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Paul Krugman just issued an prescient warning in the wake of Rex Tillerson's ouster | UK Progressive

Paul Krugman just issued an prescient warning in the wake of Rex Tillerson’s ouster

Donald Trump has nursed petty, personal grudges his entire life. Previously, their impact was limited to his businesses and anyone who had the misfortune of working with him. Now that he’s president, however, he’s free to indulge his vindictiveness on the world stage, with some help from his team of enablers.

Take his latest attack on the European Union. While announcing the tariffs on steel and aluminum, which could potentially trigger a trade war, our president tweeted that the EU has “horrific barriers & tariffs on U.S. products going in.” This, Paul Krugman notes, is bizarre on multiple levels: “To the (very large) extent to which Trumpism is based on racial enmity, picking a fight with Europe, of all places, seems strange. Furthermore, the U.S. has always looked favorably on the EU, which is, for all its faults, a major force for peace and democracy. Why rush into a spitting match with our allies that only serves the interests of enemies of freedom like Vladimir Putin? Oh, wait.”

Someone is feeding the president these destructive ideas, and all roads lead his trade czar, Peter Navarro. Navarro shares Trump’s protectionist view on trade, which seems to be his main qualification for the job. “The story of Navarro’s rise,” Krugman observes, “tells you a lot about the nature of the Trump administration—a place that rewards sycophants who tell the boss what he wants to hear.”

What he wants to hear are views at odds with mainstream economists on both sides of the aisle, and even worse, “seem to involve basic conceptual and factual errors.” Consider what Krugman calls Navarro’s “complete misunderstanding of the trade effects of value-added taxes (VATs), which the U.S. doesn’t have but play a large role in most European countries’ revenue.”

Navarro, Krugman explains, thinks VATs give Europe a giant, unfair trade advantage:

U.S. products sold in Europe have to pay VAT—for example, they must pay a 19 percent tax if sold in Germany. This, [says a campaign] white paper, is just like an import tariff. Meanwhile, German producers pay no VAT on goods they sell in America; this, the paper says, is just like an export subsidy. I’m pretty sure that’s what Trump means when he talks about “horrific” tariffs. But what this story misses is the fact that when German producers sell to German consumers, they also pay that 19 percent tax.

In reality, VAT is a basic sales tax, just like the ones we pay in the U.S. every day. So how does somehow who promotes a deep misunderstanding of Economics 101 get a job in a presidential administration? In Navarro’s case, all he has to do is tell Trump what he wants to hear.

Even worse, Krugman continues, “he’s willing to abase himself in extraordinary ways.” Take this quote from an interview with Bloomberg: “My function, really, as an economist is to try to provide the underlying analytics that confirmhis intuition. And his intuition is always right in these matters.”

 

 

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