February 5, 2014, Helene Jorgensen and Eileen Appelbaum

Charles Lane is wrong, as usual, in arguing that the Trans-Pacific Partnership (TPP), like its predecessor NAFTA, is good for U.S. workers. However, the piece is useful in providing an opportunity to explain some basic economics.

Most of the piece is dedicated to saying that NAFTA, which to some extent is a model for the TPP, was really good for the country. Lane starts by disputing that NAFTA contributed to the $181 billion trade deficit that the United States ran with Canada and Mexico. He tells readers:

"But $100.7 billion of this deficit is because of oil imports, according to U.S. government trade statistics. NAFTA has nothing to do with this; Canadian and Mexican oil imports always flowed freely."

Nope, that's not how it is supposed to work. The United States is a net importer of oil and derivative products. That does not mean that the United States is supposed to run a trade deficit. According to good old econ 101, a deficit on oil trade is supposed to mean that the dollar falls, which then leads us to increase exports and reduce imports of other items. This adjustment would not take place over night, but we would expect it to take place over a long enough period of time. So pointing to oil imports and saying that we really don't have a trade deficit with these countries really is silly. (This doesn't mean the deficit is due to NAFTA, but it certainly doesn't preclude the possibility.)

Then Lane gives us a head scratcher. He tells us this trade figure doesn't include, "almost $90 billion worth of goods that entered this country from elsewhere and then got re-exported to Mexico or Canada." He then points out that re-exports create jobs in the U.S. in shipping and other areas. Incredibly, Lane then adds in the full $90 billion value of the re-exports, telling readers:

"Eliminating oil and including re-exports produces a U.S.-NAFTA surplus of roughly $7 billion in the goods trade."

Wow, so we get just as many jobs from having one million cars pass through ports in Oakland and Los Angeles on their way to Mexico and Canada as we do from building one million cars and exporting them to Mexico and Canada? Apparently we do on the Post's opinion page. Remember these are the folks, who in NAFTA boosterism, claimed Mexico's economy quadrupled from 1987 to 2007. (The actual increase was 83 percent.)

Recently some opponents of an increase in the minimum wage have argued that we are using an inaccurate measure of inflation when we say the 1968 minimum wage would be equal to about $10.00 an hour in today’s prices. They argue that if we use the Personal Consumption Expenditures Deflator (PCE) to measure inflation --instead of the Consumer Price Index (CPI-U, modified slightly to reflect current methods back as far as 1968-- we would need a minimum wage of just $8.50 an hour to have the same purchasing power as in 1968. Furthermore, if we take the average value of the minimum wage over the years 1960-1980, the current minimum wage of $7.25 would already be roughly equivalent in purchasing power.

Dean Baker
The Guardian, January 3, 2014

Dean Baker
The Blog, Huffington Post, February 3, 2014

Mark WeisbrotThe Guardian, January 31, 2014

Dean Baker
PBS, January 31, 2014

Via Bryce Covert , I see that Senator Rand Paul told a Chamber of Commerce audience recently that being “married with kids versus unmarried with kids is the difference between living in poverty and not” and that the government “should sell that message.”