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"I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage."

— John Stuart Mill

Friday sage charts

Here’s a fun fact: The United States is the world’s second largest maker of things, accounting for 15.9% of the world’s manufacturing output despite having just 4.2% of the world’s population.

That’s pretty good!

We’re so good at making things, in fact, that the US manufactures more than the next three biggest countries — Japan, Germany, and India — combined. 

This is not just an artifact of history, either, because US manufacturers have been especially busy of late: Manufacturing-sector construction has tripled since 2021.

Unfortunately, employers are struggling to fill all the new facilities they’re building: The US manufacturing sector has 600,000 open jobs it can’t seem to fill.  

That’s probably because US workers have so many good options these days.

At Walmart, for example, truck drivers make $110,000 a year — in their first year.

If you don’t like sitting down all day, however, you can also make about $45,000 a year walking around a Walmart store as an associate.

And if that’s not going to cover your bills, you might be motivated to move up the ranks: Walmart store managers can make up to $620,000 a year.

That’s a lot — more than newsletter writers make, even — but I think they’re worth it because helping Americans lower their cost of living is a noble occupation.

Unfortunately, their job is about to get a lot harder thanks to the misinformed but widely held idea that the kind of people who shop at Walmart (like me, for example) have been suffering in recent decades.

They haven’t.

It’s true that the middle class has been shrinking in the US — but that’s only because so many people have been moving up into higher tiers of income.

So much so that the share of US households earning over $100,000 has tripled since the 1970s (in real, inflation-adjusted terms).

Lower income earners have done similarly well: CBO data shows that the lowest quintile of earners have seen a 91% increase in their real, inflation-adjusted purchasing power between 1979 and 2018.

And their gains have accelerated since: The lowest decile of earners saw the fastest wage growth in the post-pandemic economy.

These are just statistics and I’m sure there are other ways to spin them, but I can assure you that they’re consistent with my 8-year-old’s perception of the US economy in 1979 and my own 53-year-old perception of the US economy now.

President Trump has an entirely different perception, of course. But whatever he was doing in the 1970s, it wasn’t shopping at Walmart, so maybe he isn’t qualified to judge.

He isn’t solely to blame, however — politicians get elected and the media gets clicks by telling people how bad things are. 

Now, after decades of listening to these purveyors of gloom, we’ve become susceptible to the president’s idea that the US economy is so bad it needs to be blown up.

This is a tragedy for many, many reasons, not least of which is that the president’s plan won’t even help the people he thinks he’s helping.

Michael Strain of the American Enterprise Institute concisely sums this up for us: "These tariffs will reduce manufacturing employment. They will reduce the competitiveness of American manufacturing firms. They will raise prices for consumers. They will increase unemployment."

That’s bad news for everyone, Walmart shoppers included.

Let’s check the charts.

Spot the globalization:

The share of Americans employed in manufacturing was in structural decline long, long before globalization. The trade deficit with China has little, if anything, to do with it.

Fewer manufacturing jobs is a happy side effect of getting richer:

This colorful chart from the Cato Institute demonstrates that an increase in manufacturing jobs (as a percent of the total) is associated with going from poor to middle income — and that a decrease in manufacturing jobs is associated with going from middle income to high income. Maybe it works the other way, too — making a rich country poor again might increase the percentage of jobs that are in manufacturing. We’ll soon find out.

Tariffs are a solution in search of a problem:

The Economist's Mike Bird notes that it’s "an amazingly grim irony that US tariffs are being raised with the stated aim of reindustrialising America, ignoring an actual generational boom in industrial investment which the tariffs now pose a huge threat to."

The good old days are now:

The president has justified his tariff plan by claiming "we were at our richest from 1870 to 1913. That's when we were a tariff country." One measure of how ridiculous this claim is is that US life expectancy in 1900 was just 50 years — 15 years below what it is here now.

Dip buyers beware:

Knowledge in finance is cyclical, so hard-learned lessons have to be continually relearned. Now, we’re relearning that tariffs don’t do what politicians tell us they do.

What happened last time:

The "Kindleberger spiral," famous among economists who never imagined it would ever be relevant again, shows how world trade fell from almost $3 billion per month in January 1929 to just over $1 billion in March 1933 — a trend that helped the world spiral into the Great Depression.

If this is a game of 4-D chess, we’re losing:

Tariff apologists like to say that the president’s intention is to get interest rates down so he can cheaply finance the mountain of debt that he inherited from his free-spending predecessors (including himself). But, as Apollo’s Torston Slok shows here, a 2% decrease in interest rates would save the federal government an estimated $568 million — far below the $1.3 trillion that the coming recession is likely to cost it. Also, the president’s tariffs have made interest rates go up, not down. Oops.  

0-dimentional chess:

If the idea is to make the federal debt more manageable, maybe don’t propose a giant tax cut? I love tax cuts as much as the next guy, but, please, get your story straight, Mr. president.

How to turn an imaginary problem into a real one:

The average tariff on US exports was 2% before Liberation Day. Now it’s 6% — and rising.

Making people feel unwelcome:

The number of foreign visitors arriving at US airports has plummeted over the last month. I can’t blame them for feeling less than welcome.

Tariffs can end empires:

@cremieuxrecueil notes that "Antiquity — the period when economic activity concentrated in the Mediterranean — ended because the rise of Islam destroyed the flow of trade across it."

Let’s hope it doesn't come to that because this American economic empire has been pretty good for most people.

But the president seems determined to destroy the flow of trade, so it might.

Have a great weekend, Walmart shoppers.

— Byron Gilliam

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