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Trump Claims That Trade War Only Risks 'The Bank's Money'

He's so, so wrong about that. But at least he's admitting a trade war won't be good or easy to win.

In the middle of the Frank Capra classic It's A Wonderful Life, there is a sudden run on the banks—just as George Bailey is about to leave on his honeymoon, naturally.

You remember the scene.

The hardy working-class folks of Bedford Falls rush to the ramshackle Bailey Building and Loan, determined to pull their money out of the institution. George defuses the situation by appealing to their common sense. The money his investors want isn't in the safe, he reminds them, because it's invested in other things. "You're thinking of this place all wrong," George tells one irate investor demanding to be paid the lofty sum of $240. "The money's not here. Your money's in Joe's house. That's right next to yours. And in the Kennedy house, and Mrs. Makelin's house, and a hundred others."

George is right, of course. And the analogy works in the modern world too. When stock prices climb, for example, the money made by investors doesn't get sucked out of the market and tucked away into a vault. Sure, savings are important, but George Bailey knew what all savvy money managers know: Money has to be put to use to be any good. The wealth created by nearly a decade of solid economic growth isn't sitting in a bank somewhere. It's in Joe's business, and the Kennedy venture, and in Mrs. Makelin's retirement account.

Which brings me to President Donald Trump. In an interview that CNBC aired over the weekend, Trump tried to wave away the potential negative economic consequences of his trade war by suggesting that "we're playing with the bank's money."

As CNBC goes on to explain, the stock market is up 31 percent since Election Day 2016. Trump seems to believe that those gains give him the flexibility necessary engage in a trade war.

To paraphrase George Bailey: Mr. President, you're thinking of this place all wrong.

The notion that any losses incurred by a trade war won't hurt because we're only risking recent economic gains is a dangerous misunderstanding of how economies operate. That logic might work in one of Trump's casinos: win a few hands of blackjack, and it's easy enough to set aside your original chips and "play with house money," as the saying goes. But the president is forcing ordinary Americans to risk economic gains they might prefer to put to other uses.

Trump might measure the success of his trade war by the impact on the stock market, but that ignores the far more practical effects felt by workers and businesses from coast to coast. It ignores the jobs that could be shipped overseas to avoid tariffs, and the loss of jobs at businesses that simply can't compete with artificially higher costs for raw materials such as steel and aluminum. The administration's plan to slap tariffs on imported cars and car parts alone could reduce U.S. economic output by $59 billion, the Commerce Department was told at an administrative hearing last week.

Trump continues to escalate the trade war. On Friday, he said he's willing to impose tariffs on $500 billion worth of Chinese imports—in other words, just about all of them—after already hitting $34 billion of Chinese goods with tariffs earlier this year.

If that happens, the economic consequences of the trade war will outweigh the economic boost created by last year's tax cuts, according to a new analysis from The Tax Foundation, a nonpartisan think tank. "If all tariffs announced thus far were fully enacted, U.S. GDP would fall by 0.47 percent ($117.6 billion) in the long run, effectively offsetting one-quarter of the long-run impact of the Tax Cuts and Jobs Act," write Tax Foundation analysts Erica York and Kyle Pomerleau. "Wages would fall by 0.33 percent and employment would fall by 364,786."

Just the bank's money? Hardly.

This isn't just an economic blunder; it's probably a political blunder too. After two years of touting economic growth and a rising stock market as proof that his administration is doing the right thing, it's odd to suggest that those gains are only collateral against future mistakes. And it's hard to imagine that voters will shrug off the costs of a trade war by saying, "Well, it was just the bank's money."

Other Republicans seem to be picking up the line the White House is pushing:

At the risk of overanalyzing anything Trump says for deeper meaning, his comments to CNBC also seem to be the first indication that the president believes this trade war might be something other than "good and easy to win," as he famously tweeted in March. If he's admitting the "bank" might lose some of its money, that's a pretty clear acknowledgment that a trade war will have costs. His attempts to downplay those costs with a misunderstanding of how the economy works is scary, but at least there's some indication that the White House is, maybe, starting to see a bit of reality.

Photo Credit: KEVIN LAMARQUE/REUTERS/Newscom

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  • Ben_||

    Another day, another 10 posts complaining about something Trump said.

  • Scarecrow Repair & Chippering||

    If you are saying that only Trump's actions count, well guess what, his words are actionable by businesses all over the world, and the action they generally take is to pause all plans because they don't know what's going to happen.

    Anyone who thinks Trumps words are just noise has no sense.

  • Just Say'n||

    In economic matters, his words matter. In foreign policy, actions speak louder than words and the actions don't support the implications that are being made.

    Both arguments can be true

  • LynchPin1477||

    In foreign policy, actions speak louder than words

    I agree with that, but words still matter. If Trump pisses off other heads of state personally or, more importantly, their electorates (those that have them, anyway), it makes it a lot harder to convince other countries to do things that the US wants them to do. I used to think that international affairs could use a kick in the ass, but I'm coming to the realization that diplomatic norms matter, if for no other reason than that a whole bunch of other people that we have to live with care about them.

  • Just Say'n||

    That's a good point.

    In most cases, though, he gets criticized for being overly friendly with foreign leaders that he should view as "baddies". But, you're right that he is probably upsetting German citizens with his lecturing of their government.

    I rescind the point

  • DiegoF||

    I don't think that, ultimately, this is going to do jack shit electorally in Germany or any other of these countries. It might be something for local neoliberals to rage extra hard about for a news cycle or two, but ultimately it's not going to move the needle for Merkel, May, or even someone more popular like Macron. Or Michel (the prime minister of Belgium, whose name I just threw in there because it also starts with M).

    Trump does not really remain a permanent fixture of domestic politics like that anywhere but Mexico, and there he is actually so much so that he was actually neutralized as a factor in the recent election. (And as a few commenters actually paused the lazy, easy, outrage bait narrative to observe during the race, Trump who could not "even" get along with the weak, feckless conservative incumbent actually seemed to like the far-left insurgent, who in turn betrayed small signs of getting along better with him himself.)

  • sarcasmic||

    REASON IS A LEFTIST RAG BECAUSE IT COMPLAINS ABOUT TRUMP! IT NEVER COMPLAINED ABOUT HILLARY OR OBAMA! IT'S LEFTIST! COMMUNIST! AAAUUGGGHHH!!!!

  • Ben_||

    There are 1000 places to hear random complaints about Trump tweets. When it was complaining about Obama, Reason had more of a unique perspective.

  • Juice||

    Really? There were no other outlets complaining about what Obama said?

  • Ben_||

    You are correct: 0 and 1000 are the only 2 numbers.

  • Zeb||

    Well, he is the president.

  • Diane Reynolds (Paul.)||

    Sounding more progressive every day.

  • Stormy Dragon||

    And the analogy works in the modern world too. When stock prices climb, for example, the money made by investors doesn't get sucked out of the market and tucked away into a vault.

    After the initial IPO, none of the gains in a share of stock's value are invested in the company. If I buy a share of Microsoft right now at 107.85 and next year it is wort 120.85, that doesn't mean the Microsoft corporation got $13 to finance its operations. So the comparison to bank deposits being tied up in a mortgage is ridiculous.

  • Jerryskids||

    And Microsoft didn't get the original 107.85 you paid for the stock, either. It was some other investor who sold you the stock, based on the calculation that he had a better use for the money than letting it sit in a share of Microsoft. Just as you are going to do next year, decide whether you have a better use for 120.85 than letting it sit in a share of Microsoft. If, thanks to Trump's actions, your share of Microsoft is only worth 110.85, are you just going to shrug off the loss of 10 bucks as a cost of making America great again? If you want to make a fantastic omelet, you gotta break a few eggs and it's easy to do if it's somebody else's eggs you're breaking.

    But Trump is almost giving the game away with his comment about the bank's money - Trump got rich and successful the same way so many speculators do, by making damn sure he was always playing with OPM. When he says "the bank's money" he really means "it ain't my money so why do I give a shit?" Which is why he called his casino venture a success despite the fact that he bankrupted the casino - he got his money back out and a little more before he bankrupted it, so it was the banks and other investors that lost a billion or so, Trump ultimately didn't lose a dime. Not that this is any different than any other politician promising to do great and wonderful things with money that ain't theirs.

  • Just Say'n||

    "Which is why he called his casino venture a success despite the fact that he bankrupted the casino"

    Which is hilarious. How on earth do you go bankrupt running a casino? The odds are forever on your side

  • Juice||

    Well, you have to pay people (well) and attract enough suckers customers to fund it all. If the people don't come to lose their money in your casino, you lose your casino.

  • Unicorn Abattoir||

    Ask one of the many casinos in Atlantic City that are now defunct.

  • damikesc||

    Have you SEEN Atlantic City?

    Getting anybody to even go to that shithole takes a miracle.

    The Trump properties were meh, honestly.

    I used to work at the Borgata, so I had an excuse to be there.

  • Bretzky||

    Which leads to one of my favorite Simpsons' moments:

    https://www.youtube.com/watch?v=Ovfap2VtpHM

  • Unicorn Abattoir||

    Great link.

    What the hell are you doing with my money in your house, Fred?

  • DiegoF||

    I am starting to fear that people will begin to tire of Trump's endearing wackiness. Not every show lasts eight years.

    Also I really was never convinced Trump knows what he's doing with this, and things like this don't help. I've never really seen a convincing argument that this trade gamesmanship is a bad idea, but I certainly am fearful. And it's important that its effects don't slow down the economy before November in particular.

    Plus I know we're in the process of an enormous demographic coalition shift in our party system, but I don't want to see him tank in middle-class suburbia just yet. Suburban moms secretly love immigration control (they respond very well to safety fears), but they don't like trade gambits (or guns or threats to "reproductive rights" for that matter, but this is just something to further tip the balance). And the future of my entire state rests right now with three State Senate seats on Long Island. (Probably the paradigmatic example of the above description.)

  • Weigel's Cock Ring||

    Graham is right about this one. Kind of like how America had to experience some pain during World War II in order to ultimately smash Nazi Germany and Imperial Japan.

    China is not our friend, they're our enemy, no matter what the billionaires want you to think.

  • sarcasmic||

    If you are trading then you are not enemies.

  • Just Say'n||

    Or rather, by trading you tamper down animosity. Therefore, we shouldn't have trade sanctions.

  • DiegoF||

    Julia Roberts knows if you can Sleep with the Enemy you can sure as fuck trade with him.

  • damikesc||

    We were trading with Germany until the moment they declared war in 1941..

  • Weigel's Cock Ring||

    Remember, Sarcasmic's version of the Ancient Art of War goes as follows:

    1) Losing is better than winning.
    2) When you're getting your ass kicked, accept it and continue to get your ass kicked.
    3) Always fight all your battles on the other guy's terms.

  • PG23COLO||

    Government interference doesn't make markets work more efficiently. If it did, the former Soviet Union would still exist. Trump is making war on economic liberty. His policies makes perfect sense for a bully.

  • ||

    He owes it to himself to make such humorous statements.

  • swampwiz||

    It's seem that Graham is now a complete sellout to Trump. I guess he's the type of "man's man" that likes a strong man, and with his buddy McCain out of the picture, he's glommed on to another alpha male.

  • enviro414||

    So . . . Buy American made.

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