← Economic Update with Richard D. Wolff
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Welcome, friends, to another Economic Update, a weekly show devoted to the economic dimensions of our lives. Jobs, incomes, debts, our own and those of our children. I'm your host, Richard Wolff. Been a professor of economics all my adult life. And I think that has prepared me, and I hope so, to offer you these economic updates about what's in the news. Well, this week has been a flutter around the topic of tariffs. The G7 met in Canada and before, during and after accusations were flying, anger was shown. Bitterness, recrimination, you betcha.
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You saw it.
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I want to talk about what tariffs are and what's going on here first. So we're all on the same page. What is a tariff? It's just a name for a particular kind of tax. A tariff is a tax you put on something when it comes into your country from somewhere else. The mere fact that it was produced elsewhere incurs a tax which we, the United States, put on those commodities that come into the country from outside to make them more expensive for Americans who have to pay the price of the good plus the tax on top of it.
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That's all.
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Why are tariffs levied? Industries, all kinds. Agricultural, manufacturing, you name it. Try to get help from the government when they're in trouble with competitors from abroad. When competitors in other countries can produce goods more cheaply, or at least sell them more cheaply here in the United States, it hurts American producers, people producing here. And one of the things those producers could do, of course, is become more efficient. They could automate, they could work harder. They could find cheaper materials. And often they try those things. But one of the things they've always tried has been to manipulate and maneuver the government to give them protection. That's why tariffs are called kind of protection, because if you put a tariff on the goods coming in, they become more expensive. And that allows producers inside the country to sell their goods when they couldn't before because their goods are not subject to that tax. Please keep this in mind. The next time you hear the executives or the politicians paid by the executives of the companies that get these favors from the United States government, they will tell you how the government is inefficient and we need to get the government off our backs. And the private sector is efficient. And yeah, it's all very nice talk, but they're spending big bucks getting the government to give them protection. Who has protection in the United States now? Virtually every sector, somehow. I'm going to give you a few examples. We protect trucks, light trucks, 25%. That's right. The tariff in the United States makes it virtually impossible for foreign truck producers to produce those trucks and send them here. It also makes the trucks more expensive to Americans.
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Why?
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Because the domestic producer has the benefit of not having to pay a tax and can raise his price to up close to what the foreigner has to suffer with because the foreigner has to pay the tax. In other words, tariffs are a way of trying to solve your own economic problems at the expense of people abroad. And the problem is every country does this. Every country mixes a variety of protections. Let me give you a second example, which was in the news. Dairy in the United States. Cost of a gallon of milk in the United States is much cheaper than the cost of a gallon of milk in Canada. Canada has tariffs to protect their dairy, to be able to charge the much higher prices so they don't have to compete with American goods. Is that because Americans are more efficient in their dairy production? Not at all. What Americans have is another form of protection. American farmers, they get subsidized by the government because another thing that corporations like to do is get the government to give them subsidies. That's how we handle corn farming in the United States. That's how we handle wheat farming in the United States. And corn and wheat is what we give to the cows that make the milk. So the milk is subsidized in the United States, which is why it's cheap and too much of it is produced. And that's not because the Canadians have done anything. That's because we have protected our industries over the years. Different capitalist countries bargain with each other to try to keep that kind of crazy system under control. Every government tries to protect its enterprises with tariffs and subsidies and quotas and a whole lot of other things I don't have the time to go into. But there's nothing new here. Mr. Trump's notion is protecting America. America's been protecting itself just ducky fine for a long time. It uses the same things other countries do. What the United States wants to do now is renegotiate the game to disadvantage everybody else and advantage the United States. You find it amazing that the other countries are upset and are retaliating. What in the world would you propose them to do? And if we all play this nasty game, we will dissolve the international economy. And believe me, the risks and dangers of that far exceed anything having to do with this. But does Mr. Trump care? Not a bit. He is pandering to the America first mentality, bashing the immigrants, now bashing our trading partners, looking like Mr. Tough Guy while he helps the industries that he's protecting and the rest let the chips fall where they may. He hopes this will help him politically. In the same way, I want to talk to you about Ireland, where the government also behaved in a way like the tariff maneuvers, only horrible. I'm talking about the remarkable events of the last week when Ireland's president Michael Higgins apologized to the tens of thousands of women in Ireland forced to work over the last century in the country's Magdalene laundries. Young women who got pregnant, young women who had learning disabilities, young women who had even emotional problems were regularly collected by the state, often sent into those laundries where they worked under lock and key, were not paid anything, were prevented from leaving, were not told they were.
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Allowed to leave, etc. Etc.
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Thousands died. After a life of what is in effect forced labor, the government helped recruit the women to this place, forcing them often to go. When they ran away, the government brought them back. And the government gave the churches the contract for the laundry, which was profitable for the churches because they didn't pay the people any labor. It is an awful story. Hats off to the Irish government for admitting it and apologizing, although it is a case of way too little and way too late. But it indicates again that the very institutions telling you about how the government is inefficient and the government is a problem is busily utilizing the government for their own private profit all at the same time. Beware the the arguments about the private is better than the public. They're phony 90% of the time. Latest update on an old problem. Yup, emissions testing. It now turns out that long after the scandal broke in 2015 around VW, both the VW company and in the latest headlines. Likewise, Mercedes Benz and so on have been continuing to pollute by using these same devices. It's extraordinary. Nitrogen oxides are the problematic chemical that comes out of it. And in the latest study reported on by the Guardian, in a wonderful piece of work, it showed that, particularly in Great Britain. But it's the same everywhere. The death, the illnesses, the from the pollution that has been done because the car companies put their profits ahead of public health and public safety continue to be enormous. I would give you the numbers if we had more time, but the story in the Guardian is the one to look at if you're interested. The next update is a hats off for good news in this case from Senator Kirsten Gillibrand. She's a senator from New York State and she announced this last week, actually a little bit earlier in the end of May her quote, Main Street Employee Ownership Act. Here's what she wants to do. She says there are thousandsand she's quite right about this. Thousands of small and medium sized businesses where the people who started and built the business are retiring as they reach retirement age. They don't want to sell their company to some big corporation that will butcher it up. They don't want to close the industry because they know the people that they've hired over the years. They don't want to move abroad. They want to do something that keeps the jobs and the communities that depend on those jobs healthy because that's where they live. So guess what? Many of them are deciding they'd like to sell their business to their own workers. And then they discover that the workers are ready to do it and all they need is the legal support and the financing that is necessary to make such a transition from a capitalist enterprise, which is what it was and what it was built up as, to a worker cooperative enterprise, or at least a worker owned enterprise, which is where they want to go now to save the jobs, to save the communities that depend on them. But they've been held back by many old laws put into effect by corporations that could not face competition from co op enterprises, precisely because for the simple law, if workers own and operate and run the business, they do a much better job than if they don't. It's an old rule. Everybody kind of understands it and it frightens big corporate capitalists. So they made rules to make it hard for worker co ops to form, to grow, to finance themselves. And Kirsten Gillibrand is responding by passing a law. At least she's proposed it to ease the restrictions and make it much easier for worker co ops to respond to what their workers need, what the community needs, what, what the enterprise needs when the founders retire. It's a remarkable, important, progressive move. Okay, last thing, I want to go.
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Back to what I started with the tariffs.
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This maneuver of the government to help some industries, the defense of the people who support Mr. Trump and others in, in doing it, is a bizarre piece of manipulation. The idea is, oh, we're going to protect the American industries that get a tariff slapped on their foreign competitors. And of course one always says the foreign competitor is dumping the foreign competitor is doing something, as if the rest of the world are sneaky Petes and we are innocent victims. If you take that seriously, then I will offer you a really good price on the Brooklyn Bridge. Let me go back. The argument in defense is if we protect the industries, like for example, Protecting the steel industry and the aluminum industry, which the tariffs of Mr. Trump are designed to do well, then they will hire more workers and then you can portray this helping those industries as really being about helping the workers. Let me respond. Number one, steel and aluminum production is highly capital intensive. It doesn't use many workers and to increase production, which is what they'll do if they don't have to face competition from abroad and to raise their prices, which they will do because they don't have to face competition from abroad, the amount of extra jobs they create in their industries is trivial. It's very small, it's not relevant. Point number two is more important. If you listen to what I just said, one result of tariffs is that domestic producers, now no longer facing competition from cheaper imports, raise their prices. Steel and aluminum, for example, are going into making cars. Car prices will go up in the United States. Americans are having trouble affording the cars they buy. Now. They will buy fewer of them and that will mean because the price has gone up, there will be job losses in the industries that are affected by the prices risen because of the tariff. Any honest economist will tell you we can't tell you in advance whether the jobs gained in the industries that are protected will be more or less than the jobs lost in the industries negatively affected by the rising prices that protected firms can impose. Honestly, this has nothing to do with jobs, will have no significant impact on jobs, that we can tell. It is a way for Mr. Trump and the GOP to pander to certain industries by giving them a leg up which they couldn't have achieved by themselves. Inefficient government from the speech on the fourth of July, Big business has been using government from day one.
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Before moving on, I'm happy to announce.
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That we've changed the format of Economic Update.
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We're moving from a one hour show.
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To a 30 minute show. In response to what many of you have suggested and asked us to do.
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We want to be responsive and this is a way to focus and deliver to you the kinds of quality reporting and interviewing that we've tried very hard.
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To build over the last six years. I want also to remind you, particularly.
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Those of you that listen to this.
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As a radio program to Visit us.
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At patreon.com p a t r e o n economicupdate where you can see.
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The program as a television program, also.
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To subscribe to our YouTube channels and to know that we maintain podcasts such.
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As Puerto Rico Forward, that are also available to you there.
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Now let me with great pleasure introduce My guest for today, I've had him.
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On the program before, some of you will remember.
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His name is Bob Henley.
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Bob is okay, right?
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Yes, Absolutely.
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And he's a prize winning journalist and broadcaster.
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He's worked in a variety of places.
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Writes regularly for Salon magazine, and his.
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Work has appeared in the New York.
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Times, the Village Voice, the Christian Science Monitor, and who have I forgotten?
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Well, wbgo, the NPR jazz station in Newark, which is why I'm here today.
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Wonderful. Okay. You've been writing recently, Bob, about the housing crisis in this country, and that's what caught my attention. That's what I want to talk to you about. But first, you put it in a big context. You use a wonderful phrase, the unraveling of America as the setting for then talking about how housing reflects and illustrates that. What do you mean by that?
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Unraveling of my life, I guess I'd say I'm 62. And since my own family when I was a kid faced foreclosure when I was 12, I have sensed that for working people, irrespective of who was in Washington, the country has been unraveling in terms of the political economy of it, so that working people are working longer and increasingly getting less of the collective wealth that they create. And so as a consequence, I developed a series at wbgo, the NPR job station, Newark. We're doing four different discrete stories looking at aspects of this that look at these national issues of the prism of New Jersey, but are relevant to the broader conversation. And so what we see is that right now, according to the United Way, by the way, which is no leftist front organization, okay, they have been doing surveys across the country and they've created a character called Alice, and this is called Asset Limited Income Constrained but Employed. And they're looking to around the country what the families are. They're having trouble making it from paycheck to paycheck. And so what they found is that.
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Across the country, these are all people that are employed. Exactly.
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And so what they're seeing is in places like New Jersey, 38% of the population is either living below the poverty line or is in this ALICE cohort where they struggle for shelter every month. In places like California, it's like 4, 47, 48% in Hawaii, similar numbers. And when you drill down on a micro basis to specific zip codes, it can be a majority of the families, Richard, are struggling every single month to pay for their rent. And this struggle is seen nowhere in the corporate news media narrative.
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Okay. In that narrative, we're all in a big Economic recovery. How do you help us square the hoopla about being in recovery since the crash of 2008 and what you've just told us that the United Way has figured out?
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Sure. One of the things that we know is that in 2016, when I was working for CBS News Money Watch, I consulted with another, I guess hardly a Marxist front group, the national association of Counties, and they kept track of the economic circumstance in 3,069American counties. And, and they found that only 7% of the counties across the country, just as the country was going to decide who was going to be president for the next four years, had experienced an actual recovery as such. And so the rest of the country, particularly, I might add, in those 200 counties that are now famous or infamous, depending on your persuasion, in places like Ohio and Michigan, those places had not experienced a recovery. In fact, the unraveling continued, and I'll tell you now with President Trump, and continues to unravel in reality. Remember, President Trump effectively called out the phoniness of the unemployment number. That that was a non number because of all the exclusions and asterisks related to it. And he said, hey, focus on the labor force participation rate. And he managed to really kind of take away the argument that Clinton could have about this economic rebound because he spoke directly to the experience of enough Americans people that they decided to switch in 200 counties from Obama in 2008 and 2012 to vote for Trump with 70,000 votes made all the difference. Well, what we see now is when President Obama left, labor force participation rate was 62.9. Today, as we speak, it's 62.7. In other words, there's a million more idle people today than when Donald Trump came into office. And you won't see that reflected because the most important thing for the corporate news media is to deny people their own history and sense of the moment, because if they had a sense of what was really going on, they'd want radical change immediately.
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So tell us about housing. Tell us about what is it that makes, that makes a reporter like you speak about a housing crisis?
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Well, I guess it's something where we wanted to, undercover, I got a, a grant basically to look at stories that were not being reported, but were presenting themselves a little bit of shoe leather. So in New Jersey, we know that we have this tremendous crunch with housing about, I'd say a number of years ago, the Supreme Court, a big landmark state case, said Mount Laurel decision. Every town has to make room for the poor and the working class in terms of Housing, it just never happened. So I started seeing, seeing that there were all kinds of situations where people were living in a marginal housing, they were homeless. And so I went down to an area where Sandy hit very hard, like around Middletown, Keyport, Route 38, part of New Jersey and Monmouth County. What I found there was that I came across a couple in their 30s, college graduates, 31 and 32, who were living this past winter in their car. And this was what they were doing. And I said, so how did this happen? As we spoke with them and gave them an opportunity to give voice to their story struggle. It turned out that both of these individuals, their families, separately, their nuclear families, had lost their homes to foreclosure and that that had started this unraveling. And this is what we're finding is that you have a generation of young people saddled with some $1.4 trillion in student debt. And because of what happened with the last meltdown, $20 trillion of household wealth is gone. So you have that parental home that could have been sanctuary in many cases now is no longer in the family. So this is continuing to happen. Even though we're changing all the national stuff at the top about Donald Trump foreign policy, the underlying unraveling continues.
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Yeah. The remarkable thing for me is that it reminds people of something we teach in economics departments, which is the instability of capitalism. This every four to seven year downturn has long lasting consequences. It's not just the unemployment and the collapsed businesses and all of that that happens in the key opening months and even years. It's the decades of unraveling of different.
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Parts of society and intergenerational.
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Yes.
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And so the people who, in the case of the young man in this, Tim Johnson, it was in 2001 that his family's economic fortunes declined. His father was a successful African American businessman, owned a fleet of trucks. He got pancreatic cancer, died within three months. Tim was pulled back from college and the family had to lose the home in a short sale. So these things have consequences. And the fact is that President Obama and the Wall street bankers in no way dealt with the underlying body blow that is still impacting America today. And I might say the next recession, Americans, so called recession. It's not like for these people, it never let up. And it continues. We're seeing the wealth concentration like this $1.5 trillion tax cut. It's almost like physics. It's like the wealth concentration and income inequality is accelerating. If anything else.
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Yes. Under this tax cut, it can't do anything else. The companies are all showing us with the data that's coming out of it, that they are not using their reduced taxes to hire anybody. They're buying back their stocks, they're paying higher salaries to the top executives, they're beefing up their dividends to their shareholders. In other words, they're making the rich, richer Harley Davidson.
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Constructive right here you have a motorcycle company out of Wisconsin. I'm sure there were a lot of Trump voters there. He used that as a signature company, as being iconic during his campaign. And in reality, what's happened is they laid off. I think their corporate tax rate went 35% to 21%. They rewarded the workforce by laying them off, having hundreds of millions of dollars in stock buyback and building a factory in Thailand. So that's the formula, and I think people are getting aware of it. And the housing thing, that's particularly difficult in New Jersey. There's 40,000. Talk about late stage vulture capitalism. 40,000 empty homes. So this scarcity in people living in their cars is occurring as because of the foreclosure system, tens of thousands of potentially serviceable homes are being permitted to rot in place.
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You know, it's always been in this country, this phenomena that I once saw.
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Captured in a cartoon when you had a group of homeless people sitting on.
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The curb, commenting to one another as they looked across the street at the empty houses and fantasizing what it might be like to live in that one or that one. But this juxtaposition of people, less homes and homeless people is a feature of an economic system that really has lost the right to our loyalty anymore.
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Right. And I think the penultimate expression of this here in New York City, where you have this push of global capital coming in, creating a demand for luxury housing with this booming homeless population. In many cases, the greed and avarice that's driving this development is actually, and I watched it happen as a working journalist here, working for the Village Voice over the years, where the marginal housing stock, the single resident occupancy, the arrangement that you might, you know, all rent control, all that's under tremendous pressure because of the multibillion dollar stakes. And we're seeing that squeeze out happened here, and it's manifest in record homelessness.
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Are people moving about? Is there a pushback? Are there people facing this housing crisis that are trying from below to make change?
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I will say in New Jersey that there's a grassroots movement for a foreclosure moratorium. Because particularly what's happened is if you are a victim of redlining already, that is that you were targeted for predatory loans before the meltdown, then you're twice victimized because then they come back and try to enforce a contract that should have been illegal to begin with. And with the election of a Democratic governor, Phil Murphy, there's some hope that they might pass this moratorium to buy people a couple of years. In many cases, this is the kind of thing that has to be a granular solution. It's hard to decentralize. It has to be a local community decision to turn around and even occupy these homes that are vacant and start turning them around. It's direct action applied at the local level.
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And people are beginning to do this.
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Yeah, I think that you're seeing this. But the problem is that people still are struggling in isolation. And that's why it's so important, a program like this. It gives people a sense that they're not alone and that this narrative does exist. And it's not just that they individually aren't making it in this fabulous system.
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Well, Bob, we come to that point in all these interviews when I can say thank you very much for what you have presented to us. It's a lot for us to chew on, but I'm in a new position, which I'm happy to also say that in addition to thanking you, to let.
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Our audience know that this conversation is going to continue and it will be available for you to participate in and listen to and think about very simply by going to our patreon.com channel, economicupdate patreon p a t r e o n.com economicupdate or where we will continue to explore this issue of housing and unraveling. So I want to thank you all for being with us under this new format. I hope you find it useful and effective. And I want to thank truthout.org, that remarkable independent source of news and analysis.
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That has been a partner with us.
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For a long time, and to say not only thank you to them, but to all of you, especially if you too can partner with us by sharing what you've heard here, by making others aware of these programs and what they offer.
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And I look forward to speaking with you again next week.