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Unleash Prosperity Hotline
Issue #1239
04/08/2025
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1) Want to Cut the Trade Deficit? Have a Good Long Recession

One of the dumbest theories from the NatCons that we keep hearing of late is that we have to eliminate America's "trade deficit."

As we've shown many times on these pages, the trade deficit is simply a mathematical mirror image of our capital import surplus.

But what is also misunderstood is the trade deficit corresponds with prosperity.

As the FRED blog has put it in their headline analysis: "trade deficits decrease in recessions and increase in booms"

Here is their clear cut analysis:

"How does the trade balance relate to economic activity? The graph below shows that every time there's a recession, the trade deficit tends to decrease. Or, if we go farther back in the past, the trade surplus tends to increase."

That's because Americans have more money to spend on imports when times are good and much less money when times are tough.
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2) How Trump Can Score a $7 Trillion Win for Free and Fair Trade

Markets cheered the prospects of a zero-zero deal with Israel yesterday. Why not take it global? Trump has proposed it himself in the past. UP co-founders Stephen Moore and Dr. Arthur Laffer lay it out in today's WSJ:

In 2018 at the Group of Seven meeting in Charlevoix, Quebec, Mr. Trump made a remarkable free trade proposition to the world's leaders: The U.S. would lower its tariffs to zero if their nations would do the same.

His exact words were: "No tariffs, no barriers. That's the way it should be. And no subsidies. I even said, 'no tariffs.' . . . Ultimately, that's what you want. You want tariff-free, no barriers and you want no subsidies." ...

Mr. Trump should give a globally televised address announcing to the world that the U.S. is ready to drop its tariffs and industry subsidies to zero tomorrow on any nation that does the same. This would be the ultimate reciprocal tariff policy. President Trump and the U.S. would regain the moral high ground in trade disputes. It would be enlightening to see which supposedly "free trade" nations accept Mr. Trump's challenge.
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3) How Europe Cheats On Trade

Read this carefully:
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This is a bunch of typical Euro-mumbojumbo.

Europe is offering zero tariffs (that's a start), but only on industrial goods. Agriculture is off the table. And what about non-tariff barriers?

Consider the pharmaceutical sector, as UP senior research fellow Tomas Philipson notes:

America invents the majority of the world's new medicines -- yet we ran a $117 billion global trade deficit in biopharmaceutical products last year...Foreign price controls are a major reason that America imports so much more than it exports, despite dominating the sector when it comes to research and development...

For decades, European governments have been leeching off American research and development by imposing stringent price controls on drugs.

Those price controls function as a non-tariff trade barrier.
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Any trade deal with the EU must require a cessation of all price controls on American-made drugs.
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4) It's Official: The Economist Magazine Is Now Wrong On EVERYTHING

The once venerable British magazine The Economist went looney left about 20 years ago when their honest skepticism about global warming morphed into a position of climate hysteria.

Ever since, the magazine echoes the propaganda of the left, not real news. Consider their recent bogus claim that school choice harms students. Writing a stark warning against a broad voucher bill that allows low-income kids in Texas to receive as much as $10,000 in tuition support to attend private schools. The editors wrote:

In theory vouchers turn education into a marketplace, rewarding good schools and punishing bad ones. In practice it hasn't worked like that in America so far. Research shows that such reforms lead to bleak academic outcomes. Fifteen states have passed universal voucher programs, in which students from both rich and poor families are eligible. Early studies of single cities looked promising. But over time statewide analyses came to conclude that on average pupils do worse under voucher systems.

This is a complete fabrication.

We asked our friends at EdChoice which "statewide analyses" The Economist was referring to, and they were stumped. What we do know is that they ignored volumes of statistical evidence that prove the opposite.

EdChoice's literature summary finds nearly universal benefits from choice programs:
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We give The Economist an F grade here. We are also canceling our subscription and we hope you do too.
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5) State Subsidies for Film Production Bomb

California has ruined its once dominant and thriving film business in Hollywood, by creating a high tax, pro-union, and byzantine regulatory climate. Film and TV industry employment in the LA area hit a 30-year-low last year, with the region's share of jobs falling from 33% in 2022 to 22%.

What is Governor Gavin Newsom's response? Force feed film companies to stay in California by doubling the state's film and TV tax credit program to $750 million. The state will now provide up to a 40% tax credit to offset production expenses.
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California has been passing out lavish tax credits since 2009 to keep the industry from moving out - but to no avail.

Chasing film crews doesn't work. Audits of state film tax credits routinely find they cost states more money than they save. But states refuse to learn the lesson. Democratic Gov. J.B. Pritzker has just expanded Illinois's tax credit package. So has New Jersey.

But they keep losing jobs. Why not just cut their highest in the nation tax rates on ALL their businesses, rather than pick winners and losers.
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6) The Monkey Wrench That Is REALLY Hurting Our Manufacturing

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