I have a really sort of bone headed clip to play for you today from a Republican senator
from Florida, Rick Scott.
And the clip is interesting, but really it's going to serve as a kind of jumping off point
for us to talk about really some of the basics of how the American economy is organized and
how it is really based on the type of relationship that we have with China.
And so the point of this is for us to better understand why Donald Trump's critique of
the U.S. China trade relationship is so wrong and so misguided.
And you really can't understand that unless you understand some of what we're going to
talk about here.
So as many of you know, you've probably heard Trump say, and it's true, the United States
imports a ton of stuff from China.
This includes raw materials.
This includes finished electronic products and other products.
And we don't export as much to China as we import from China, meaning we have a trade
deficit with China.
The obvious reasons why this is the situation include labor is cheaper in China.
The weaker regulatory environment in China also makes it financially advantageous to
do this.
That's all true.
But there's really a lot more to this that we have to understand.
So to set the conversation, here's Florida Senator Rick Scott.
He's a Republican, of course, saying nobody in the United States should be buying stuff
from communist China.
Let's look at what he had to say.
I believe this was yesterday or the day before on the floor of the Senate, which prohibits
the U.S. government from purchasing drones manufactured in countries identified as national
security threats like Iran and China.
We know communist China steals our technology and intellectual property.
Yet the U.S. government continues to buy critical technology like drones with American tax dollars
from Chinese companies backed by their government.
No one in America should buy products made in communist China, especially not the U.S.
government.
We cannot continue this practice.
And my American Security Drone Act is a commonsense solution to end this threat to our national
security.
So what these Republicans and to be honest, many Democrats get this wrong as well.
What is being missed about the China trade conversation so often is that our trade deficit
with China and China holding so much American debt as they do through bonds.
This is not a bug in the system.
We might not like it, but it's a feature of how this system is designed.
And I'll explain to you what that means.
Collectively, the United States decided implicitly, the United States decided decades ago that
we value cheap products from China more than we value domestic production.
We don't want to pay more for stuff that's made in the United States.
When I say we, you might be okay with it.
But as a country in organizing our economy, our leaders have decided we want the cheap
stuff from China.
So our entire economy is based around specialization.
And this includes exporting services like we increasingly do to China, but importing
products, products that have been made in China because the demand for these products
is so high and many of these products would not be affordable to everyday Americans if
they were manufactured in the United States.
Now, that's because of a whole other set of problems.
But if we're going to talk about the U.S. China trade relationship, we have to sort
of set this basic understanding.
So naturally, this means we're going to import more stuff from China than we're going to
export.
And that's where you get a trade deficit.
That's the trade deficit.
Trump refers to.
And many Republicans refer to.
Now, when you hear the word deficit.
It sounds bad.
It's meant to sound bad because we think, oh, deficits, bad, surpluses good.
If you think about your household economy, your household budget.
You want to be running a surplus.
You want to have something left over at the end of the month rather than than to be deficit
spending, charging stuff at the end of the month with the trade relationship.
It's not deficit bad surplus good necessarily.
We run a trade deficit by design because of how we've organized the economy to depend
on that cheap stuff from China.
So everybody in the U.S. can afford more stuff instead of less stuff.
And part of what keeps China competitive in this context is that they set the value of
their currency relative to the dollar using what's called a modified fixed exchange rate,
which basically means if the dollar loses value, China will start buying dollars through
bonds.
This is how China ends up holding so much of our debt because they want to keep that
exchange rate between the dollar and the yuan roughly the same.
Now, over the last few years, China has reduced the degree to which they do this.
But part of why China is buying so many bonds and.
Holding so much of our debt is because of this trade relationship that we decided we
wanted in order to keep the flow of cheap Chinese stuff coming to the United States.
Now, I think it's a good moment to mention you hear the right.
Always go crazy.
China owns us.
China owns our debt.
Japan actually hold more of our debt than China.
But for political reasons, you don't really hear much about that.
Japan's just not considered a threat in the same way that China is because their economy
is a different type of economy.
But the point here is we as a country, we as an economy could decide we don't want to
import stuff from China anymore.
We don't like the political idea of importing stuff from China.
We don't like the economic idea, as Rick Scott said.
Let's stop buying from communist China.
We could do that if we wanted.
But you have to understand that specialization and trade, including with China in total,
have created more jobs in the United States than have been destroyed due to outsourcing.
We've given tens of millions of Americans access to products which we now take for granted.
So I'm not defending it.
What I'm saying is if we want to have the conversation of no longer having a trade deficit
with China, of no longer buying stuff from communist China, as Rick Scott says, we can
do that.
It would have massive consequences here in the United States.
Things would get more expensive.
A lot of people would lose jobs, but we might decide that in the long run it's worth it.
But if we're going to have this conversation, we have to have the full conversation because
we have this fantasy conversation where Trump says get rid of the trade deficit.
Rick Scott says don't buy stuff from communist China.
And people end up coming away with this idea that we could just stop buying from China
manufactured domestically and the economy would be otherwise unaffected.
Other than we've brought jobs home or whatever the case may be, that's not the reality.
So I'm not saying what would be right or wrong.
What I'm pointing out is we have decades of economic policy built upon the foundation
of we value the flow of cheap goods from China more than we value a lot of other things that
we could value in the economy.
Don't allow Republicans like Rick Scott and Trump and even some Democrats who don't really
understand this.
Don't let them oversimplify this into stupidity with let's just end the trade deficit type
of stuff because we have decades of implicit and explicit decisions built upon.
We want to keep the free.
I'm sorry.
We want to keep the cheap stuff coming from China.