12/02/2009 12:06 pm ET Updated Dec 06, 2017

Get ready for protectionism

The most recent Gallup Poll on what Americans think is the best way to create jobs is a bit disheartening because it flies in the face of basic economics. Protectionism is the number one way Americans believe more jobs can be created.  This was true for Republicans, Independents and Democrats. The data suggest that the Obama Administration is in touch with what people want as the President has certainly shown protectionist mettle.

The phrasing of the top answers was "keep manufacturing jobs in the U.S" and "lower taxes." Gallup titled the article "Americans See Protectionism, Tax Cuts as Ways to Create Jobs." This seems accurate although I should note that there was a question asking whether we should use more "Buy American" measures to protect jobs and fewer respondents wanted this.  So, Americans are not calling for protectionism of the Smoot-Hawley variety.

On other issues, notice the shift in priorities between Democrats and Republicans on tax cuts, regulation, and infrastructure projects.  I interpret this dichotomy as demonstrating Republicans favouring lower taxes and less regulation to help small business.  Think Joe the Plumber. Democrats back more direct job creation measures.

President Obama is trying to take a middle road in part to mollify blue dog Democrats in Congress in the lead up to 2010 mid-term elections. Given the polling data, I do not anticipate his administration will favour direct jobs creation as the primary means of creating jobs. However, I believe that the economy will stall without this direct job creation and this will mean a major defeat for Democrats in 2010, making Congress more hostile to the Administration's priorities.

As for protectionism, Obama has shown repeatedly that he is not a free-trader. Back in January, the dean of free trader Jagdish Bhagwati called Obama a protectionist. I have begun to share that view.  The data show that this is how Americans want their President to act. I believe China is the likely target of any protectionism in the U.S.

But protectionism is sub-optimal. All economists agree; even liberals like Paul Krugman say so.  Nonetheless, Krugman is on record favouring protectionism as a "second-best argument. He sees a strong political case for protectionism. And given Obama's previous record, the need to create jobs and the polling data, some sort of protectionism is probably where we are headed.