Happy Boxing Day!

We humans got all sorts of books, electronic devices, food items, and other doodads for Christmas. As usual, though, the cats made out much better than us, having a grand time with all the packing ephemera. Later they climbed a few trees and looked longingly at some hummingbirds who were perfectly safe, but seriously annoyed at all the feline prowling near their feeder. Life in the wild is pretty tough these days.

Here's the latest version of the Arctic meltdown, this time in cheerful Christmas colors:

For a while there, it looked like maybe things were heading back down to normal, but then a few weeks ago temps started spiking again. It's now more than 30 degrees warmer than normal at the North Pole.

Data since 1958 is here. If you click through the years, you'll see that the previous record was somewhere around 15 degrees above normal for maybe a week or two. Current Arctic temps are not only higher than they've ever been, but they've lasted for about four months so far. I am pretty sure this means Santa's workshop has long since fallen through the thin ice and disappeared forever into the inky depths of the Arctic waters. Sorry about that, kids.

So let's suppose that Donald Trump really does impose a 10 or 15 percent tariff on all goods entering the United States. Or maybe only Chinese and Mexican goods.1 What would happen? Who would be the winners and losers?

The simplest way to think about this is to remember what happens when tariffs are reduced. Textbook economics says that overall GDP will grow, prices will go down, but certain groups of people will be disproportionately harmed. So if tariffs are increased, the opposite should happen. Economic growth would suffer, prices would go up for most people, but certain groups would benefit. It's not always clear what those groups are, but generally speaking workers in the sectors most vulnerable to foreign competition would probably benefit: textiles, clothes, shoes, rubber products, computer assembly, and so forth.

That's the theory, anyway. The reality is sometimes different. Free traders, for example, often point to the example of automobile tires. In 2009, President Obama slapped a huge tariff on Chinese tires in order to protect the US tire industry. The chart on the right shows what happened: other countries rushed to fill the void and tire imports skyrocketed. The usual estimate is that about 1,200 jobs were saved at a cost to US consumers of $1.1 billion. That's $900,000 per job, which is obviously a bad deal, but it's also a diffuse deal. Unions and tire workers were happy regardless of how things turned out, while consumers probably barely noticed that they were paying an extra dollar per tire.

If Trump enacted a tariff only on China, this is roughly what would happen: some of China's business would move to other countries, and net US imports would stay about the same. China would lose, other countries would gain, and in America it would be a wash.

But what if Trump enacted a 10-15 percent tariff across the board on every country? Economically, that would act like a sales tax on foreign goods. Prices would go up, which would allow American companies to increase production in sectors where a 10-15 percent advantage was enough to make them competitive.2 The exact way this would shake out depends on the elasticity of demand for various goods, but in the end American workers in certain sectors would almost certainly make gains, while all American consumers would pay higher prices. Is this tradeoff worth it? I'd say no, but plenty of people would disagree.

That's the 100-thousand-foot view, anyway. In real life, other countries would almost certainly retaliate—maybe via tariffs of their own, maybe in other ways. Boeing, for example, usually suffers when the Chinese get annoyed with us, because Chinese airlines develop a sudden fondness for Airbus planes. Or the authorities in Beijing could make life harder for American companies doing business in China. Or they could get nasty in any of a dozen other ways. Ditto for the rest of the world, which would appeal to the WTO at best and retaliate with their own trade barriers at worst.

And no matter what the rest of the world did, American companies would face headaches for years as they tried to rework their supply chains, which are global for nearly every product you can think of. American products use lots of parts made overseas, and lots of overseas products use parts (and services) from America. For example, a San Francisco Fed paper estimates that 55 percent of the value of Chinese goods is actually US content. To make this concrete, think about iPhones: If China ends up making fewer iPhones, that also means fewer jobs for the Apple sales force and lower sales for the plant in Texas that makes iPhone processors. The whole thing is a mess—and it's especially a mess if companies have no assurance about how long the tariffs will stay around or what's around the corner from the rest of the world as they figure out ways to get back at us.

The bottom line is this:

  • The impact on workers in certain sectors would be anything from negative (in the case of a big trade war) to fairly positive (if the tariffs worked and the rest of the world decided to ride it out).
  • Prices would go up for everyone. And since low-income workers buy more goods as a share of their income, higher prices would hit them the hardest.
  • Economic growth would almost certainly slow down.

Most likely, Trump's tariffs would be a bad deal for nearly everyone, and maybe—maybe—a good deal for a few workers and CEOs in the sectors that have been hardest hit by foreign competition.

More generally, you can't really talk about "trade" in the abstract. Basically, there's China and there's everyone else. China is our big problem, but the trouble with retaliating against China is that it's too late. We have lost a lot of jobs to them, but the damage was mostly done years ago. By the time Obama took office there was little he could do, and there's even less that Trump can do now. It's also true that China was a bad actor on the world economic stage for a long time. But again, their worst practices are mostly in the past. Their export subsidies are fairly low these days, and their currency manipulation is mostly to push the yuan up, not down. This benefits America, not China.

There is one best-case scenario, though: Trump threatens the Chinese and ends up getting some concessions from them without ever enacting any tariffs. Is that likely? I guess that depends on how good a negotiator you think Trump is. Unfortunately, his record in the business world doesn't give much cause for optimism on that front.

1Yes, he could do it. Details here.

2For example, if China makes clocks for $2 and America makes clocks for $3, a 15 percent tariff wouldn't do anything for American clockmakers. Even at a Chinese price of $2.30, Americans still couldn't compete. However, consumers would end up paying $2.30 for clocks instead of $2.

On the other hand, if China makes cars for $9,000 and America makes cars for $10,000, a tariff could have a big effect. Chinese cars would now cost $10,350, and that means consumers would buy a lot more American cars. Unless, of course, they really prefer the Chinese cars even at a higher price. It all depends, you see.

As you can see, Hopper is getting ready for Christmas. She has spurned this particular cat bed since the day we bought it, but as soon as we put it under the tree she claimed it as her own.

Does our tree look a little sparse? I assure you we have plenty of ornaments higher up, but we decided to keep the bottom foot of the tree free of distraction. I assume this needs no explanation.

To celebrate the Grinch version of Christmas, here's my 2016 list of stuff I've gotten tired of over the past year. I'm not suggesting that nobody should use any of these memes in the future. Go ahead! Who cares whether I'm annoyed? Nor are they the the worst cliches or most overused examples in the world. They're just things I've grown weary of. They are in no particular order. Enjoy!

  1. Side-eye tweets about "takes." This is mostly annoying coming from people who all write takes themselves. Stop the self-hatred! Some people are makers (i.e. reporters) and some people are takers. You should revel in your role in the journalistic ecosystem.
  2. The madman theory. Yes, yes, we all know that Richard Nixon tried to make Russia and China think he was a madman who needed to be treated with kid gloves. This strategy lasted, what? A year? And it didn't work. We've also heard it "explained" a thousand times by analogy to two cars speeding toward each other on a one-lane road, and one guy throws away his steering wheel. We get it.
  3. Correlation is not causation. If you're a serious researcher making a serious point about a serious study, you're fine. However, this usage is vanishingly rare. Most often it's tossed off by someone who thinks it's a brilliant riposte to anyone who demonstrates a correlation. Knock it off. It's not nearly as smart as you think it is.
  4. Container shipping revolutionized world trade. This is a true fact. I know it's true because people keep writing articles about it, as if it's some kind of revelation. Maybe it was 20 years ago. Today, not so much.
  5. Van Halen's brown M&Ms. If you don't know what this is, Google it. As for the rest of you, please find some other example to make whatever point you're trying to make.
  6. _____ is wealthier than the bottom 50 percent of the world. Look, the wealth of the bottom 50 percent of the world is zero. Everything is wealthier than the bottom 50 percent of the world. Headlines that use this format are nowhere near as amazeballs as many people appear to think they are.
  7. Ironic criticism of the White House Correspondents' Dinner from people who go to it. I know: you think this shows that you're a regular joe who's in on the joke. It doesn't. It just shows that you're afraid of people thinking you're part of the DC press corps.
  8. ____'s Terrible, Horrible, No Good, Very Bad ____. This is not the most overused cliche in the world, but it might be the laziest. You don't even have to think of some kind of clever construction. You just fill in the blanks and call it a day. Let's all give it a rest.
  9. Bloggers who complain about the press covering Donald Trump's tweets even though they obsess over them too. These guys are the worst.

Oh man:

Sam Brownback, the Kansas governor whose tax cuts brought him political turmoil, recurring budget holes and sparse evidence of economic success, has a message for President-elect Donald Trump: Do what I did.

....“My critics, which are many, they only want to look at the budget,” Mr. Brownback said in an interview. “They won’t look with any depth or detail at the impact on small-business growth or private-sector job growth. That’s the target, that’s what we’re after.”

....Mr. Brownback said a number of states face budget problems and said Kansas has “never had more private-sector jobs.”

It's technically true that Kansas has "never had more private-sector jobs." What that really means, however, is that despite five years of population growth and economic expansion under Sam Brownback, Kansas has only barely passed its previous peak from 2008—while the rest of the country passed that mark long ago. The chart on the right shows total Kansas private-sector employment vs. US private-sector employment starting in January 2011, when Brownback took office. His tax-cutting policies didn't work from the start, and the longer he's stayed in office the worse they've done. Kansas is the poster child for the failure of betting on tax cuts for the rich to supercharge the economy.

If you want a more sophisticated analysis that takes into account all the excuses people will toss at you (drought, airplane manufacturing, etc. etc.), check out Menzie Chinn. His latest is here, and you can search Econbrowser for all the gory details you want. Spoiler alert: None of them change the picture on the right.

The front page of my morning LA Times happened to feature the headlines on the right. The headline on women reminds me of this Slate piece about how a lot of women who voted for Trump are now worried that he might defund Planned Parenthood. And of course, there's yesterday's news about all the business titans who are suddenly concerned that Trump might raise tariffs. Even on the right, it seems like everybody's worried or alarmed or concerned these days.

We've seen dozens and dozens of headlines like this over the past few weeks. An awful lot of Trump backers seem sort of shocked by what's going on. I mean, he wasn't serious about all that stuff on the campaign trail, was he?

Who knows? But it looks to me like America has finally adopted a constitutional monarchy. The nice thing about this arrangement is that you have one person, the king or queen, who handles all the ribbon cuttings and so forth, and another person, the prime minister, who can then focus almost entirely on actual governing. In our case, Donald Trump is the new king of America, tweeting out nonsense, going on victory tours, and hobnobbing with famous people at Mar-a-Lago.

And then we have our new prime minister, Mike Pence. Freed from the demands of public appearances, he spends all his time behind closed doors running the country. He wants to kill Planned Parenthood. He wants to privatize the VA. He wants to immiserate millions of people on Obamacare.

Maybe Trump wants some of this stuff too. There's no telling, really. He mostly seems to be the guy tasked with distracting everyone while Pence fills the cabinet and chats with Paul Ryan about how to run the country. Among other things, this probably means that the business community doesn't need to worry. Pence and Ryan will talk Trump out of the wall and the tariffs and the replacement for Obamacare. If he starts to balk, they'll get Jared Kushner to whisper soothingly in his ear and then turn on the TV.

Welcome to the Mike Pence administration.

In his annual press conference, Vladimir Putin took a victory lap:

“Democrats are losing on every front and looking for people to blame everywhere,” Putin said in answer to a Russian TV host, one of 1,400 journalists accredited to the marathon session. “They need to learn to lose with dignity.”

....“Trump understood the mood of the people and kept going until the end, when nobody believed in him,” Putin said, adding with a grin. “Except for you and me.”

Putin has repeatedly denied involvement despite the accusations coming from the White House, and the Kremlin has repeatedly questioned the evidence for the U.S. claims. On Friday he borrowed from Trump’s dismissal of the accusations, remarking “maybe it was someone lying on the couch who did it.”

“And it's not important who did the hacking, it's important that the information that was revealed was true, that is important,” Putin said, referring to the emails that showed that party leaders had favored Hillary Clinton.

That last line is almost word-for-word what Republican apologists say. Putin is basically admitting that Russia was behind the hacks and then smirking about it. He must be having a good old time these days. I wonder how Republicans are going to feel about this when Putin decides it's time to get rid of Trump and help the other side?

The Washington Post reports that 2016 "had the lowest rate of population growth of any year since the Great Depression." The US population, it turns out, grew by slightly less than 0.7 percent compared to 2015. There's some good news and bad news about this. First the bad news: the working-age population is growing even more slowly than that. Here it is for the 21st century:

Our working-age population continues to grow, but only at a rate of about 0.5 percent per year. But here's the good news: at least we're not Russia. Their working-age population started declining half a decade ago and is now "growing" at the rate of -0.8 percent per year:

And then there's Japan. Their working-age population is also declining, but it didn't even start the 21st century in positive territory. Currently their working-age population is growing at the rate of -1.2 percent per year:

The working-age population in the US isn't growing very fast, but it's growing faster than almost any other developed country.