I thank Paul Gottlieb, an economics professor at Rutgers University, for inspiring today’s newsletter. He wrote to me recently to point out “one of the least-covered stories in economics during the Biden administration.” Namely, that “in mid-2022, the 50-year-old federal program known as Trade Adjustment Assistance was allowed to expire,” leaving it to hobble on until its funding runs out or Congress intervenes.
I somehow missed this bad news. Trade Adjustment Assistance is a good thing. It compensates workers, firms, farmers and communities for damages related to trade, such as job losses caused by offshoring or competition from cheap imports. Workers, for example, get supplemental unemployment insurance benefits, job training and help with job search and relocation.
The program goes back to 1962, although it took more or less its current form in 1974.
When President John F. Kennedy signed the Trade Expansion Act of 1962, he said that “we cannot protect our economy by stagnating behind tariff walls.” He added, in words that sound like the way politicians talk about China today, “A vital expanding economy in the free world is a strong counter to the threat of the world Communist movement.”
Kennedy understood that it would be politically impossible to expand trade without doing something to help its victims. “When considerations of national policy make it desirable to avoid higher tariffs, those injured by that competition should not be required to bear the full brunt of the impact,” he said earlier that year in a special message to Congress. “Rather,” he wrote, “the burden of economic adjustment should be borne in part by the federal government.”
America seems to have forgotten Kennedy’s wisdom. And I’d argue that’s a big reason for the backlash against free trade and the election of Donald Trump, who likes to say that tariff is “the most beautiful word in the dictionary.”
If the government doesn’t do anything to help the people and communities harmed by free trade, it should come as no surprise that those people will warm up to Trump’s message.
Trade Adjustment Assistance was too skimpy even before the summer of 2022, when Congress allowed the Trade Adjustment Assistance program to expire — or “sunset,” in Capitol Hill lingo. Now, applications aren’t being accepted, and benefits for current enrollees will cease entirely in 2026 unless Congress acts. The program’s staff have left government or moved on to other jobs in the agencies.
“It was hard for me to see what happened to T.A.A.,” Brent Parton, the president of CareerWise, a nonprofit specializing in apprenticeships, told me. He oversaw the program as the former acting assistant secretary of the Labor Department’s Employment and Training Administration from 2022 until this April.
It’s worth a reminder that international trade is, in general, a huge plus. Countries benefit when they specialize in making the things they’re good at and using some of the income to buy things they’re not good at. Norway, for example, imports bananas (although I was surprised to see that it exports a few, too).
Everybody can win from trade if a sliver of the benefits received by the majority of the population are shared with the minority who are net losers. That can take the form of taxes on the general public that are used to finance programs such as Trade Adjustment Assistance.
So, why was it allowed to lapse? One reason is that in the past, it usually got extended as part of deals to expand free trade. Republicans would push for trade expansion, and Democrats would demand Trade Adjustment Assistance as a concession. Now the positions of the two parties are muddled. No one is leading the charge for free trade, so there’s been no opportunity to put together a compromise deal that extends Trade Adjustment Assistance.
Another problem is that people don’t believe that Trade Adjustment Assistance can do the job it’s asked to do. The problem seems too big. “I don’t think you can win an election by saying, ‘Don’t worry, I’ve passed T.A.A. and you’re going to be fine,’” David Skillman, a former Capitol Hill staff member who is a lobbyist and a managing director at the law firm Arnold & Porter, told me.
Among economists, the job training portion of Trade Adjustment Assistance got a reputation for ineffectiveness. “We find that the T.A.A. program is of dubious value in terms of helping displaced workers find new, well-paying employment opportunities,” Kara Reynolds, an economist at American University, and John Palatucci, then a research assistant there, wrote in 2008.
But the economic case for Trade Adjustment Assistance is strengthening. For starters, new research shows that the program is more effective than once believed. Using new statistical techniques, Benjamin Hyman, then of the University of Chicago, found in a 2018 paper that workers who received assistance earned about $50,000 more over 10 years than similar workers who for random reasons weren’t approved for it. (The advantage disappeared after 10 years.)
A paper released in May looked at a T.A.A. program for workers ages 50 and older, which doesn’t require job training and instead partially tops up the wages that people earn after they’re laid off for up to two years. The paper found that wage insurance in the government program didn’t change the kinds of jobs people got, but it did increase the earnings they got and thus the taxes they paid, while reducing the unemployment insurance benefits they received. That saved taxpayers about $7,000 per recipient, according to the authors: Hyman, now of the Federal Reserve Bank of New York; Brian Kovak of Carnegie Mellon University’s Heinz College; and Adam Leive of the Goldman School of Public Policy at the University of California, Berkeley.
Also, though not specifically related to T.A.A., the quality of training programs that prepare people for work in particular sectors has been improving, Kovak told me. There’s more of a focus on growing industries. People are earning certificates for specific, in-demand skills. And they are being followed up with after training, both to help them and to inform trainers about what workplace skills were truly in demand.
If Trade Adjustment Assistance is renewed — and I hope it will be soon, because the need is clear — it should have a much bigger focus on apprenticeships. Most displaced workers learn better on the job than from books. “They don’t feel like they’re being sent back to school,” Parton, of CareerWise, told me. Plus, employers prefer people with real-world experience.
Truck drivers whose jobs are threatened by autonomous vehicles sometimes double down on driving, figuring that if they can’t beat the machines, at least they can beat their fellow drivers, Daniel Shoag of the Weatherhead School of Management at Case Western Reserve University and two other economists found in a 2021 study. Trade Adjustment Assistance can avoid that perverse effect — investing more in a declining industry — by showing displaced workers a better way, Shoag told me.
This week I interviewed Ryan Craig, a prominent supporter of apprenticeships. He is a managing director at Achieve Partners, a private equity firm that buys tech and health care services companies in sectors with talent shortages and builds their staffs using apprenticeships. He wrote a book that came out last year, “Apprentice Nation: How the ‘Earn and Learn’ Alternative to Higher Education Will Create a Stronger and Fairer America.”
Craig said Achieve Partners is able to run apprenticeship programs without government subsidies because it’s “cherry-picking the top 1 percent of applicants,” but for apprenticeships to work more broadly to help workers displaced by trade or other causes, consistent government subsidies will be necessary. He said he was impressed that Linda McMahon, President-elect Donald Trump’s choice for education secretary, has written favorably about apprenticeships.
George Washington apprenticed as a land surveyor and Paul Revere as a silversmith, so the United States would be going back to its roots if it joined the ranks of other wealthy, industrialized nations (such as Germany) that have extensive apprenticeship programs. It’s not the full solution to the backlash against free trade, but it’s better than building a tariff wall to “protect” the nation from global commerce.
The Readers Write
In your newsletter about how to fix health insurance, maybe you are correct that the biggest culprits are the providers and not the insurance companies. However, to the average Joe, getting smashed by a huge bill or simply a denial of medications or medical procedures — it’s like a building just fell on him. The whole system needs to be dismantled and the government needs to take over just like in the rest of the civilized world. For once let’s try putting people first.
Carlos Aranguren
Gaithersburg, Md.
The fundamental problem is that profits and patient care will always be in an inverse relation: You can enhance one only by diminishing the other. If profits are down this quarter, you bring them up by issuing more denials.
Michael P. Bacon
Westbrook, Maine
It is appalling that a single-payer scenario such as “Medicare for all” does not even come into discussion. It would address the two most important misaligned incentives in your piece: It would create an incentive to pay for prevention since the same payer (the taxpayer) would reap the benefits down the road. And nothing would work more effectively against health system mergers than a single payer that sets up reasonable prices based on local resource capacities.
Dr. Resul Kaan Ozbayrak
Sacramento, Calif.
Fixing health care is so complicated that only 32 of 33 high-income democracies have figured it out. (Not to say they’re perfect.)
James Bertolone
Rochester, N.Y.
You wrote about artificial intelligence. True intelligence is a biological trait that only sentient beings possess. Large language models perform pattern matching with numbers only and are not sentient. You are using words that suggest intent and some sentience behind output you observe, but where there is none.
Gaurav Goel
Austin, Texas
If you send a letter or submit an application to any large company or institution, it may be evaluated and discarded by A.I. before a human ever has a chance to evaluate context. If you are filing an appeal to a denial of insurance, the circumstances that you submit as a human may be discarded by an algorithm.
Karen Estrada
Hillsboro, Ore.
Let’s hope A.I. treats us better than we have treated the animal kingdom.
Kevin Cahill
Albuquerque, N.M.
Quote of the Day
“Inauguration Day is still a month away, yet the chaos monkeys have already taken over.”
— Paul Krugman, the former New York Times columnist, in his Substack newsletter (Dec. 19).
The post The Fate of This Federal Program Helps Explain Trump’s Win appeared first on New York Times.
