Tariffs And Taxes

When I was still a Republican, and Republicans were still a political party and not a cult, there was broad agreement within the GOP that tariffs were rarely if ever useful policy tools. They raised the price of goods, invited retaliation, and interfered with productive trade. Today that position is, if anything, more correct: In our increasingly globalized economy, most tariffs are counterproductive.

There was less agreement back then about tax policy, and over the years–as the GOP has pursued tax cuts as an article of faith (and self-interest)–it has taken a real effort on the part of ostensibly thoughtful “policy wonks” to ignore the mounting evidence of the harm that low-tax philosophy was doing. (Kansas, anyone? How about the most recent tax cuts, which even the Congressional Budget office says did nothing for the economy, but did line the pockets of the already obscenely wealthy?)

Trump’s sudden decision (all of his decisions are sudden–comes with the “why examine this, I”ll just go with my gut” process) to impose tariffs on Mexico until they magically manage to seal the border is egregious for a number of reasons. Republican Senator Grassley has noted that trade policy and immigration policy are different, and require different tactics–and that this gambit is highly unlikely to work. Worse still, the U.S. does an enormous amount of business with Mexico, and a large number of American companies have operations in both countries. It gets complicated.

Ed Brayton summed it up succinctly at Dispatches from the Culture Wars:

Most of the goods crossing the border are parts of a larger supply chain, particularly for the auto industry that is already reeling from Trump’s huge tariffs on steel and aluminum. That means this is going to do enormous damage to our economy. Both economies, actually, and what happens when Mexico’s economy is in bad shape? More illegal immigration, obviously. The man is desperately ignorant, on virtually every subject but especially on this one.

I won’t belabor the thorny economic issues raised by this latest bit of Trumpian economic ineptitude. What I do want to point out–and as economists confirm–is that tariffs are taxes on the American public. Trump seems to think they are paid by the country against which he is leveling them, but anyone who has taken Econ 101 knows better. We the People pay the tariffs, because they raise the prices paid by consumers. And they are already hurting the poor.

So tariffs are effectively a tax we pay. Worse, however, they are a tax that fails to do what taxes ought to do: pay for necessary government services.

The Republican approach to tax policy is simply a fixation on cutting taxes. The reason that  is so misguided is that taxes pay for the country’s physical and social infrastructure. The roads we use, the police and firefighters we rely upon, the national defense, the costs of ensuring clean air and water, maintaining the justice system, social security and Medicare…on and on.

Think of the country as a club you belong to, with facilities and amenities that need to be maintained. Taxes are your dues. They keep the club furnace and roof repaired and the grass mowed.

It is entirely appropriate to argue about the specifics of tax policy: how should those dues be assessed? Who should pay the most? How do we ensure that the monies raised are properly spent? What are the tasks we need to fund collectively through government with our tax dollars? Reasonable people will have disagreements about these issues.

But onerous taxes levied through the imposition of disruptive and ineffective tariffs don’t fund our government. They just burden consumers–and especially the poor–without any offsetting benefit or return.

Leaving aside Trump’s multitude of offensive, childish and criminal acts, his ignorance of the economic consequences of his tariffs is a perfect example of his inadequacies for the office.

If Americans are capable of learning a lesson, that lesson is “don’t elect an ignoramus. It will cost you–and it sure won’t make America great.”

 

 

20 thoughts on “Tariffs And Taxes

  1. Sheila, “If Americans are capable of learning a lesson, that lesson is “don’t elect an ignoramus. It will COST you–and it sure won’t make America great.”

    That’s the lesson, but the course has to include more than RHETORIC. Most victims of cancer, before agreeing to treatment, want more than just words to rely on. They want proof. They want to see it, if possible.

    In this instance, the COST must be DESCRIBED in a form similar to an MRI. All the pertinent evidence is available. The only obstacle is our lack of CIVIC COURAGE to do what is necessary.

  2. Trump has simply found another devious way to make up the loss of tax income with his cuts to the super wealthy by instituting tariffs of different degrees on countries he has already damaged diplomatic relations with. This is a way to bring in income (he is unaware of the outgo or who is forced to pay it) to find money to pay for his wall…and cover that more than $102 MILLION for his golf outings and paychecks to his family members to advise him. As long as McConnell sits on the throne in the U.S. Senate and the sitting Republican Senators sit mute; the House majority of Democrats and American citizens will remain Trump’s victims.

    Mexico is at a disadvantage on two borders; they cannot control the Central American countries from which the immigrants are coming to either find safety in Mexico or make it to Trump’s southern border of the U.S. Their national economy is further suffering while they deal with their own poverty level, violence and criminal control in many areas. Trump’s tariffs could be the final straw; the last action to cause the control on the Mexican side of the border to collapse and increase the illegal immigrant problems already straining the Border Patrol and Homeland Security financially and their physical control. This can open weakened areas at our many borders while Trump concentrates on only one area of interest.

    The talk of Trump refusing to leave the White House if he loses in 2020 is only strengthening his egotistical, childish belief that he was mean to rule this nation. These newest tariffs have many hidden destructive actions; they are reaching far beyond the southern border of the U.S., the northern border of Mexico, into our homes as Trump and his wealthy minions become wealthier.

  3. Marv; please stop telling us what we already know. You have become the primary source of rhetoric on the blog. Your history in the judicial system is impressive, your knowledge of German and Nazi history is impressive, just as your repeated comments regarding our errors in judgement and what you view as our lack of action to rid this country of our home-grown Fascist leadership is impressive BUT it is not helping. You continue to kick us while we are down and trying to recover while at the same time licking our wounds and fighting to maintain the 1st Amendment right to freedom of speech which maintains your constant RHETORICAL commentary on this blog and elsewhere on the Internet. Your defeatist attitude is not encouraging the weaker links who may be reading the blog but not commenting; and a chain is only as strong as its weakest link. I count you among the those of the George and Dan Winright ilk and our long-gone Gopper.

  4. Tariffs are paid by those who buy the goods on which the tariffs are levied. Prices of domestic goods or those produced in countries other than the targeted nations may also rise because of the decreased competition (supply).
    In the past (1890s), the GOP supported tariffs to assist domestic producers. So did Democrats until Bryan came along.
    To avoid Trump tariffs, eat fruit like grapes from Peru.

  5. I’m trying to remember which law gives the President the authority to levy taxes. The Constitution clearly gives that power to the Congress. I know there are a lot of laws out there, and I may have missed the one where Congress ceded that authority. Are there any tax lawyers in the house to inform us? Are violations of the Constitution considered high crimes, or are they simply misdemeanors?

  6. As Thom Hartman writes in a column: “The simple fact is that we no longer, in any meaningful way, make computers or TVs or clothes or power tools or toys or pretty much anything in the USA, except military hardware, guns, processed food and fracked gas.”
    If Democrats Want to Beat Trump, They Better Not Nominate a ‘Free Trade’ Candidate

    If the Democrats promote pro-corporate trade policies in 2020, get ready for four more years of Donald Trump gloating at us all from 1600 Pennsylvania Avenue

    https://www.commondreams.org/views/2019/05/30/if-democrats-want-beat-trump-they-better-not-nominate-free-trade-candidate
    =================================================================
    Ross Perot warned back in the 1992 debates with Clinton and Bush the Elder, if NAFTA went into effect what the result would be:

    “We have got to stop sending jobs overseas. It’s pretty simple: If you’re paying $12, $13, $14 an hour for factory workers and you can move your factory South of the border, pay a dollar an hour for labor, … have no health care—that’s the most expensive single element in making a car— have no environmental controls, no pollution controls and no retirement, and you don’t care about anything but making money, there will be a giant sucking sound going south.
    … when [Mexico’s] jobs come up from a dollar an hour to six dollars an hour, and ours go down to six dollars an hour, and then it’s leveled again. But in the meantime, you’ve wrecked the country with these kinds of deals.”

    The Neo-Liberal New Democrat Bill Clinton signed NAFTA into law which went into effect on January 1, 1994.

    — As far as a Global Economy or Globalism is concerned – Steroid Capitalism Rules. The quest for Profit has no morality or ethics. The less human rights, environmental rules, regulations, and worker rights, the better for profits.

  7. Next time anyone on this blog gets out on the highway/interstate you need to take a good look at the number of semis hauling those “made out of country” goods from ports of entry to some interior destination in the US of A. Now think CO2. And if you do not see the connection between trade and climate change then good luck to you and yours. And if you do not see the connection between the Republican Party’s denial of science and its trade policies then you need to do some serious thinking, because it isn’t just the Koch brothers, the coal mine owners, and greedy manufacturers who are driving “anti-regulation” policies; it is the availability of all those entities to be able to transport their foreign made products at a rate low enough to continue garnering those big profits.

  8. Truer words…”If the Democrats promote pro-corporate trade policies in 2020, get ready for four more years of Donald Trump gloating at us all from 1600 Pennsylvania Avenue.”

    Let me be more precise; the case for Biden is the case for Trump.

    What many commentaries on Mexico ignore is the socialist Presidente Mexico elected. That and a tariff on goods might kill off NAFTA as companies flee for other countries to set up shop.

    Furthermore, I’m not sure Trump’s tariffs are legal, considering NAFTA. If Canada pisses off Trump, can he set up tariffs on them as well?

    I would imagine most trade agreements include clauses about tariffs.

    Maybe Trump thinks Mexico is like a Central American country where the USA should rule through the proxy of a Banana-Republic setup by Trump.

  9. Is there any way to total up what our tax dollars are paying farmers NOT to grow specific crops plus Trump’s $62 MILLION handout to farmers for their losses due to his tariffs? Are we yet paying the same for food items we do NOT get as for the food items we do buy? And Indiana farmers still holding off plowing and planting due to the continuing rainfall which will increase costs of what they do produce if and when they can begin farming. This also forces increasing the amount of produce we import which increases those prices.

    And Trump’s tariffs on non-consumable imports increases prices drastically plus, as Theresa pointed out recently, increases the amount of sales tax on everything.

    “Leaving aside Trump’s multitude of offensive, childish and criminal acts, his ignorance of the economic consequences of his tariffs is a perfect example of his inadequacies for the office.”

    And who will there be to harvest the crops migrant workers have always been relied on in this country? We have only seen the possible outcome of his newest idiocy…I refuse to use the term “inadequacies” when referring to Trump. As Theresa points out; all roads (no pun intended) in this country lead to science; ignoring or refuting it will not change the facts or the outcome.

  10. If we had a wealth redistribution up government it would reduce income taxes and increase tarriffs. Income taxes “hurt’ the wealthy. Tarriffs hurt the consumers.

    The only good news here is that Trump and McConnell are unelecting themselves.

    Climate change was an alarm that went off to warn humans that we were living unsustainable lives from the stand point of energy. The recent movie, “The Biggest LIttle Farm” is one of many signs that we are living unsustainable lives from the standpoint of life’s source of energy, food. The turmoil all over the world is an alarm that we are living unsustainable lives from the standpoint of global human population numbers and the artificial borders that we rely on to contain them.

    Plutocrats say, oh boy, opportunity for power will abound from the chaos. Full steam ahead. Turn up the propaganda on entertainment media and teach the cult to vote for us to keep the chaos coming.

    Our President as near as I can tell is incapable of doing anything about anything.

    Democrats say, we are not perfect, don’t vote for us.

    I feel so sorry for my grandchildren.

  11. i had a boo boo in conversation up here in NoDak..a few farmers and related working class,were discussing the latest mexico taffiffs.. well i said, at least you got,your welfare this time….mmmmm, it really quieted the conversation. seems they dont look at their bailout as welfare nor, a issue..to them,it was needed,and that was that. they are still staunch trumpers,marching our country into a deeper pit. seems its o.k. for them to look at this as some sort of needed issue,when they littreally got screwed.if the corn farmers are looking to get some of that,well corn isnt in the bailout plan. hense,we now see a push for further ethanol in fuels.bad move, if your not aware,it cuts the milage your car makes with say,premimum gas.thats gas without ethanol,and 91 octane. 10% ethanol avgs, 10% less milage. also it makes your engine work harder and gets the cylinder temps up,along with your oil temp. my beef,, no one in any media mentions this,or,any, consumer sediments. like were suppose to take this and live with it,. again, no decision,no voice,and added costs to our lives. the scam, the dept of ag, has a program to install ethanol blending pumps,(you select) and that will probably remove the premium pumps. like a tariff, we are the end consumer,and tariffed as needed,at any costs to the working class. i do not hear any visable republican(and few demos) voice against any of this tariff except as a passing piece of lip service,as usual..

  12. An economic explanation (admittedly oversimplified):

    Increased tariffs on foreign goods can give a short-term boost to economic indices.

    1. Domestic consumer purchase of foreign goods at higher prices boosts Personal Consumption Expenditures, one element of GDP growth.
    2. Competitive nationally produced goods can increase prices, profitability and Business Investment, another element of GDP. More workers are also hired and unemployment falls.

    But in the longer run, deleterious economic impacts kick in.

    1. Countries reciprocate with higher tariffs of their own and domestic production of foreign sold goods are reduced e.g. soy beans.
    2. Consumers pay more for all goods affected by higher tariffs, reducing consumer purchasing power, savings and investment.
    3. Supply chains are destabilized and realigned, reducing economic efficiency typically at higher costs.
    4. The economic well being of all countries affected by higher tariffs, imposed or received, suffers. See Adam Smith “Wealth of Nations” (1776) Will we see the latter deleterious effects in 2019-2020?

    Never hoped for a recession before. Seems immoral.

  13. Quotas; yes! Tariffs; no!
    Licensing; yes! Tariffs; no!

    Worldwide, countries, including the United States, and especially Germany, use a system of licensing and quota imports to control import of designated goods.

    Expand the system.

    Strengthen the system.

    Licensing and quotas have a history of being more flexible, more effective and less troublesome than tariffs.

    Yes, licensing and quotas can be tightened, even considerably, without major conflict. Germany, Switzerland and Finland do it all the time.

    Trading partners and competitors — as well as consumers — adjust to those restraints, rather than go to war (economic or otherwise). International competition amid these restraints tend to use quality and service rather than cheap labor to leverage world market position. And quotas and licensing does not drive domestic production, short of other causes, to an economic grave. Such import restraints (even during radical increase of restraints) are accepted by restricted nations as hardball but business as usual, rather than as a slap to the national face…or as suicidal grandstanding by some twisted ego’s sociopathic concept of self-gratification.

    For example, even though Turkey has a customs agreement with the EU, transport of certain Turkish goods to the European Union is subject to extensive administrative overheads, like licensing, that Turkey estimates cost it three billion euros a year and stops cold certain of its exports to the EU.

    If the United States TRULY does not want its domestic manufacturers (of goods meant to be sold in the US) to move operations overseas, it could simply prohibit said move outright…or require billion dollar licensing in order to import and sell the product domestically. And do so using a non-threatening incremental schedule of tightenings.

    Hint: TRULY is the operative word.

  14. The House Democrats need to open hearings and label them…………..

    “Comprehensive Hearings on the Mueller Report and Other Criminal Activities of the Executive Branch.”

    Then they need to hold those hearings for the next year. Forget about impeach because Mitch is not going to let it happen in the Senate. But a year of these Hearings in the House will bring the country to where it was after the Sam Ervin Watergate Hearings. The vote to impeach then in the House Judiciary committee was 27 to 11 with six Republicans joining the 21 democrats.

    This is doable, but conviction by the Senate is not. Get on with the hearings, but label them for what they are.

  15. So my friends and fellow contributors have differences on how to present the news of the day, though not the news! Good! That’s First Amendment talk, and talk Voltaire famously approved before our framers took quill in hand and wrote it into the Constitution via amendment.

    With a few obvious exceptions, I think all of our contributors to this blog have much to offer and are offering it, and that we can disagree without being disagreeable. For instance, I agree with nearly all of what Larry has to offer today, but do not agree that the EU has hit upon the solution Trump cannot find via tariffs with their exorbitant quotas and fees charged for Turkish imports since the Turks can pull the counterbalancing quota and fee regime and, after adjustment for population and currency values etc., nothing has changed between such wannabe traders other than destruction of the law of comparative advantage, which ensures that both would be trading partners will pay higher prices for the goods planned for import or export, an (if possible) planned externality.

    That said, I can understand how Larry and I can reach different conclusions from the same facts, and I appreciate his learned contributions to this blog. He, JoAnn, Marv, Theresa and several others who contribute to this blog are the good girls and guys in this endeavor with their insights, so let’s keep ’em coming and save our negative energy for the real estate promoter masquerading as president in the Oval Office, a sick salesman who knows about as much about public service as I do about brain surgery. Duh!

  16. Personally I think that Nancy P is a pretty experienced and astute politician. As such she’s fully aware that winning the Presidency and hopefully the Senate in 2020 is critical for the country and also what the demographics and polling are saying about the electorate now. Clearly revenge would be sweet for her but not worth risking the country.

    The Democrat candidates are offering a wide menu of choices and rank and file Democrats will get what most of them support when the primary is over.

    My worry is how far the winning team replacing the Trump circus will have to go to repair his damage.

    Like climate change we let things go too far to have a chance at escaping costly consequences. They are unavoidable now but we cannot let up for a minute trying now to reduce the damages that we’ll have to start fixing in 2021.

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