If President Obama's budget is a message to the world about what he’d like to see happen over the next year, Republicans aren’t his only audience — he’s talking to Democrats, too. And if there’s one thing he disagrees with congressional Democrats on most right now, it’s trade.
But the president has some bargaining chips. One of them is trade adjustment assistance (TAA), the half-century-old program that compensates people who lose their jobs because of trade liberalization. Historically, it has been a way for free-traders to gain the consent of those whose constituents get shafted when trade barriers fall. This time around, it looks as though the White House may be trying to use it in the same way, in an attempt to pass the Trans-Pacific Partnership agreement once negotiations conclude.
Buried deep in the president’s budget is a paragraph that backs a proposal put forth by Sen. Sherrod Brown (D-Ohio), the Senate’s most outspoken advocate of trade adjustment assistance, that would boost funding for the program to the level it was before Congress allowed it to lapse in 2014. If adopted — which is as unlikely as any of the president’s bolder requests — the plan would cost $986 million, up from $658 million in fiscal 2015.
That could amount to a substantial gift for the individuals and communities hit hardest by trade deals. But would it be enough to entice nervous democrats to get behind trade promotion authority?
Not likely, says Lori Wallach, who serves as a muse to the trade-skeptic progressive caucus from her perch at Public Citizen’s Global Trade Watch. The size of a TAA package, she thinks, is beside the point. In fact, the bigger it is, the plainer the admission that trade liberalization has had starkly negative effects.
"TAA is like burial insurance. The thing to do, in the first place, is avoid dying,” Wallach says. "The members of Congress who are against fast track and against the TPP are not going to switch positions because of a robust TAA program. They’re looking for a different kind of trade policy, so you don’t have so many losers that need a safety net.” In other words, a generous TAA budget line is table stakes for those already inclined to support the White House trade agenda, but not enough to entice many who aren't.
Separate and apart from its importance in leveraging support for a trade agreement, of course, is a more important question: Does trade adjustment assistance even help the people it’s supposed to?
The program has been the subject of debate in wonky circles over the years, with conservative groups such as the Heritage Foundation and the Cato Institute arguing that it’s a waste of money, especially as funding levels rose rapidly through the 2000s. People who lose jobs or business to overseas companies aren’t more deserving of help than those affected by other economic trends, such as automation or technological disruption, they say. (That’s also why it’s possible that a large TAA package could be a wash for the president strategically — he might lose conservative votes even as he gains liberal ones.)
Generally speaking, though, the evidence on effectiveness of TAA is mixed.
Here’s how the program works: If it’s pretty clear that your workplace has been shuttered and the company reopened it in some country with which the United States has a free trade agreement, you can apply for assistance. There are different pots of money for businesses, farmers and individuals, and it’s used as supplementary unemployment insurance and for re-training expenses. As part of the 2009 American Recovery and Reinvestment Act, TAA was reauthorized and expanded to include service-sector and public-sector jobs, as well as communities adversely affected by trade — a reflection of globalization’s ballooning impact. (That expansion provision ended at the end of 2013.)
The assistance for businesses is intended to put them on more solid ground in the face of stiff import competition, and the Government Accountability Office found that it did help them raise sales slightly (although the total amount of assistance available is tiny, at only about $16 million per year).
For workers, a 2008 study by researchers from American University found that the retraining assistance did help people find new jobs — but they were at much lower wages than their previous positions. A 2012 cost-benefit evaluation commissioned by the Department of Labor found a net cost to society of $53,802 for each person who enrolled in the program between November 2005 and October 2006.
Here’s the problem with TAA, no matter how well-designed and funded: Even if you retrain someone, what jobs are you retraining them for? The lost manufacturing jobs paid well for someone with a high school education, and the jobs that have been created in the interim are either service jobs that pay a lot less, or highly skilled jobs in urban centers that are just too far out of reach.
“I think the more people you can get in the training part, the better off they are,” says Kara Reynolds, an American University economics professor who did the 2008 study. "But when you look at the places where the beneficiaries are, a lot of them are small towns where there aren’t a lot of options.”
That’s why a generous trade adjustment assistance package probably won’t buy many votes: Even if trade deals have a net positive effect on the American economy, for those on the losing end of the equation, there’s no way to fully recover.