In what may be the last international trip of his presidency, Barack Obama met with leaders in Peru this weekend to continue negotiating the Trans-Pacific Partnership, an agreement which would strengthen economic ties between the United States, Japan, and ten other countries.
But hanging over the meeting was a promise made repeatedly by President-elect Donald Trump on the campaign trail, and one he says he will implement within his first 100 days in office: to withdraw the United States from the TPP.
Withdrawal from the TPP is one of many economic proposals Trump has promised to act on when he assumes the office of the presidency, along with implementing major tax cuts and rolling back financial regulation, launching a $1 trillion dollar spending campaign on infrastructure projects, and more.
Kenneth Rogoff, professor of economics and public policy at Harvard University, joined Boston Public Radio to discuss some of these policies and their long-term ramifications.
MARGERY EAGAN: A lot of us were hysterical in the days leading up to the election that if Donald Trump won, not only would the market drop considerably but our 401ks would be in the rubbish pail. Then there was that drop briefly—and then the markets went back up again. What’s the deal with the market and Donald Trump?
ROGOFF: It's hard to explain markets in general, so I'm not going to read too much into it. But I think we have to distinguish between: is he bad for the economy, or bad for the United States? I think they’re two separate questions. If you get read of the environmental law, growth is going to boom. But maybe we get skin cancer 20 years earlier. I think there are serious questions about regulation where maybe the Obama Administration went too far, and maybe he’ll pull back. Then again, some of those regulations maybe we really want. It’s complex. I thought it was one-sided of the media to portray him as a disaster for short term growth, especially given that he has a Republican Congress.
JIM BRAUDE: You surely embrace the notion of addressing inequality but you don't think getting out of these trade deals in the case of NAFTA or canceling in advance or not signing TPP are the way to go. Why? Why are his policies not good ideas on trade?
ROGOFF: On the Pacific one, both candidates were going to renounce it, basically. Sanders campaigned strongly against it. I think the correct analysis of that one is it didn’t affect the U.S. very much. It actually opened up Japan a lot. It was very good for poor countires—Vietnam, Peru—and we were sort of providing a leadership role. It’s more symbolic, really, our withdrawing from that. China isn’t even in it, and that’s a lot of the bone of contention here. I fear if we pull back on trade, it’s not going to be so good for inequality on the purchasing side. Poor people, lower-income people, they buy things from Wal-Mart and stores where the prices are going to go way up. I think as far as bringing manufacturing jobs back, we may bring manufacturing back, but robots might be taking the jobs.
BRAUDE: Let's focus on China for a minute though. There's potential for a trade war with high tariffs...you've written about the impact on low-income people, tens of millions of low-income people in China. Should that concern us in a selfless way as Americans, or a selfish way that it is in our economic self-interest for there not to be abject poverty in China?
I think we have to distinguish between: is [Donald Trump] bad for the economy, or bad for the United States? I think they're two separate questions.
ROGOFF: I think it's both. Some of the inequality conversations are very inward-looking, and overlooking the fact that the last three decades have been the best in the history of the world for relieving real poverty, hundreds of millions—billions—coming out of abject poverty. To proclaim capitalism as a failure, as Thomas Piketty does, is staggeringly hypocritical. That said, there’s a real question about who the winners and losers are. Do you compensate them? We haven’t enough. There’s no doubt about that. The best way to do it is through a progressive tax system. We seem to be going to a more regressive tax system, at least that’s what the early indications are. I don’t think this is so easy, to pull out of globalization. By the way, pulling out of NAFTA is a whole other cup of tea. We agreed to [NAFTA.] It's a treaty.
BRAUDE: He doesn't have the power to withdraw from this, should he choose?
ROGOFF: I’ve heard mixed things on what the president can and can’t do. Possibly, even if he can’t withdraw from it, he can make the implementation so awkward that Canada and Mexico wish they weren’t in it. I mean, all this emphasis on NAFTA—let’s face it, Bernie Sanders did this too, [saying] 'Hillary Clinton supported NAFTA, it's awful'—but it’s our trade with China that’s the overwhelming thing. With Canada, it’s a very different mix: car parts, maple syrup...It’s the trade with China people are really feeling. But if it wasn’t China, it might be automation. Manufacturing in the U.S. has been going up, it’s not going down. It’s the jobs that haven’t been going up.
EAGAN: What do you say to the people, from an economic perspective, who feel they can’t pay their mortgage and can’t send their kids to college? There is a real legitimate economic anxiety.
ROGOFF: Absolutely, the lifestyle hasn’t improved at the rate it’s been improving. We went through this long period after Wold War II. where things were just getting better and better. I wouldn’t quite buy the statistics that say it’s been so stagnant. For example, life expectancy has been steadily going up every decade, significantly, but clearly we’ve run in a period where we’ve had tax policy especially go in the opposite direction of income distribution. I actually think the Bush tax cuts in the early 2000s were a huge mistake. It made the tax system more complicated, it was very regressive. That’s the first line of defense: improving redistribution. These are forces you can’t turn away form. Automation is coming even without globalization. Trying to find ways to share these gains and make everybody better off is very important.
To hear more from Kenneth Rogoff, tune in to Boston Public Radio above. This transcript has been edited and condensed for clarity.