Tariffs, fair trade and the legacy of Reaganism

"A trade balance is a measure of national power that reliably identifies rising and falling nations." So writes Pat Buchanan in this must-read op-ed on the state of the American economy: Who Killed the Middle Class?  As Buchanan notes, the policy of free trade begun under the first President Bush worked to accelerate the problem of America's trade deficits with foreign powers, one of the fundamental drivers of the collapse in the growth of the middle class:

Since Bush 1, when some of us began to argue loudly that a mindless ideological pursuit of free trade would imperil America’s industrial base, the total of U.S. trade deficits in goods with the world is approaching $10 trillion — 10 thousand billion dollars! 

Might this humongous dumping of foreign goods into the U.S.A., killing our factories, and the liberation of our transnational elite to close plants, outsource production, and bring foreign-made goods back free of charge into the U.S. market, have had something to do with killing the middle class? 

The U.S. median income stopped growing in the mid-1970s, the same time we began to run 40 straight years of ever-expanding trade deficits.

Buchanan's analysis skirts around something that few politicians will openly admit:  the ideology of free trade has resulted in the deliberate de-industrialization of our country. This policy of de-industrialization has had catastrophic consequences across the board not only for the middle class, but also for the working poor. As manufacturing jobs in industry & textiles have collapses, the engine for economic mobility in our economy has gone from a sprint to a crawl.

If one raises this point among conservatives or libertarians nowadays, there is almost always an eventual retort to the legacy of Ronald Reagan. Wasn't Reagan, the argument goes, an advocate for free trade? Rhetorically, Reagan embraced the language of free trade while actually using tariffs and trade protections for American industry to support the policy of fair trade. And that's not just my candy-colored reading of history. Here's a report, issued by the pro-free trade libertarian Cato Institute, written in 1988 (the last full year of Reagan's second term), demonstrating conclusively that the Reagan administration engaged in a large number of interventions in the trade system in order to protect the American marketplace for American companies and American workers.

In trade, as in most other aspects of his administration's policies, Reagan was no doctrinaire ideologue. Buchanan, who worked in the communications department of the Reagan White House, understands far better than most what roots of the current American economic crisis. At its root, it is a crisis of the middle class. And it is a crisis that pre-dates the 2008 melt-down by decades.