Must-Read: Paul Krugman: Reagan, Trump, and Manufacturing

Must-Read: What produces manufacturing decline is not “trade deals” but stupid industrial and macroeconomic policies–like those of Reagan, and now Trump:

Paul Krugman: Reagan, Trump, and Manufacturing: “It’s hard to focus on ordinary economic analysis amidst this political apocalypse…

…But getting and spending will still consume most of peoples’ energy and time; furthermore, like it or not the progress of CASE NIGHTMARE ORANGE may depend on how the economy does. So, what is actually likely to happen to trade and manufacturing over the next few years?… We have what looks like an unusually good model in the Reagan years — minus the severe recession and conveniently timed recovery, which somewhat overshadowed the trade story…. A large move toward budget deficits via tax cuts and military buildup, coupled with quite a lot of protectionism… the import quota on Japanese automobiles was one of the biggest protectionist moves of the postwar era…. What happened in the Reagan years was “twin deficits”: the budget deficit pushed up interest rates, which caused a strong dollar, which caused a bigger trade deficit, mainly in manufactured goods (which are still most of what’s tradable.) This led to an accelerated decline in the industrial orientation of the U.S. economy…. Trumpism will probably follow a similar course; it will actually shrink manufacturing despite the big noise made about saving a few hundred jobs here and there…