WATCH: Trump Touts Protectionism in Speech to Congress
In a speech to a joint meeting of Congress that was virtually absent of details, President Donald Trump invoked a pronouncement by one of his predecessors concerning the protection of the United States economy. That predecessor was the sixteenth president of the US, Abraham Lincoln, also the first Republican president.
In addition to his usual trashing of free-trade agreements, Trump also summoned the memory of another Republican president, Dwight Eisenhower, a great builder of highways, to promote his infrastructure program.
“‘The abandonment of the protective policy by the American government will produce want and ruin among our people,’” were Lincoln’s words quoted by Trump. According to published analyses, Lincoln uttered those words in the 1840s, well before he became president.
“Lincoln was right,” the president added, “and it’s time we heeded his advice and his words.”
Do we really need to pursue policies from the mid-nineteenth century to generate economic growth? The US economy has moved on dramatically since Lincoln’s day. Protectionism was a popular policy back then because it was thought necessary to protect a new and growing US industrial sector from more powerful competitors such as England. It’s also worth mentioning that tariffs were the major source of revenue for the federal government in those years, before the establishment of federal income taxes.
In more recent times, protectionism had a devastating effect on the US economy. The Smoot-Hawley Act of 1930 arguably ignited or deepened the Great Depression and contributed to a 66-percent decline in world trade from 1929 to 1934, at which time it was overturned.
Trump also repeated his usual bromides that the US “lost more than one-fourth of our manufacturing jobs since NAFTA was approved.” It’s well established that advances in technology, and not free trade, caused the decline in US manufacturing jobs. US manufacturing output is currently near its all-time high.
On infrastructure, Trump said that “the time has come for a new program of national rebuilding,” remembering Eisenhower’s interstate highway buildout.
But Trump was short on details on how he would pay for such a program. “To launch our national rebuilding,” he said, “I will be asking Congress to approve legislation that produces a $1 trillion investment in infrastructure of the United States, financed through both public and private capital…”
Here’s the rub for such a scheme. Congressional Democrats support a $1 trillion infrastructure program, but want to money to from federal coffers. That would take a tax increase, or an increase in the national debt. Those choices are anathema to traditional Republicans, which is why no major infrastructure program passed Congress during the Obama years, once the Republicans achieved their congressional majorities.
Trump’s reference to “private capital” harkens back to his campaign proposal which sought “equity participation” from private firms in his infrastructure scheme and granting those companies tax credits. But it’s not clear how private companies would participate in the building of roads, schools, airports, and hospitals, nor whether they would want to.