Cheap goods are absolutely a part of the American dream, for the same reason higher pay is part of the American dream.
“Access to cheap goods is not the essence of the American Dream,” Secretary of the Treasury Scott Bessent said in a speech on Thursday. “The American Dream is rooted in the concept that any citizen can achieve prosperity, upward mobility, and economic security.”
It makes no sense to present cheap goods as a contrasting goal to economic prosperity. In fact, “cheap goods” is just another way of saying “higher pay.”
A price is a ratio. Every price is expressed with a numerator and a denominator, whether you realize it or not. There are two ways to make a ratio smaller: Reduce the numerator or increase the denominator.
Imagine you’re at the grocery store and there’s a box of crackers selling for $5. You only see the numerator of the ratio on the price tag because the denominator is implied: one box. $5/1 box.
The store could make the crackers cheaper by putting them on sale for $2.50. $5/1 box > $2.50/1 box.
It could also make them cheaper by keeping the number of dollars the same but increasing the number of boxes. So it could put the crackers on a buy-one-get-one-free sale of $5 for two boxes. $5/1 box > $5/2 boxes. In this case, the per unit price would be $2.50, exactly the same as the first sale.
This is very intuitive to anyone who has been in a grocery store. (Forgive Bessent: He’s worth $700 million and probably hasn’t done his own grocery shopping in a while.) A 50-percent-off sale leads to the same per-unit price as a buy-one-get-one-free sale. Mathematically, it’s two different ways of adjusting a ratio that yield the same result.
There are other senses in which prices are ratios. You could also measure the ratio of the price paid for a good to a person’s income. Let’s say the person buying the $5 box of crackers makes $1,000 per week. The price of the box of crackers to that person is $5/$1,000 of weekly income.
If the store puts the crackers on sale, that reduces the numerator in that ratio. That’s “cheap goods.” It’s good to buy stuff when it’s on sale. Good luck finding someone who demands to pay full price when a sale is ongoing.
Like any other ratio, though, you can also reduce it by increasing the denominator. That’s “higher pay.” If the person’s income increases to $1,200 per week, then the $5 box of crackers also gets cheaper for them. $5/$1,200 < $5/$1,000.
The ratio of the dollars you spend on a good to your income can be reduced either by reducing the dollars you spend or by increasing your income. Mathematically, they both reduce the price. “Cheap goods” and “higher pay” are the same thing.
We have good reason to believe that international trade helps reduce prices in both ways. Trade for consumer goods increases competition and makes more goods available at lower price points. Trade for inputs to production lowers input prices and leaves businesses more money to invest in workers through higher pay and productivity.
When you consider the price of something as a fraction of someone’s weekly income, it’s easy to see how cheap imports benefit poorer people more than richer people. An individual at the federal poverty line this year makes about $300 per week. If an imported good saves him $3 over a domestic alternative, that’s an entire 1 percent of his weekly income saved. A person who makes $3,000 per week only saves a tenth of a percent of his income from buying the same good.
Cheap goods are absolutely a part of the American dream, for the same reason higher pay is part of the American dream: Both reduce prices on stuff people want to buy. Maybe extremely rich former Wall Street executives look down on people who buy cheap imports, but good luck explaining to people that they really should pay more because the government says so.