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Fact Checkers Get It Wrong on Jobs and China

Posted By Derek Scissors, Ph.D. On October 24, 2012 @ 5:15 pm In International | Comments Disabled

Who fact-checks the fact checkers?

After the debate Monday night, CNN engaged in a fact-checking exercise. [1] Many criticize these exercises for being more slanted and less accurate than what’s being fact-checked in the first place, and sure enough, this is what happened with China trade [2] and jobs. CNN, for example, used numbers from the Economic Policy Institute (EPI) that are demonstrably wrong.

EPI says the large U.S. trade deficit with China has cost more than 2 million American jobs in the last 10 years. There are so many ways in which this is wrong that it’s hard to know what the worst mistake is.

One is that the number goes beyond hypothetical to fictional. EPI calculated its number as if all the production that took place in China could magically move back to the U.S. But if it could just move on back without any problem, why would it have left in the first place?

There is a lot of production in China because goods can be made cheaply and well, making it possible for Americans (and others) to buy more. If computers and cell phones were assembled in the U.S. instead of China, prices would be much higher and far fewer people could afford them. Those jobs wouldn’t come back to the U.S.; they’d vanish in mid-air over the Pacific as the computer and cell phone industries crashed.

Another huge mistake is the one year in the past decade that EPI thinks is a success. In that year, America’s trade deficit with China in goods fell by more than $40 billion. America’s overall trade deficit in goods fell by more than $300 billion! According to EPI’s “logic,” many jobs must have been created that year.

If you’re wondering what year we’re talking about, it’s 2009. You may have a slightly different memory of 2009 than EPI does. You may remember unemployment jumping from 7.3 percent to 9.9 percent. The trade deficit fell and unemployment rose—exactly the opposite of what EPI assumes when it cranks out the false China figures CNN cited.

That’s because the strength of our economy drives both the trade deficit and jobs. When our economy is strong, we have more jobs and a large trade deficit. When it’s weak, as in 2009, we have less of both.

To be fair to CNN, a lot of people think that a trade deficit can cost jobs, even if they don’t go as far as EPI. New research from The Heritage Foundation shows that this is a mistake, explaining why and how imports actually help support jobs. [3]

In contrast to EPI, the Heritage logic is simple: Imports don’t just appear in our homes; they are unloaded, trucked, stored, and sold first. All those activities involve jobs that wouldn’t be there if imports were unavailable and the goods were too expensive for people to afford them. Moreover, these jobs exist right now—they don’t require some fictional transfer away from China.

The Heritage study puts the number of jobs supported by imports of Chinese clothes and toys at more than 500,000. America’s trade relationship with China could definitely be better, but the idea that China trade hurts the U.S. is not supported by a proper look at the evidence. CNN’s urge to check facts is the right one. They should just go a little deeper.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2012/10/24/fact-checkers-get-it-wrong-on-jobs-and-china/

URLs in this post:

[1] After the debate Monday night, CNN engaged in a fact-checking exercise.: http://www.cnn.com/2012/10/23/politics/fact-check-china-tires/index.html

[2] China trade: http://www.heritage.org/index/country/china

[3] explaining why and how imports actually help support jobs.: http://www.heritage.org/research/reports/2012/09/trade-freedom-how-imports-support-us-jobs

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