Trump Policies Causing Pessimism Among Consumers And Small Businesses

 

From Politifact.com.

Giant Corporate Mergers Hurt Both Workers And Consumers

The following post is part of one written by Robert Reich:

Last week, in a court in Oregon, the Federal Trade Commission began to rein in two giant runaway grocery chains — Kroger and Albertsons — that want to merge into the biggest grocery combination in history and gallop away with your money and many workers’ wages.

 

It’s the first time anti-monopoly law has been used both to tame consumer prices and help workers gain better wages. The case illustrates how the Biden-Harris administration is seeking to restructure the economy for the common good — and what the Harris-Walz administration will, hopefully, have the opportunity to do even more of. 

Three arguments undergird the FTC’s case:

(1)  Grocery prices are already through the roof, in part because there’s not sufficient competition in most local grocery markets to force chains to lower their prices. Kroger and Albertsons are the two biggest grocery chains in America. If they’re allowed to merge, the combined company, plus Walmart, will control 70 percent of the grocery market in over 150 cities. That means even higher prices. 

(2) The proposed $24.6 billion merger would not only put 5,000 American grocery stores under one corporation. It would put 41 retail grocery brands and 4,000 pharmacies under the same corporation. It would signal to every other industry they can make big profits by further monopolizing.

(3) If allowed to combine, Kroger and Albertsons would also put their combined 700,000 workers under one corporation. These workers would then have to bargain with just one take-it-or-leave-it giant grocery chain. This would erode their bargaining power, leading to lower wages, worse benefits, and weaker worker protections. 

This last point — the relationship between corporate concentration and lower wages and benefits — is almost never raised in antitrust litigation yet it’s hugely important for understanding the current structure of the American economy and why so many American workers justifiably feel shafted. 

Since the late 19th century, the U.S. government has been deciding the extent to which corporations can join together to gain market power, and workers can join together in labor unions to gain bargaining power. This balance of power has had as much effect on prices and wages as supply and demand — in fact, it undergirds supply and demand.

 

In 1890 and then again in 1914, the United States enacted anti-monopoly laws. Teddy Roosevelt and Woodrow Wilson were fierce trust-busters. In 1935, FDR signed into law the National Labor Relations Act, which allowed workers to form labor unions and required employers to negotiate in good faith with those unions. 

By 1950, big business and big labor were in rough balance. That balance of power was central to the growth of both the American economy and the American middle class. It fostered a basic bargain: As corporations became more profitable, their workers did, too. . . .

Over the last 40 years, though, union power has dropped precipitously while corporate power has soared. The result has been near-record levels of inequality (see chart, above). 

In 1955, over a third of all workers in the private sector were unionized, which gave them considerable bargaining power to get higher wages. (Employers whose workers weren’t unionized often offered their workers almost the same wages and benefits as those in the unionized sector, to fend off unionization.)

Now, only 6 percent of private sector workers are unionized. 

Meanwhile, over just the last two decades, more than 75 percent of U.S. industries have become more concentrated.

Four beef packers now control over 80 percent of their market, domestic air travel is now dominated by four airlines, and many Americans have only one choice of reliable broadband provider. Just four companies — Walmart, Costco, Kroger, and Albertsons — dominate the grocery industry. 

When few workers are unionized, wages remain stagnant or decline. Without adequate competition, prices and corporate profits rise. The result: Wealth is siphoned off from workers and consumers to large corporations and shareholders. . . .

The Biden-Harris administration has made a good start at reining in corporate power and strengthening worker power. Stopping the Kroger-Albertsons merger is an important step along the way. 

Here’s hoping the Harris-Walz administration will take many more such steps.

Consumer Confidence In The Economy Is Improving

 

From the University of Michigan Survey of Consumers.

Having More Choices Is Not Always A Good Thing

 Conservatives love to say that having more choices is always a good thing. That's not always true, especially if some of those choices are designed to bilk consumers of their hard-earned money. Consider this article from Nobel Prize economist Paul Krugman:

Dan Patrick, the lieutenant governor of Texas, is clearly what my father would have called a piece of work.

Early in the pandemic he made headlines by saying that older Americans should be willing to risk death so that younger people could “get back to work.” More recently, he suggested that Texans who found themselves with $17,000 electricity bills after the February freeze had only themselves to blame, because they didn’t “read the fine print.”

Funny, isn’t it, how politicians who denounce liberal elitists sneer when ordinary Americans get into trouble?

But something else struck me about Patrick’s take on supersize power bills: How did we become a country where families can face ruin unless they carefully study something as mundane, as normally routine, as their electricity contract?

And electricity isn’t a unique example.

As The Times’s Margot Sanger-Katz has documented, many people end up with heavy financial burdens because they chose the wrong health insurance plan — yet even experts have a very hard time figuring out which plan is best. Using an out-of-network health care provider can also lead to huge medical bills.

Wait, there’s more. One cause of the 2008 financial crisis was the proliferation of novel financial arrangements, like interest-only loans, that looked like good deals but exposed borrowers to huge risks.

What these stories have in common is that they’re snapshots of a country in which many of us are actually offered too many choices, in ways that can do a lot of harm.

It’s true that both Economics 101 and conservative ideology say that more choice is always a good thing. Milton Friedman’s famous and influential 1980 TV series extolling the wonders of capitalism was titled “Free to Choose.”

The spread of this ideology has turned America into a land where many aspects of life that used to be just part of the background now require potentially fateful decisions. You don’t get a company pension, you have to decide how to invest your 401(k). When you turn 65, you don’t just get put on Medicare, you also decide which of many Medicare Advantage plans to sign up for. You don’t just get power and phone service, you also have to choose from a wide variety of options.

Some, maybe even most, of this expansion of choice was good. I don’t miss the days when all home phones were owned by AT&T and customers weren’t allowed to substitute their own handsets.

But the argument that more choice is always good rests on the assumption that people have more or less unlimited capacity to do due diligence on every aspect of their lives — and the real world isn’t like that. People have children to raise, jobs to do, lives to live and limited ability to process information.

And in the real world, too much choice can be a big problem.

The lesson of subprime mortgages, health insurance and now Texas electricity is that sometimes people offered too much choice will make bigger mistakes than they imagined possible. But that’s not all. Too much choice creates space for predators who exploit our all-too-human limitations.

Before the subprime mortgage crisis, Edward Gramlich, a Federal Reserve official who warned in vain about the potential for disaster, asked, “Why are the most risky loan products sold to the least sophisticated borrowers?” The question, he suggested, “answers itself — the least sophisticated borrowers are probably duped into taking these products.”

Similarly, there’s clearly a lot of profiteering in medical billing, with the victims disproportionately those least able to understand what’s happening.

Beyond all that, I’d suggest that an excess of choice is taking a psychological toll on many Americans, even when they don’t end up experiencing disaster.

There’s a growing body of research suggesting that the costs of poverty go beyond the trouble low-income families have in affording necessities. The poor also face a heavy “cognitive burden” — the constant need to make difficult choices that the affluent don’t confront, like whether to buy food or pay the rent. Because people have limited “bandwidth” for processing complex issues, the financial burdens placed on the poor all too often degrade their ability to make good decisions on other issues, sometimes leading to self-destructive life choices.

What I’m suggesting is that a society that turns what should be routine concerns into make-or-break decisions — a society in which you can ruin your life by choosing the wrong electric company or health insurer — imposes poverty-like cognitive burdens even on the middle class.

And it’s all unnecessary. We’re a rich country — and citizens of other rich countries don’t worry about being bankrupted by medical expenses. It wouldn’t take much to protect Americans against being scammed by mortgage lenders or losing their life savings to fluctuations in the wholesale price of electricity.

So the next time some politician tries to sell a new policy — typically deregulation — by claiming that it will increase choice, be skeptical. Having more options isn’t automatically good, and in America we probably have more choices than we should.

Voters Believe Government Is Biased In Favor Of Bankers

 The chart above reflects the results of the new Economist / YouGov Poll -- done between January 31st and February 2nd of a nationwide sample of 1,500 adults (including 1,272 registered voters). The margin of error for adults is 2.9 points, and for registered voters is 3.0 points.

It shows that the American public overwhelmingly believes the government is biased in favor of rich bankers. They are right!

Trump Is Lying - China Does Not Pay The Tariffs (You Do)

Donald Trump wants Americans to believe that the tariffs he has levied on Chinese goods entering the United States is being paid by China. He has repeatedly claimed that is true, but it isn't. The fact is that these tariffs are paid by American importers, and then are passed on to consumers. In other words, it's a hidden tax on the American consumer!

Here's what PolitiFact had to say about Trump's claim:

In remarks at the White House on May 9, Trump said, "So our country can take in $120 billion a year in tariffs, paid for mostly by China, by the way, not by us. A lot of people try and steer it in a different direction. It’s really paid — ultimately, it’s paid for by — largely, by China. And businesses will pour back into our country."

He reiterated that argument in a May 13 tweetstorm, saying that "there is no reason for the U.S. Consumer to pay the Tariffs, which take effect on China today." Trump suggested some alternatives — buying from suppliers in a country without tariffs, or buying from an American company.

His repeated message is that Americans shouldn’t worry about the economic impact of his tariffs, couching his claim by saying it's "mostly," "really," "largely" or "ultimately" paid for by China. Despite the hedging words he uses, experts told us the president is wrong to offer that sort of assurance.

"It is inaccurate to say that ‘countries pay’ tariffs on commercial and consumer goods — it is the buyers and sellers that bear the costs," said Ross Burkhart, a Boise State University political scientist. "Purchasers pay the tariff when they buy popular products. Sellers lose market share when their products get priced out of markets.". . .

The idea behind imposing tariffs is to make American companies more competitive with their foreign counterparts. As those companies prosper, the thinking goes, they can hire more workers and pay their employees better. Those workers, in turn, would have more money to spend, and that helps spread those dollars around the economy more broadly.

Economists told us, however, that real-world examples of tariffs working as intended are rare, and consumers of the tariff-levying country are the primary victims of tariffs, by having to pay higher prices.

The federal treasury does get paid when tariffs are levied. But Chinese exporters don’t make the payment. The importers do — usually U.S. companies.

"If the U.S. imposes a tariff on Chinese televisions, the duty is paid to U.S. Customs and Border Protection at the border by a U.S. broker representing a U.S. importer — say, Costco," Howard Gleckman, a senior fellow at the Urban Institute-Brookings Institution Tax Policy Center, wrote in September. "The Chinese government pays nothing.". . .

When the tariff is small, an importer may elect to keep its prices stable rather than pass the tariff cost along to the consumer. But experts say that’s not the most common decision for the types of tariffs at issue in the current U.S.-China trade war.

"When tariffs are levied at 10 percent, many firms choose to absorb the cost in their margins," said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics. This can be done by settling for lower profit margins or cutting costs in some fashion.

"However, with tariffs now scaled up to 25 percent, firms will inevitably pass on some or all of the increase to U.S. consumers," de Bolle said. "That means that U.S. consumers could in some cases pay 25 percent more for a given good than they did before."

Meanwhile, tariffs could mean that producers pay more, as materials that are used to make products sold in the United States rise in price. Those price increases are likely to be passed on to consumers as well. It’s possible that U.S. consumers could find tariff-free products elsewhere, but in many cases, a suitable product may not be available, or may be more expensive or of lower quality.

In addition, tariffs could also produce delays or price spikes that spiral across the economy, since the economy is now tightly interwoven into complex and time-sensitive "supply chains." And any slowdown in the supply chain could mean layoffs for producers and a hit to the broader U.S. economy. . . .

Our ruling

Trump said that tariffs are "paid for mostly by China, by the way, not by us."

China doesn’t pay the initial tariffs — U.S. importers do. In many if not most cases, those costs are passed on to American consumers, whether it’s directly on the products hit by the tariffs or through an impact on U.S. companies who use raw materials hit with tariffs. China could also take a hit over the longer term in its gross domestic product, but experts say the harm to the U.S. economy would be swifter, more certain and potentially bigger.

We rate the statement False.

Trump Tariffs Are A Huge Tax On American Consumers

Donald Trump is still trying to tell Americans that his tariffs on China and Mexico are paid by those nations. Only a moron would believe that. Those tariffs are paid by American importers, and then passed on through higher prices to American consumers. In other words, it's a huge tax hike on Americans.

How big a tax hike is it? With only the 5% tariff on Mexico and the current tariff on China, it would be the largest tax hike on Americans in nearly three decades. And if the tariff on Mexico rises to 25%, as Trump proposed, it would be the largest tax hike on Americans in over five decades.

Here's how Zack Budryk describes the new tax on Americans in The Hill:

President Trump’s proposed tariffs on Mexican imports – an effort to pressure the country to halt the flow of migrants from Central America – could constitute the biggest tax hike on American consumers in nearly three decades, according to an analysis by the Tax Foundation.

The 5 percent tariff on Mexican goods is set to take effect June 10 and steadily increase until it reaches 25 percent “unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory,” according to a statement from the White House Thursday.

Existing tariffs in place against Mexico would increase revenues by $69 billion, or about 0.32 percent of gross domestic product (GDP), according to the right-leaning Tax Foundation. The 5 percent tariff would increase this figure to about 0.40 percent of GDP. Tax increases under then-President Bill Clinton in 1993 led to revenues of about 0.36 percent of GDP, according to the Tax Foundation.

“The Tax Foundation model estimates that if the Trump administration imposes additional tariffs on automobiles and parts, additional tariffs on products from China, and tariffs on products from Mexico, GDP would fall by an additional 0.50 percent ($124.82 billion), resulting in 0.33 percent lower wages and 387,041 fewer full-time equivalent jobs,” the foundation states.

The Tax Foundation’s estimates only apply to the initial 5 percent tariffs. If the White House makes good on its threats of 25 percent on all Chinese and Mexican imports, the revenues would reach 1.45 percent of GDP, a figure last reached after a 1968 tax increase, according to the Treasury Department.

Trump Proposes Another Hidden Tax On U.S. Consumers

Donald Trump was not happy with just putting a hidden tax on American consumers by placing tariffs on products from China. Now he is proposing substantial tariffs on Mexican products. He will place a 5% tariff on June 10th, and raise that tariff by 5% each month until it reaches 25% in October. He says the tariffs will last until Mexico effectively blocks Central American refugees from coming to the United States -- which Mexico has little control over.

Trump and his cohorts want you to believe that the new tariffs on both China and Mexico will be paid by those countries. That is a huge lie. The tariffs are paid by the U.S. companies that import Chinese and Mexican products, and are then passed on to U.S. consumers in the form of higher prices. Not a single penny will come out of the Mexican and Chinese treasuries to pay these tariffs.

These new tariffs are stupid, and will do nothing to stop refugees from trying to come to this country.

Catherine Rampell, in The Washington Post, gives us 10 reasons why these new tariffs are "mind-bogglingly stupid":

1. Americans are paying these tariffs. We already have two studies by teams of top-notch trade economists who have found that the costs of Trump’s earlier tariffs are being passed along to American businesses and consumers. An update of one of those studies pegged the cost of tariffs announced before Thursday (including the most recent escalation on $200 billion of Chinese goods) at $831 per U.S. household. It seems reasonable that this latest round of tariffs on Mexican goods will also be largely absorbed by Americans.

2. This will seriously screw up supply chains and hurt American companies — including American companies that need Mexican parts to make their own products that get sold here or exported abroad.

Mexico recently became our No. 1 trading partner. Two-thirds of our imports from Mexico are intra-company trade (i.e., a firm trading with itself across the border).

The auto industry is especially vulnerable; of U.S. auto exports, about 35 percent of the value-added comes from imported inputs, according to Deutsche Bank Securities chief economist Torsten Slok. Note also that the U.S. auto industry is already in trouble. Announced layoffs for the first four months of this year in autos are the highest since 2009, according to Challenger, Gray & Christmas.

3. We don’t know the full economic cost of the tariffs, but it would be painful for the United States. Two years ago, a research and consulting firm calculated an estimate for the costs of a similar (20 percent) tariff on Mexican imports: “Over three years, the bill comes to $286 billion in lost value to the U.S. economy and a loss of 755,000 American jobs. Two-thirds of those job losses would be at the expense of low- to medium-skilled workers.”

4. It’s not clear the tariffs are legal. The White House said its legal justification for the tariffs is the International Emergency Economic Powers Act. This 1977 law is mostly related to sanctions; it has never been used for tariffs, according to the Congressional Research Service. Some trade lawyers have suggested that the law does not give the president power to unilaterally impose trade duties.

5. Mexico does not have power to do the thing Trump seems to be asking the country to do. He’s asking Mexico to block people from Central America from crossing into the United States to exercise their internationally recognized legal right to seek asylum.

6. There is no plan. There was never a plan. Even acting White House chief of staff (and Office of Management and Budget director, and apparently new Labor Department overlord) Mick Mulvaney acknowledged this in a call with reporters. When asked what it would take to remove the tariffs, he said the decision would be “ad hoc.”

7. This new self-inflicted trade-war wound gives us less leverage in negotiating a new trade deal with China (and the European Union and Japan, both of which we’re also simultaneously trade-warring with). The tariffs will damage our economy and encourage already suffering trade-dependent sectors — including agriculture and manufacturing — to place more pressure on the administration to reach a deal as soon as possible. Basically, it makes our stated willingness to absorb a little more trade-war-related pain less credible, since we’ve absorbed so much pain already.

8. It will also damage our ability to negotiate with China (and the E.U. and Japan) because it proves, once again, that Trump can’t be trusted to keep his word, including in the form of a signed international agreement. 

Recall that Trump had previously said that his global steel and aluminum tariffs would stay on our friends in Canada and Mexico until a new North American Free Trade Agreement was signed. But after it was signed last fall, he still didn’t remove the tariffs. Finally, two weeks ago, under pressure from lawmakers, he did remove them ... only to turn around and announce fresh across-the-board tariffs on everything from Mexico.

Mexico negotiated the new NAFTA in good faith, and then was punished for it. Why would anyone ever make a deal with this president, one that required literally any concessions, given this track record?

9. The decision to impose tariffs — and thereby harm red-state farmers and manufacturers — could cause a rift with the Republican lawmakers who have been protecting him. To be sure, they’ve supported him through the trade wars so far. But at some point even they might break, especially if they think another trade war front could jeopardize their own reelection chances.

10. If Trump does indeed manage to wreck the Mexican economy, that would likely increase the flow of immigrants trying to cross the border into the United States. When the Mexican economy is lousy, after all, demand to come to the United States rises.