Friday, September 7, 2012

EPI, The Unions' Very Own Think-Tank - Or - Always check your source!

A 2001 Pew Research Center Survey showed 49% of Americans were in favor of the North American Free Trade Agreement (NAFTA). By 2010, supporters amounted to only 35% of those surveyed, while 44% were against it - with 55% believing NAFTA had produced a net loss in jobs, and only 8% believing it resulted in net new jobs. The 8%, by the way, had it right (or did they? See below*). Interestingly, Republicans (the "free market" party) exhibit a stronger loss in support than do Democrats. In 2010, a mere 28% of Republicans favored NAFTA. And, surprisingly (given their platform) only 24% of Tea Partiers thought NAFTA a good idea**.

Now you understand precisely why, as I suggest in earlier columns, protectionism is where left and right merge. Where survey/poll-inspired politicians, from both sides of the aisle, exploit this most pernicious misconception among voters.

*In verifying the above claim - that NAFTA created net new jobs - I discovered that stats compiled by the Economic Policy Institute (EPI) strongly suggest otherwise. The EPI claims that NAFTA resulted, not in new jobs, but in a whopping net loss of some 700,000. At first blush, I'm thinking "Wow, 700,000 (net) folks lost their jobs as a result of NAFTA. How can there be such disagreement on something that you would think is fairly estimable?" As it turns out, the EPI's number is based on what, in essence, [they say] would have been the new job number had the goods we imported been produced in America. They assume (I take it) that the quantity of a good we Americans purchased from say Mexico (because it was cheaper than it's facsimile made in America) would have been purchased every bit as aggressively (in spite of the higher price) were it made in America (and they do it convincingly with graphs). Now, given how odd, and rudimentary flawed, that argument is, I figured I better check out the EPI. And, sadly, what I discovered was the worst sort of cronyism. Why am I not surprised?

Let me just say that when the organizations providing the start-up (and ongoing) funding for your organization are the AFSCME, the United Auto Workers Union, the United Steel Workers Union, the United Mine Workers Union, the International Association of Machinists, the Communications Workers of America, the Service Employees International Union, and the United Food and Commercial Workers Union, you'll have more than a little incentive to bend your findings in a certain direction. Essentially, the unions created their very own think-tank, gave it an official-sounding name, and charged it with manufacturing statistical evidence that supports their specific objectives. Now if that doesn't convince you of the abject collusion at hand, consider that the President of the EPI is none other than Lawrence Mishel, a long-time member of the Democratic Socialists of America.

I understand where Mark Twain was coming from when he said "There are three kinds of lies: lies, damned lies, and statistics."

Here's the other side of the story (Washington Post 2008), which includes no hypothesizing. But (of course) considers only supporting data.

"With NAFTA, our economy remains the envy of the developed world. In fact, by most indicators, America has outperformed the average of the Group of Seven nations. Since 1993, our economy has grown 54 percent and more than 25 million net jobs have been created. In the 14 years before NAFTA, our nation's average unemployment rate was 7.1 percent. From 1994 to 2007, the average was 5.1 percent. U.S. manufacturing has grown at nearly 4 percent annually since NAFTA was enacted, nearly double that of the previous 14 years.

America is the world's No. 1 exporter, with $1.6 trillion in exports of goods and services last year; 2007 also marked our fourth consecutive year of double-digit export growth. Trade plays a significant role in our nation's economic growth, contributing 26 percent of the increase in real gross domestic product last year. NAFTA also accounted for a third of our overall goods exports in 2007. This trade benefits American workers who make the products we send abroad, American farmers who grow the agricultural exports, and American families and consumers who have more choices in our stores."

(In the interest of full disclosure; the author of the Washington Post article is Carlos Gutierrez, who served as the U.S. Commerce Secretary (appointed by GW Bush) from 2005 to 2009. Although NAFTA was established in 1994, under WJ Clinton.)

In the words of Milton Friedman:

"Complete free trade is not politically feasible. Why? Because it's only in the general interest and in no one's special interest. The benefits of a tariff are visible. [Union workers] can see they are "protected". The harm which a tariff does in invisible. It's spread widely. There are people who don't have jobs because of tariffs, but they don't know it."

And in the words of Dr. Friedman's idol Adam Smith:

"By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland?"


"It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy...What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom."

Lastly, to capture the political flavor of my message: While campaigning to an Ohio audience in 2008 candidate Obama railed at the "1 million jobs lost to NAFTA". In 2010, he takes credit for what some say is a NAFTA clone, the

1 comment:

  1. Excellent article! I'm going to print it for my 18 year old son as a demonstration of how badly special interests can sway statistics, and how politicians pick and choose among those that fit their current needs to get support and/or be relected.