Should-Read: A well-argued smackdown from the smart Dean Baker:

Dean Baker: Opposition to Trade Deals: Brad DeLong’s “Socialism of Fools” Might Look Like Common Sense to Those Outside the Fraternity: “First, Brad is well aware that the economy has operated well below full employment… http://cepr.net/blogs/beat-the-press/opposition-to-trade-deals-brad-delong-s-socialism-of-fools-might-look-like-common-sense-to-those-outside-the-fraternity

…I would argue this has been the case for almost all of the period since the collapse of the stock bubble in 2001. But he attributes this to a simple failure of the government to run full employment policies, rather than the large trade deficits we saw develop following the East Asian financial crisis in 1997. While… the government could maintain full employment by running much larger budget deficits… that does not appear to be politically feasible. Even among Democrats, very few are willing to say that we should have larger budget deficits to bring the economy to full employment….

The costs of being below full employment are disproportionately borne by disadvantaged groups in the labor market, especially African Americans and Hispanics.

Anyhow, if the political reality is that we will not have full employment fiscal policies, does it take a “fool” to argue that big trade deficits are a real problem? The cost of the shortfall in demand that we have seen over the last decade almost certainly exceeds $10 trillion by now and it is enduring, as we have seen lasting reductions in capacity, as Brad has written about himself. And millions have seen their lives and families disrupted by long periods of unemployment. Should we not worry about this damage from the demand shortfall created by trade deficits because there is in principle an economic fix, even though everyone knows it is not politically feasible?…

The loss of manufacturing jobs, which offered relatively good paying employment for people without college degrees (roughly two-thirds of the labor force), had a large effect on the wages of this group of workers. There was both the immediate effect on the displaced workers and their communities, which has been well-documented by David Autor and his various co-authors, and also the longer term effect from the reduced demand for less-educated workers…

I really have no good answer to his first and second points—they are good ones, and my only practical out for the future is a hope that the Federal Reserve will move to and then achieve a higher inflation target. The third I would push back against—the “loss of manufacturing jobs” is overwhelmingly not a trade phenomenon, and the net factor content of our exports and of activities financed by capital inflows is not that different from the net factor content displaced from employment by imports. We should be focusing on policies to achieve equitable growth, not less-inequitable stagnation…