will require deep structural reforms.

The policy worthies have said for eight years: stimulus today, structural reform tomorrow. Now it’s tomorrow, but novel excuses for stimulus keep coming...

Keep reading here, the Wall Street Journal Oped. I'll post the whole thing in 30 days as usual.

Somehow the WSJ thinks anyone is interested in growth and serious policy on the eve of the election. Or maybe they were just tired of Trump vs. Clinton and needed to fill space.  At any rate, it might give you a little reprieve from the election coverage.