How NAFTA Broke American Politics

The podcast begins by highlighting how trade, tariffs, and domestic manufacturing are central to current political campaigns, echoing debates from the 1990s. It introduces NAFTA as a pivotal trade deal that significantly altered the U.S. economy and realigned both political parties' connection to the working class. The host, Michael Barbaro, explains that to understand today's politics, one can trace it back to NAFTA's inception in 1993, which opened trade with Mexico and Canada. This agreement is seen as signaling the outsourcing of well-paying manufacturing jobs, particularly in Rust Belt states, and a long-term political shift. The Democratic Party moved away from its working-class roots towards the professional and college-educated class, while the Republican Party, traditionally aligned with big business, began rhetorically embracing working-class politics.

The discussion delves into the context of NAFTA's emergence, initiated by Ronald Reagan in the late 1970s and early 1980s during a period of economic difficulty. Reagan, influenced by libertarian economist Milton Friedman, believed in free trade as a win-win, reducing government regulation and boosting exports. While an earlier agreement with Canada involved similarly developed economies, NAFTA expanded this to Mexico, a significantly poorer country. Critics, like Ross Perot, immediately feared that this would allow corporations to exploit cheap labor in Mexico, leading to a 'giant sucking sound' of American jobs moving south. In the 1992 presidential campaign, George H.W. Bush championed NAFTA for its potential to boost exports and jobs. Perot vehemently opposed it, arguing it would hurt American manufacturing. Bill Clinton, the Democratic nominee, took a middle-ground approach, supporting trade but advocating for side agreements to protect environmental and labor standards.

Clinton's strategic middle-ground stance on NAFTA was driven by the Democratic Party's desire to regain the presidency after 12 years and its shift towards 'New Democrats' – a more business-friendly image. After winning the election, Clinton vigorously pushed for NAFTA, arguing that more exports would create American jobs. His administration, including Vice President Al Gore, heavily relied on the consensus of experts, arguing that the agreement was an empirical fact supported by economists across the political spectrum. This period saw a 'triumphalism' where NAFTA was presented as an irreversible future. The media, largely comprised of college-educated individuals, also echoed this pro-NAFTA sentiment, creating an echo chamber despite significant public opposition, with polls showing two-thirds of Americans against it.

Despite public apprehension, the critical hurdle for NAFTA was the vote in the House of Representatives. The debate was contentious, with strong opposition from figures like Bernie Sanders and leading Democrats such as David Bonior, who argued that it would lead to job losses and that working-class Americans felt overlooked by elite experts. However, many Democrats also supported the agreement, believing it was essential for America's economic future. The bill narrowly passed with 234 to 200 votes, largely due to the support of over a hundred Democrats, alongside the majority of Republicans. Bill Clinton signed NAFTA into law in December 1993, launching a 'free trade juggernaut' that would see him later establish normal trade relations with China.

After NAFTA became reality, the U.S. economy boomed, but it also accelerated the outsourcing of jobs. Between 1997 and 2020, over 90,000 American plants closed, resulting in 5 million manufacturing job losses. This disproportionately affected non-college-educated workers, leading to increased income inequality and significant psychological distress, concentrated in Rust Belt states. The episode uses the example of Master Lock in Milwaukee, once the 'Machine Shop of the World,' where manufacturing jobs were already declining before NAFTA but were greatly accelerated by it. Chancy Adams, a worker at Master Lock, shares his story. Born in 1980, Adams grew up with the expectation of stable factory jobs that provided good wages. He found a job at Master Lock in 2010, initially making $10 an hour, but envisioned a career there, similar to his elders who built stable lives. His sense of security was reinforced by a visit from President Obama in 2012, celebrating a modest 'reshoring' of jobs.

Chancy Adams thrived at Master Lock, learning complex machinery and eventually earning over $30 an hour, allowing him to buy his first home and support his family. He felt immense pride in his work and was seen as a role model. However, on May 24th, his world shattered when he was informed that the Milwaukee plant would close, with many jobs moving to Mexico. Feeling numb, scared, and betrayed, Adams found himself scrambling for survival. He eventually found two jobs, but together they paid less than his Master Lock salary and required an exhausting schedule, leaving him with no time for himself. His experience highlights how NAFTA and similar agreements gave companies immense leverage to threaten plant closures and extract concessions, exerting 'downward pressure on working-class Americans.'

Adams's disillusionment extends to politics; he plans not to vote, expressing that no president has benefited him, and his initial engagement with politics via Obama led to similar disappointment. He views Trump as a 'gangster' businessman and Kamala Harris as a 'crook.' His eventual desire to vote for Trump reflects a broader political realignment. NAFTA created an opening for Republicans to reinvent themselves, explicitly seen in Donald Trump's 2016 campaign. Trump, despite his party's history, railing against NAFTA and other free trade deals, focusing on job losses and economic nationalism. In contrast, Hillary Clinton, the Democratic candidate, found herself defending her husband's legacy, leading to a miscalculation. Senator Chuck Schumer's 2016 statement, predicting Democrats would gain moderate Republicans in suburbs byforsaking blue-collar voters, epitomized this class realignment.

The Democratic Party's focus on wealthier, college-educated voters led to Hillary Clinton's failure to visit Wisconsin, a key swing state, in 2016. Trump's narrow victory in blue wall states like Michigan, Pennsylvania, and Wisconsin, heavily impacted by NAFTA, underscored the political consequences. While Trump renegotiated NAFTA into the USMCA, his actions did not halt the outsourcing of jobs, exemplified by Master Lock's recent closure. However, his rhetoric resonated with voters. On the Democratic side, President Biden and Vice President Harris have also demonstrated a shift. Biden increased tariffs on Chinese goods and emphasized his closeness to labor unions, even walking a picket line, a stark contrast to Bill Clinton's approach during the NAFTA debate. This represents a significant journey for Biden and the Democratic Party, acknowledging the detrimental effects of past free trade policies on the working class. Both parties are now critical of past free trade agreements, signaling a new era in American trade policy. Chancy Adams implores politicians to keep jobs in the U.S., highlighting the dignity of well-paying jobs for those without college degrees and the profound disaffection of the American working class.