A standard pitch former Vermont Gov. Howard Dean makes on the campaign trail is that as president he would stop the outflow of manufacturing jobs to countries that have lower environmental and employment standards. But the bad news is, he adds, “You’ll have to pay more for what you buy at Wal-Mart.”
It’s an easily tossed-off remark that seems to suggest that a toy made in the United States and bought at Wal-Mart would cost a consumer, say, $12.99, rather than $8.99. But economists say such changes in trade policies would have dramatic and wide-ranging effects on the U.S. economy, though they don’t necessarily agree on what those effects would be.
“He actually said that?” chuckled Brian Wesbury, chief economist at Chicago investment banking firm Griffin, Kubik, Stephens & Thompson Inc.
“People like Howard Dean want to keep all these manufacturing jobs,” he said, citing Southern textile jobs that have gone overseas to cheaper labor. “We’ve got to move on, but people like Howard Dean don’t like change. They’re afraid of it.”
Most of the presidential candidates for the Democratic nomination share Mr. Dean’s desire to tighten foreign-trade rules that, ultimately, would raise the cost of goods for the U.S. consumer. The payoff, they say, is that it would keep jobs in the United States and return life to shuttered mills nationwide.
Even some Republicans, particularly from Southern textile states, share some of Mr. Dean’s foreign-trade philosophy. “Fair trade,” if not exactly “free trade,” is their mantra.
Sen. Joe Lieberman of Connecticut is one Democrat who worries about Mr. Dean’s vision for foreign trade, predicting it would lead to what he calls a “Dean depression.”
Mr. Lieberman’s campaign has compiled government trade statistics that show Mr. Dean’s trade policies would cost the United States $1.2 trillion and more than 8 million jobs. It would end all trade with Africa, Central and South America and most of Asia.
“It’s absolute economic insanity,” said David Littman, chief economist at Comerica Bank in Detroit. “People call him a doctor, but he’s clearly not a doctor in economics.”
Mr. Littman pointed to the tariffs President Bush imposed on foreign steel last year in an effort to give a little breathing room to the nation’s gasping steel industry. Those tariffs, he said, artificially inflated the price of steel anywhere from 30 percent to 70 percent for automakers and their suppliers.
“It cost five American jobs for every steel job it protected,” Mr. Littman said. Also, the tariffs raised the final cost of automobiles.
When Mr. Bush lifted the steel tariffs late last year in the face of a trade war with Europe, Mr. Dean chastised him.
“Governor Dean believes that we should be protecting American jobs by making trade fair, that we need tougher labor and environmental rights in our trade agreements, that we need to enforce vigorously the terms of existing trade agreements so that American workers, farmers, and businesses get the benefits that we bargained for,” a campaign statement defending the former governor’s policy said.
But economists also say that the effects of tariffs go beyond simply raising the costs of goods. There is great value, Mr. Wesbury said, in finding the least-expensive manner for manufacturing something, even if that means doing it overseas.
“We’re always looking for a less-costly way of doing things,” he said. “The more success we have at doing that, the more wealth we create. If China wants to build something for half the price it cost us to build it, then let them. We’ll spend that savings on something more productive.”
A study conducted by Alliance Capital Management in New York found that among large economies, the United States is far from alone in watching its manufacturing jobs disappear. In fact, between 1995 and 2002, the United States lost a smaller portion of its manufacturing jobs than have countries such as Japan and Brazil.
The answer: higher productivity using few workers. “We always look for ways to make things better, faster, cheaper,” Mr. Littman said.
In a July speech before a group of Iowa plumbers and steamfitters, Mr. Dean said: “We have to protect middle-class jobs in the United States with the same enthusiasm and vigor that we apply to protecting intellectual-property rights, capital and the interests of investors.”
But sacrificing efficiency to preserve jobs does not help the economy, Mr. Wesbury said.
He pointed to the European Union, whose member nations have much stricter employment laws. The workweek generally is limited to 35 hours, there are stiff restrictions on laying off workers and the governments provide for years of unemployment insurance.
The unemployment rate for the European Union is 10 percent, compared with 5.7 percent in the United States.
Mr. Wesbury calls job losses caused by increased efficiency “creative destruction.”
“We’ve become more efficient at everything, which causes our economy to change,” he said.
But what about all those U.S. dollars that flow overseas as well when companies outsource for cheap labor?
“They never leave our system,” Mr. Wesbury said. “All those dollars in circulation must come back to the United States, whether it’s in new investments or to purchase products.”
Like several economists, Mr. Wesbury notes the irony of wanting to save textile jobs.
In 1811, an Englishman named Ned Lud led riots to destroy the new and efficient fabric looms installed by textile mills, which replaced many of the sewers and stitchers who had been employed by the mills.
Mr. Lud was immortalized by the coining of the word “Luddite,” which is used to describe anyone who opposes technological progress. It seems an unlikely term to attach to the Democratic candidate who revolutionized the use of the Internet in national campaigning.
But, Mr. Wesbury said, “Under Howard Dean, a restaurant would still employ 20 people in the back washing dishes instead of buying a dishwasher.”