Pennsylvania Senator Pat Toomey joined em this morning:
HH: Joined now by United States Senator Pat Toomey from Pennsylvania. Good morning, Senator Toomey.
PT: Good morning, Hugh, thanks for having me.
HH: Always good to have you. I want to talk mostly tariffs, but I want to begin, you’ve known Attorney General Sessions for a long time in the Senate. Should the Attorney General reverse the zero tolerance policy that has led to the separation of 2,000 from their families at the border?
PT: Well, no, I don’t think he should reverse the fundamental policy, but there are some things we ought to look at doing differently, I think. First, I think the instance of the, you know, the heart-wrenching separation of a small child from the mother is, has been, the frequency’s been exaggerated significantly. There are serious challenges at the border like does the person claiming to be the parent, is that person actually the parent? There are problems of that nature. But at the end of the day, if we had family detention centers, and we had the law that permitted the use of family detention centers, then this problem would be enormously diminished.
PT: Important, though, that we not take the approach that the Obama administration took, which is just okay, can’t separate families, so just release them into the United States. That obviously just guarantees an endless wave.
HH: Senator, I don’t think the problem’s been exaggerated, because it’s, the Wall Street Journal’s reporting on the statistics of 2,000 children since May being separated, and Jacob Soboroff, who’s a very good reporter, a colleague of mine at MSNBC, went inside one of the facilities last night and described it, no other way, he said, than an animal kennel. Have we appropriated enough money? Do we have enough places for these families to wait their adjudication and their return to their home country if necessary, because I think this, maybe you agree with me or don’t, it could become the Republicans’ new Katrina and the President’s new Katrina?
PT: No. No, no, that’s why I say, I think we need, actually, I think we need legislation, because we have court decisions that say that we cannot hold minors, is my understanding. And I don’t think we do have a sufficient level of detention facilities that are geared for families. This is not my area of expertise, Hugh. I’m going to have to drill down into this and address it, because I do agree it’s not a sustainable situation. And maybe you’re right. Maybe this is happening with a higher frequency than I’ve been aware of, and it is certainly, it’s just not the right thing to be doing.
HH: Okay, my last question on this, and then I want to go to tariffs. Do you agree it could become a Katrina-like disaster for the President?
PT: You mean a political disaster?
HH: Yes. It’s a humanitarian disaster, and I’ve covered the moral side of it.
PT: Yeah. Yeah, yes. I suppose it could. I mean, I think clearly, the country is focused on this. Clearly, it’s a horrendous situation if a small child is being taken away from the child’s actual mother. So I think we’ve got to solve this problem.
HH: All right, now let me turn to, the German government has caused markets to go crazy this morning, because Merkel might fall, and the German stock exchange is down a point and a half, percentage and a half. Tariffs are causing enormous economic uncertainty across the United States, especially in farm states. Are we on the edge of some kind of a market panic, Senator Toomey?
PT: Well, I certainly hope not, but sometimes, I do think that the market prices, you can argue that there’s some fragility in that, right? You can argue that it was monetary policy that contributed a lot to the rise in equity prices. I think you can also sustain these prices based on earnings. But you throw in a big risk to earnings like a trade war, if this thing continues to spiral downward, like major disruption in Europe if that were to occur in Germany, then yeah, we can have a significant setback in the market. I think our underlying economy is strong, but it would be, it would be a real tragedy if an unnecessary trade war undermined that strength.
HH: The Daily Express headline from three hours ago in the UK is End of Merkel Would Trigger Uncontrollable EU-Wide Breakup. Europe Fears Nightmare. I think that might be a little over the top. It is a broadsheet, obviously, do you think?
HH: But I am worried that if she does go down, a lot of reverberations are felt everywhere. Agree?
PT: Oh, I think that’s right. I think that’s absolutely right, and part of it is because you know, it’s becoming, you know, this project, the European Union, is becoming increasingly unpopular throughout Europe for a variety of reasons, and she is perceived as the leader who had held it together through both her own strong personal leadership, badly flawed in my view in many instances, but nevertheless strong leadership, and of course the fact that Germany is the great economic power of the continent. So if she is cast aside, and there is a, say, conservative populist, and I don’t follow Germany politics well enough to have a sense of what might succeed her, but you know, if it were a leadership that were not so sympathetic to holding the European Union together, then that would be disruptive.
HH: It certainly would, and I think Jens Spahn is the guy who is going to be it, but I’ll come back to it. Let’s talk now about the tariffs in the United States. I am so sympathetic to your old colleague in the house, Kevin Cramer, running for Senate in North Dakota. He should have an easy win. I am sympathetic to Iowa Congressmen who are looking at soy beans just getting killed by these tariffs. Is the President indifferent to the politics of these tariffs, even if you know, he believe in their economic vitality? I don’t, but he does.
PT: Yeah, he does. You know, I haven’t had that conversation with him. I’ve spoken with him a great deal about the economics of it. But you’re right. I mean, we are doing, first of all, the tariffs are doing damage across the entire country. In my state of Pennsylvania, okay, people think of Pennsylvania as a steel making state because we are, and we have been. But the truth remains that there are far more people working in companies and industries that use steel than there are people who make steel. And I don’t like it when the government tries to pick winners and losers, but in this case, putting tariffs like this on steel and aluminum, the Section 232 tariffs, and that’s only one category of the President’s tariffs, it’s already doing more harm than good even in a state like Pennsylvania. So you extrapolate…you look at where the retaliation has occurred, and it’s another whole magnitude.
HH: Have you talked to Peter Navarro? Now I’ve known Peter, by the way, for 20-plus years. He is a left wing Democrat. He ran five times for office in San Diego as a left wing, no growth Democrat, lost five times. He is now finally getting his no growth policies via the West Wing. Have you talked to, he’s by the way charming and affable and wonderful and witty, but he’s just a complete off the charts protectionist.
PT: Yeah, this is a guy, you know, he really seems not to like trade. He is a pure protectionist. He is a mercantilist. He is in a very different place. I have not spent much time speaking with Peter Navarro except briefly when he first came in. I spent a lot of time talking to Bob Lightnizer, our trade rep and speaking with Larry Kudlow now, Gary Cohn before him, and Steven Mnuchin as well as the Vice President and the President himself. So I’m doing everything I can. It’s not clear that it’s working, but I think we’re heading down the wrong road.
HH: Now it seems to me that almost everyone agrees that we have to confront China on their anti-competitive policies.
HH: …such as intellectual theft.
HH: But not our allies.
HH: I mean, does the, have you talked with the President about this?
PT: Yes, yes, this very argument. I mean, so I totally disagree with the notion that the President holds that a trade deficit is the measure of the extent to which a country is stealing from you. I don’t think a trade deficit represents theft at all. But even in the President’s construct where it does, how do you justify putting tariffs on the steel from Canada, a country with whom we have pretty much a breakeven on trade and actually a modest trade surplus in steel? So it just doesn’t make any sense in the case of Canada or Mexico, for that matter, and I would argue that the European Union should be viewed the same way. Here’s what I think we ought to be doing. We ought to bring all of our big trading partners, all the big economies together, and confront China with some very harsh terms that they have to end the outrageous theft of intellectual property and coerced technology transfer, and be willing to carry through some very, very tough repercussions, and maybe some of them include some tariffs. That wouldn’t be my first choice, but I could understand that if the goal were to end the outrageous, really, theft of American and Western technology. That is a worthy goal, and we need to do something about it. But to go to our allies and pick a trade war and start slapping tariffs on their, which by the way, I don’t even like to use the word tariffs. These are taxes on American consumers. So we’re going to punish Canadian steelmakers by taxing American consumers on the steel they make, and by the way, they buy more steel from us than we buy from them. It just doesn’t make sense.
HH: Now I am, are you sympathetic to the President’s argument that dairy is subject to a 240% tariff moving north from America into Canada, and that they had reached an agreement and he was in essence clawed back, because he got on Air Force One, Prime Minister Trudeau tried to claw back the deal. Are you sympathetic to that argument?
PT: So I am very sympathetic that the tariffs and obstacles that the Canadians impose on our dairy products is terrible policy. It’s certainly not good for us, really not good for them, either. We do manage, actually, to have a surplus in dairy trade with Canada, by the way, but that’s an aside. So again, it goes to the question so what’s the goal here? If the goal is to negotiate a way the remaining barriers we have to trade between the United States, and again, we have our own, right? We subsidize agriculture massively in a variety of ways that make it difficult for other countries to compete. If the idea were to negotiate these away, I would be all for it. I had this conversation with the President. The problem is if you look at what they are actually demanding of the Canadians and the Mexicans, it is a worse NAFTA than what we have now. It’s a sunset provision that makes the whole thing go away. It’s the end of the investor state dispute settlement mechanism which creates a reliable and predictable judicial review type of mechanism. These are not good policies, and so you know, as I say, we’re just heading down the wrong path with our own allies.
HH: I want to go back to Germany for a moment, and by the way, it’s Jens Spahn is the likely successor to Merkel. If Merkel resigns, what do you want the President to do or say just to make sure markets are calm, because it’s, she’s just a person. Anyone is replaceable. It’s not the end of the world, but what do you want the President to do or say if she does resign?
PT: Well, I mean, I haven’t thought about this a lot, and I’m not close to the situation, but I think the important message from the President is a reminder of the strength and the resiliency of the fundamentals of the American economy. And those will continue.
HH: And they are good right now, are they not? Aren’t they great?
PT: They’re, no, they’re great. They are, they’re great, Hugh, which is why it would be absolutely tragic to allow an escalation and an trade war to undermine it, because these are among the best economic times of my adult life. That is, that’s just a fact. And they can get better, still, and I think they probably will if we can avoid a devastating trade war.
HH: I hope you are being listened to, Senator Toomey. Do you have any plans to talk to the President this week about this?
PT: You know, I don’t think I have any plans on the schedule, but I don’t think a week has gone by since the President has become president that I haven’t spoken with him about something. I will give him credit. He is very accessible. He reaches out to members of the Senate, including those with which he disagrees. On this subject, you know, we disagree. He knows that, but he’s still very open to receiving our input.
HH: Last question, GATT, you know, the General Agreement on Trade and Tariffs, we haven’t tried one of those in a while. Isn’t that a way to deal with this?
PT: Well, yes. The other way to deal with this is to fix the flaws in the Trans-Pacific Partnership, unite the emerging economies of the Pacific Rim. As you know, that partnership excluded China, and would dramatically increase American leverage on exactly what we were talking about – a rules-based system where you cannot get away with the theft of intellectual property.
HH: I hope that happens. I hope that happens. Senator Pat Toomey from Pennsylvania, thanks for joining me this morning.
End of interview.