He's right to resign, leaving policy to the intellectual teenagers

Or perhaps we should put that as Gary Cohn was and is right to resign over the idiocy that Donald Trump and Wilbur Ross have cooked up over trade tariffs. And the markets seem to agree too. The point and purpose of economic policy making is not to make Americans poorer. Or at least the policy of the American government shouldn’t be to do so. Yet that is exactly and precisely what this policy does – it’s therefore idiotic, isn’t it?

Gary D. Cohn, President Trump’s top economic adviser, said on Tuesday that he would resign, becoming the latest in a series of high-profile departures from the Trump administration.

White House officials insisted that there was no single factor behind the departure of Mr. Cohn, who heads the National Economic Council. But his decision to leave came as he seemed poised to lose an internal struggle over Mr. Trump’s plan to impose large tariffs on steel and aluminum imports. Mr. Cohn had warned last week that he might resign if Mr. Trump followed through with the tariffs, which Mr. Cohn had lobbied against internally.

If you’re an economic adviser and the person you’re advising insists upon doing something which is, in economic terms, flat out insane then yes, you really should be resigning. For your own peace of mind if nothing else. If only more of Maduro’s advisers had done so, eh? Not that the lunacy is confined to that side of The Pond:

Q: What do you think about Donald Trump’s claim that the EU is unfair over trade, and his threat to impose tariffs on EU cars?

Cecilia Malmström insists that there are “only losers” in a trade war, so Europe will respond in a proportionate and balanced way.

Note what she doesn’t say. That because there are only losers in a trade war we’ll not have a trade war then. The correct EU, or anyone else, response to American tariffs is a shrug of the shoulders. You want to make Americans poorer then, well, OK. What do we care? Why should we make our own poorer in return?

This is one of the things which is so damn annoying about the EU in fact. There they are, nicely insulated from the voters and thus from their misconceptions about all sorts of things. Here’s one of those misconceptions, that protective tariffs are a good thing. That insulation should mean the EU can ignore the hoi polloi, in a manner that Trump can’t and or doesn’t. But are they doing so? Taking advantage of what is supposed to be that technocratic advantage? Are they hell. At which point why bother with having them in the first place – as we’re shortly about to do ourselves.

Markets are right to take fright at this:

Economic adviser Gary Cohn’s resignation from the White House hit world stocks and the currencies of U.S. trade partners Wednesday, as many investors judged the news meant President Donald Trump was pushing forward with planned tariffs.

Futures pointed to a 1% opening fall for the S&P 500 and a 1.3% drop for the Dow Jones Industrial Average, with shares of heavy machinery maker Caterpillar leading declines in premarket trading.

There’s not all that much that governments can do to create economic growth. Set the basic ground rules, insist upon easy taxation, tolerable justice and all that, sure. But beyond it there’s very little evidence that specific actions to produce growth actually produce growth. However, governments can easily do things which screw up the production of economic growth. Trade tariffs being one of the more obvious. An interesting little conundrum really, an argument for anarcho-capitalism even. Governments can’t do much good but can do a lot of harm. So, let’s have no government. I follow that same logic to a stance of classically liberal minarchism which seems a better stance, given that government does rather need to set those basic ground rules.

The real point though about Cohn’s resignation is that this is near the last of the economic adults leaving the room. We’re going to be subject to the teenagers – in intellectual terms- like Ross, Lighthizer and Trump’s own ignorance of economics. Really, not something to look forward to. As markets are telling us.

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11 COMMENTS

  1. Dunno. For one thing, despite all the trouser-soiling going on about Trump’s mooted tariffs, they’re actually small beer.

    25% on steel and 10% on aluminum isn’t going to make much of a difference to consumers one way or t’other. It’s something like $0.02c on a can of beer.

    It’s also not much different to what George Dubya Bush or Bill Clinton or Ronald Reagan did, or what the EU does now. Not exactly a selling point, to be sure, but not exactly Maduro stuff either.

    Trump’s plan is very obviously to shake up international trade so as to protect jobs in America. That’s obviously antithetical to maximising economic efficiency, but it’s not irrational or immoral.

    These tariffs probably won’t do much good (or bad), but if he can use the threat of tariffs to create a more favourable environment for creating and retaining good family-man type jobs in the US, he’ll probably get his face carved on Mount Rushmore.

    • Not even 2 cents a can, as the US has 70% of the US market, and there is no cost if Coors buys domestically. Not to defend tariffs, but you can’t just add up a domain and tack on a fraction, any more than doubling the 39% income tax rate would double receipts. The damage is less than usually stated – depending, of course, on the repercussions, and to a lesser extent on the perceived benefit of politicking over producing.

  2. upon entering govt service, if you have to sell assets for “conflict of interest” reasons, you dont have to pay taxes for 10 years (providing you serve for 366 days) …
    … the theory is that since the sale of assets wasnt volantary but was to meet a govt constraint, you should have time to pay the taxes as recompense for having the timing decision taken away.

    How much GS stock did Gary sell, and how much interest will he earn over the 10 years on the tax deferral? So you knew Gary was going to slug it out for a year. If Gary’s next gig is heading Merril, (forcing out/replacing Montag), it’l be dejavu all over again

    Even more interesting for 81 yr old Wilbur. He gets to sell now, pay no cap gain tax, and probably die before 10 years are up and cap gains tax will be due. That combined with basis step up will be a nice deal for Wilbur’s heirs.

  3. Good policy or bad, it was wrong for Cohn to resign. The role of an advisor is to advise the president on a specific topic. The president has a lot of factors to consider including politics, national security, regional employment before he makes a decision. What Cohn is saying is that if Trump doesn’t agree with him on everything, he’ll resign. If every advisor did that, no president would ever have any advisors. It’s just self centered and selfish

    • No, it was right for Cohn to resign. Trump noted recently that he “likes disagreement” or something, but by now he understands the need for a unified team. The East Coast newspapers capitalize on any leak to bray about a divided Executive, and if there are no leaks that day, they invent one. If Cohn stayed, he would have to defend the tariffs. It was notable that he didn’t attend their official announcement. Kudlow is not a replacement; he was on WABC last night giving his honest opinion as always. If appointed, the networks would play tape and Trump would have to waste time fighting a new scandal.

      Cohn was ready to resign last year when Trump committed the offense of not siding against Republicans sufficiently strongly after Charlottesville. Yes, this was selfish and foolish too. But for the top adviser to be unable to get the President to do the right thing, then to have to stand side-by-side and defend the wrong thing, you eventually decide you have better things to do.

      Also, Cohn, despite his free-trade stance, is a creature of Goldman Sachs and the Democratic Party. Trump’s core supporters who do not study economics viewed him as a wolf in the fold.

  4. Cohn has been looking for an excuse to resign for a while now, and this is as good as any. As a member of the globalist banker cabal, he was never comfortable with the Trump administration’s nationalist tendencies.

  5. “The point and purpose of economic policy making is not to make Americans poorer. Or at least the policy of the American government shouldn’t be to do so. Yet that is exactly and precisely what this policy does.”

    Almost makes Trump a Democrat doesn’t it?

  6. @Steve, March 7, 2018 at 12:31 pm

    Dunno. For one thing, despite all the trouser-soiling going on about Trump’s mooted tariffs, they’re actually small beer.

    Small beer – only $9 Billion.

    Which equates to a $6 Million subsidy for each steel worker – doesn’t sound like small beer to me.