As I write this, it’s been about two weeks since the “Liberation Day” tariffs were announced. While nobody expects political economic models to be stellar (see the myriad of “economic impact studies” that come out for any project that just happen to coincide with what the local politician wants to hear), the model released by the USTR/CEA stands out. I, and many others, have already written about its numerous faults. It reads like an undergrad essay thrown together at the last minute following a furious run through Google Scholar rather than a considered scientific recommendation. Further defense by Council of Economic Advisers chair Stephen Miran has been inadequate as well as he continuously misapplies citations and uses discredited models to advance the plan. These are post hoc justifications for a desired policy rather than a policy crafted to solve a real problem.
But I remain ever the optimist, and I do see some silver linings from this hot mess. As Frederic Bastiat once said, “[T]he worst thing that can happen to a good cause is, not to be skillfully attacked, but to be ineptly defended.” The natural corollary to that is the best thing that can happen to a bad cause is to be ineptly defended. So, a silver lining from this ill-conceived and ineptly defended tariff scheme could be a sustained demise of protectionist and mercantilist nonsense. Protectionism hasn’t been very popular, and a February poll by Gallup shows that an overwhelming majority of Americans (81%) see trade as an opportunity for economic growth (a mere 14% see it as a threat). Even among Republicans, this stance holds, with 78% believing trade represents opportunities. Given the heavy stock market losses and generalized chaos from the first few weeks of April, I’d suspect that those attitudes haven’t changed much (or, more likely, people have become even more skeptical of the Administration’s policies). The silver lining I see could be that protectionism continues its popular decline given how ineptly its greatest champion has defended it. Maybe if Trump continues to spend his resources defending this hill, his attention will be drawn away from some even worse policies.
That said, there are substantial green tornadic clouds attached to this silver lining. By writing and defending this report, the Council of Economic Advisors has greatly tarnished its reputation. One of the results we see in the literature on expert opinion over and over again is that when experts are over precise, provide low-quality information, and do not discuss alternatives, trust in them falls. This result holds even if the information ends up being correct. Accuracy does matter, but more importantly for communication is that the expert be forthright. The economists defending the tariff scheme, most notably Steven Miran, have been anything but forthright. Miran has even been called out for misrepresenting or outright lying about the information he cites. All this undermines what has, until these past few months, been a reliable source of expert advice. Diminishing the reputation of the CEA could cause the rise of economic “flat-earthism.”
We saw a similar event with public health during COVID. Fauci et al were not forthright about COVID, vaccines, or anything really. Fauci even said on multiple occasions that he lied or misled in order to accomplish some goal. Consequently, public confidence in the public health administrations plummeted and we saw the rise of anti-vaxxer sentiments.* Fauci et al ineptly defended public health and it had led to disastrous outcomes. I fear the same with my own profession.
A careful reader will note the two effects I discuss are counter to the other. I do not know which will ultimately prevail. To keep my metaphor going, sometimes the green clouds just hide a lot of rain and the silver lining prevails. Other times, the silver lining is diminished by a strong and destructive tornado. I hope for the silver lining. But I fear the tornado.
*Note: when I say “anti-vaxxer” I mean literally, in that they are anti-vaccine. Someone who opposes mandates is not an anti-vaxxer.
