Paul Krugman is an Idiot #6,375

Paul Krugman produced a column yesterday regarding manufacturing employment and its relationship the trade deficit which is so filled with muddy and downright delusional thinking that it’s hard not to conclude that he hasn’t had a stroke or brain aneurysm and simply become brain dead.

He begins by giving the opinion that people who believe that “US manufacturing has disappeared because it has all moved to China and Mexico”  are “largely wrong.”  He goes on to say that “pointing to measures of industrial production is not the bet way to make this point,”  and argues that a better way to examine the above claim is to “ask how much of the decline in manufacturing employment would have been avoided if we weren’t running big trade deficits.”

Since it was the export of manufacturing jobs to cheaper labor overseas which largely caused the trade deficit, because consumers are buying foreign goods instead of domestic ones, that’s sort of saying that we should ask how quickly the chicken would have died if I had not hit it in the neck with my axe.

He then says that the negative contribution of 3% to GDP in manufacturing is a “major obstacle in efforts to achieve full employment,”  as if we were actually making any efforts to achieve full employment, because it is “a drag on the overall demand for US goods and services.”  Really? Aside from a deficit in manufactured goods being unrelated to services, domestic or otherwise, and therefor unlikely to be a drag on them, as to domestic goods he’s saying that the unavailability of domestic goods reduces demand for domestic goods.

Hello? We’re not buying American computers because America doesn’t make computers. America has no manufacturing jobs making computers. They are all in China. And so we import computers, adding to the trade deficit, because the computer manufacturing jobs were all sent to China. Those jobs were not sent to China because there was a trade deficit, they were sent there because it allowed companies to build computers more cheaply. And I don't mean less expensively, I mean more cheaply.

He then makes the point that the trade deficit of 3% does not account for a decline in manufacturing jobs, which is “15 points,”  but he’s not even comparing apples and oranges, he’s comparing apples and freight trains. The 3% decline is a percentage of the nation’s total dollar economy, while the “15 points,”  is the share of manpower employment; manufacturing employment accounted for 25% of the workforce in 1970, and it accounts for 10% today. The workforce is vastly larger today that it was 45 years ago, so it’s pretty hard to come up with any really meaningful numbers, but Krugman’s numbers certainly don’t do it, and the manufacturing workforce certainly has shrunk.

Oddly, manufacturing accounted for 30% of jobs in 1955, but he doesn’t use that number. He chooses a time 15 years later and 5% lower. One has to wonder why.

He admits that the “3 points out of 15”  is an exaggeration, actually who knows what it is, because “not every dollar of manufactured exports corresponds to a dollar of manufacturing value-added,”  except that we’re not talking about “value-added”  here, we’re talking about labor, and one cannot conflate dollars with relative employment share in national employment.

“For the most part,”  he concludes, “in other words, declining manufacturing employment isn’t due to trade.”  And this is the crux and reason for the whole pile of babble and nonsense, because Paul Krugman is a supporter of Barack Obama’s push for the Trans Pacific Partnership “free trade” agreement. “But even if we’d had a highly protectionist world,”  he says, “…we’d still have seen most of the great decline in industrial jobs.”