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On Military and Spending, It’s Trump Versus Trump
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It can be a challenge to follow the pronouncements of President Trump, as he often seems to change his position on any number of items from week to week, or from day to day, or even from minute to minute. Consider his speech last week at the Conservative Political Action Conference (CPAC). It was reported as “fiery” and “blistering,” but it was also full of contradictions.

In the speech, President Trump correctly pointed out that the last 15 years of US military action in the Middle East has been an almost incomprehensible waste of money – six trillion dollars, he said – and that after all that US war and meddling the region was actually in worse shape than before we started.

It would have been better for US Presidents to have spent the last 15 years at the beach than to have pursued its Middle East war policy, he added, stating that the US infrastructure could have been rebuilt several times over with the money wasted on such militarism.

All good points from the President.

But then minutes later in the same speech he seemed to forget what he just said about wasting money on militarism. He promised he would be “upgrading all of our military, all of our military, offensive, defensive, everything,” in what would be “one of the greatest military buildups in American history.”

This “greatest” military buildup is in addition to the trillions he plans on spending to make sure the US nuclear arsenal is at the “top of the pack” in the world, as he told the press last Thursday. And that is in addition to the trillion dollar nuclear “modernization” program that is carrying over from the Obama Administration.

Of course when it comes to nuclear weapons, the United States already is at the “top of the pack,” having nearly 7,000 nuclear warheads. How many times do we need to be able to blow up the world?

At CPAC, President Trump is worried about needlessly spending money on military misadventures, but then in the same speech he promised even more military misadventures in the Middle East.

Where is the money going to come from for all this? Is the President going to raise taxes to pay for it? Is he going to make massive cuts in domestic spending?

In the same CPAC speech, President Trump reiterated his vow to “massively lower taxes on the middle class, reduce taxes on American business, and make our tax code more simple and much more fair for everyone.” And that’s all good. So it’s not coming from there.

Will he cut domestic spending? The President has indicated that he also wants a massive infrastructure modernization program launched in the near future. The plan will likely cost far in excess of the trillion dollars the President has suggested.

That leaves only one solution: printing money out of thin air. It has been the favorite trick of his predecessors. While he correctly condemns the $20 trillion national debt passed down from previous Administrations, his policies promise to add to that number in a massive way. Printing money out of thin air destroys the currency, hastening a US economic collapse and placing a very cruel tax on the working and middle classes as well.

Following the President’s constantly changing policies can make you dizzy. That’s a shame because the solution is very simple: end the US military empire overseas, cut taxes and regulations at home, end the welfare magnet for illegal immigration, and end the drug war. And then get out of the way.

(Reprinted from The Ron Paul Institute by permission of author or representative)
 
• Category: Foreign Policy • Tags: American Military, Donald Trump 
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  1. I can’t disagree with the article from a logical point of view, but in a practical way where does logic come into it?

    Trump appealed to many constituencies and he knew that he needed their votes to get elected President. He also knew what they wanted to hear. Detroit got a speech about outsourcing, the military gets a speech about a great military buildup, small businesses get a speech about cutting taxes and European Americans uneasy about immigration get a speech about the Mexican wall. The Jews get Jerusalem, a tough stance on Iran and a continued “special relationship” and the underemployed get a speech about the many jobs rebuilding US infrastructure.

    It all makes sense from a “winning” point of view.

    Constituencies can pick and choose the parts they like and ignore the logic – after all, religions have been running the same system for millennia. All you need is ” believers” (in this case in God Trump).

    Jesus replied, “They do not need to go away. You give them something to eat.”

    We have here only five loaves of bread and two fish,” they answered.

    “Bring them here to me,” he said. And he directed the people to sit down on the grass. Taking the five loaves and the two fish and looking up to heaven, he gave thanks and broke the loaves. Then he gave them to the disciples, and the disciples gave them to the people. They all ate and were satisfied, and the disciples picked up twelve basketfuls of broken pieces that were left over. The number of those who ate was about five thousand men, besides women and children.

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  2. I lack any special insight into Donald Trump’s mind, who knows what’s in there.

    But, in theory, there might be a way to upgrade “all of your military” in what would be “one of the greatest military buildups in American history,” & “massive infrastructure modernization program” while throwing far less money than hitherto.

    The clue is in the fact that DoD couldn’t account for some six trillion dollars.

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  3. anonymous says:     Show CommentNext New Comment

    “almost incomprehensible waste of money – six trillion dollars”

    Where do you get such a high figure? There’s no need to exaggerate when it’s already terrible.

    Read More
  4. Trump was probably just using 2020 dollars as opposed to nominal – our currency is being eroded fairly quickly, to where a trillion bucks will be chump change to the US Feral Gov’t by 2020.

    Read More
  5. Trump is like Hans, the horse who could count. He stops stomping his hoof when the body language of the watchers signals the right number.

    Read More
  6. I agree that Trump is a whirling dervish at times and can often change his opinions with the wind. I too am not quite sure how he plans to increase spending in certain areas including a 1 trillion dollars in infrastructure spending , decrease it in other areas, lower taxes and still dramatically reduce the almost 20 trillion dollar debt. It’s sure going to be interesting.

    Trump should consider resorting to that dreaded T word that is kryptonite to all libertarians and conservatives big and small. That word is tariff.

    Read More
    • Replies: @jtgw
    I've been going back and forth in my mind on the tariff question. On the one hand, there is no doubt that a tariff is just another tax, since the added costs to imports will be passed on to consumers; a lot of tariff supporters don't see that far and imagine the costs will only be borne by foreigners, or by the domestic companies that import. It is also indisputable that, by limiting foreign competition, tariffs protect inefficient domestic businesses, which also imposes costs on everyone, since resources are being diverted to less efficient uses, not only costing consumers but also other domestic businesses that could have used those resources more profitably.

    On the other hand, there is the question of whether what one buys with this tax will pay for itself in other ways. One relatively straightforward example is domestic arms manufacturers. While it could be more efficient to import arms, that makes the country vulnerable if a war should break out and trade should be disrupted, leaving the armed forces with no means to obtain weapons. More sophisticated proponents of tariffs might also suggest that the political tranquility purchased with some protection of domestic producers is worth the cost to consumers. The retort would be that such politically necessary tariffs get exploited by special interests; a more politically powerful lobby will get strong protection for its producers, while less savvy producers get exposed to the full force of international competition.

    I think maybe the best (and quite Utopian) compromise would be a low, uniform tariff (e.g. 5%) that gathers just enough revenue for the purposes of a limited central government. It would offer a bit of protection to domestic producers, but would not play favorites among different industries. Additional protection to strategically important industries, like arms manufacturing, could be had by legislation requiring e.g. the central government to buy only from businesses based in the country; American taxpayer money should not go to foreign governments or foreign companies.

    The "invade the world" doctrine is responsible for the perception that we are not spending enough on defense. We're spending quite enough on it if our purpose was simply to defend ourselves from attack; we are probably not spending enough if the goal is to police the world.

    The federal government should not be involved in most domestic infrastructure spending; that is the responsibility of the states. Unfortunately, Trump's administration is probably stuck with it. What's more worrying is that some of the reasoning for boosting infrastructure spending is Keynesian, which I agree with RP is quite misguided. Public spending cannot create a net gain in employment or wealth, because the spending is only made possible by diverting wealth and resources from other sectors of the economy (whether directly in taxes or indirectly in inflation). We may very well see the infrastructure as necessary for other reasons, e.g. we decide there must be roads or public schools or poor relief - but we have to recognize that these all cost us ultimately. It is foolish to use public spending to boost employment; the only way to boost employment is to reduce taxes and public spending, put money on a sound footing, and allow the market to liquidate debt from previous bubbles.
  7. @KenH
    I agree that Trump is a whirling dervish at times and can often change his opinions with the wind. I too am not quite sure how he plans to increase spending in certain areas including a 1 trillion dollars in infrastructure spending , decrease it in other areas, lower taxes and still dramatically reduce the almost 20 trillion dollar debt. It's sure going to be interesting.

    Trump should consider resorting to that dreaded T word that is kryptonite to all libertarians and conservatives big and small. That word is tariff.

    I’ve been going back and forth in my mind on the tariff question. On the one hand, there is no doubt that a tariff is just another tax, since the added costs to imports will be passed on to consumers; a lot of tariff supporters don’t see that far and imagine the costs will only be borne by foreigners, or by the domestic companies that import. It is also indisputable that, by limiting foreign competition, tariffs protect inefficient domestic businesses, which also imposes costs on everyone, since resources are being diverted to less efficient uses, not only costing consumers but also other domestic businesses that could have used those resources more profitably.

    On the other hand, there is the question of whether what one buys with this tax will pay for itself in other ways. One relatively straightforward example is domestic arms manufacturers. While it could be more efficient to import arms, that makes the country vulnerable if a war should break out and trade should be disrupted, leaving the armed forces with no means to obtain weapons. More sophisticated proponents of tariffs might also suggest that the political tranquility purchased with some protection of domestic producers is worth the cost to consumers. The retort would be that such politically necessary tariffs get exploited by special interests; a more politically powerful lobby will get strong protection for its producers, while less savvy producers get exposed to the full force of international competition.

    I think maybe the best (and quite Utopian) compromise would be a low, uniform tariff (e.g. 5%) that gathers just enough revenue for the purposes of a limited central government. It would offer a bit of protection to domestic producers, but would not play favorites among different industries. Additional protection to strategically important industries, like arms manufacturing, could be had by legislation requiring e.g. the central government to buy only from businesses based in the country; American taxpayer money should not go to foreign governments or foreign companies.

    The “invade the world” doctrine is responsible for the perception that we are not spending enough on defense. We’re spending quite enough on it if our purpose was simply to defend ourselves from attack; we are probably not spending enough if the goal is to police the world.

    The federal government should not be involved in most domestic infrastructure spending; that is the responsibility of the states. Unfortunately, Trump’s administration is probably stuck with it. What’s more worrying is that some of the reasoning for boosting infrastructure spending is Keynesian, which I agree with RP is quite misguided. Public spending cannot create a net gain in employment or wealth, because the spending is only made possible by diverting wealth and resources from other sectors of the economy (whether directly in taxes or indirectly in inflation). We may very well see the infrastructure as necessary for other reasons, e.g. we decide there must be roads or public schools or poor relief – but we have to recognize that these all cost us ultimately. It is foolish to use public spending to boost employment; the only way to boost employment is to reduce taxes and public spending, put money on a sound footing, and allow the market to liquidate debt from previous bubbles.

    Read More
    • Replies: @KenH

    .....a lot of tariff supporters don’t see that far and imagine the costs will only be borne by foreigners, or by the domestic companies that import.
     
    Tariffs also protect domestic industries from foreign nations who have a low wage or even slave wage scale with no health benefits. Libertarians and most conservatives rarely see that far.

    It is also indisputable that, by limiting foreign competition, tariffs protect inefficient domestic businesses, which also imposes costs on everyone.....,
     
    This is a highly debatable and disputable claim and the issue is much more complicated and comprehensive than anti-tariff hardliners make it. U.S. domestic industry is “inefficient” only insofar as they can’t compete with slave wages like industries in China, Indonesia, Pakistan, etc.

    Other considerations in favor of protective tariffs:
    1) Other nations underwrite and subsidize their industries which puts U.S. industry at a distinct disadvantage, and thus making them artificially “inefficient”. China, Japan and Europe all subsidize certain industries they deem vital which helps with R&D and boosts profit and loss. In Europe’s case it’s their aerospace industries and AIRBUS. This puts Boeing at a disadvantage in the commercial airline industry.

    2) The cost of “cheap” untaxed imports invariably rise when once weaken or destroy their American competitors. A dry cleaner I used had suddenly increased his price by 15% when the last American makers of plastic bags and hangers went out of business. He told me that Chinese competitors were underselling their American competitors and one by one they went out of business. When the last American supplier went belly up the Chinese raised the price to a level higher than what any "inefficient" American manufacturer previously charged.

    3) Tariffs can encourage foreign manufacturers to relocate part or all of their operation to America to avoid paying it. America is a huge market that is vital for everyone.

    4) “Efficient” foreign manufacturers got that way largely by American companies transferring their hard won technology and spending tens of millions of dollars tooling up and training companies and employees in various foreign (mostly Asian) nations.

    5) Then there’s the panoply of taxes and regulations, EPA or other, that hamstring “inefficient” U.S. industries that their “efficient” foreign competitors don’t have to contend with.

    6) Sometimes a tariff is hardly noticeable and is mere pennies on the dollar. Or, for example, if Chinese television manufacturer Hisense is slapped with a 25% tariff that means 32” HDTV’s increase from $200.00 to $225.00. Not much in the grand scheme of things and still easily affordable for the vast majority of buyers. And if Trump’s protectionist and America First economic plans raise the average wage & salary by 10% or more than people are still coming out way ahead.

    It was the tariff imposed by Ronald Reagan that rescued Harley-Davidson from the brink of ruin in the early 1980's. I have just over 20yrs working in three different industries and have seen firsthand how the lack of a tariff can harm U.S. companies and make their standing in a given industry more tenuous.
    , @KenH

    The “invade the world” doctrine is responsible for the perception that we are not spending enough on defense.
     
    Agreed. We spend more than anyone and our imperial ambitions have led to a highly bloated "defense" budget. If we returned to non-interventionism we could cut the 600 billion budget in half at least. But the "America must lead" crowd is firmly in charge and based on his SOU speech Trump has now converted to this way to thinking.

    The federal government should not be involved in most domestic infrastructure spending; that is the responsibility of the states.
     
    I mostly agree but the die has been cast with previous projects funded by the federal government. If Trump can pay for it without adding to the debt then great, but if not then he needs to scale back his trillion dollar plan.
  8. @jtgw
    I've been going back and forth in my mind on the tariff question. On the one hand, there is no doubt that a tariff is just another tax, since the added costs to imports will be passed on to consumers; a lot of tariff supporters don't see that far and imagine the costs will only be borne by foreigners, or by the domestic companies that import. It is also indisputable that, by limiting foreign competition, tariffs protect inefficient domestic businesses, which also imposes costs on everyone, since resources are being diverted to less efficient uses, not only costing consumers but also other domestic businesses that could have used those resources more profitably.

    On the other hand, there is the question of whether what one buys with this tax will pay for itself in other ways. One relatively straightforward example is domestic arms manufacturers. While it could be more efficient to import arms, that makes the country vulnerable if a war should break out and trade should be disrupted, leaving the armed forces with no means to obtain weapons. More sophisticated proponents of tariffs might also suggest that the political tranquility purchased with some protection of domestic producers is worth the cost to consumers. The retort would be that such politically necessary tariffs get exploited by special interests; a more politically powerful lobby will get strong protection for its producers, while less savvy producers get exposed to the full force of international competition.

    I think maybe the best (and quite Utopian) compromise would be a low, uniform tariff (e.g. 5%) that gathers just enough revenue for the purposes of a limited central government. It would offer a bit of protection to domestic producers, but would not play favorites among different industries. Additional protection to strategically important industries, like arms manufacturing, could be had by legislation requiring e.g. the central government to buy only from businesses based in the country; American taxpayer money should not go to foreign governments or foreign companies.

    The "invade the world" doctrine is responsible for the perception that we are not spending enough on defense. We're spending quite enough on it if our purpose was simply to defend ourselves from attack; we are probably not spending enough if the goal is to police the world.

    The federal government should not be involved in most domestic infrastructure spending; that is the responsibility of the states. Unfortunately, Trump's administration is probably stuck with it. What's more worrying is that some of the reasoning for boosting infrastructure spending is Keynesian, which I agree with RP is quite misguided. Public spending cannot create a net gain in employment or wealth, because the spending is only made possible by diverting wealth and resources from other sectors of the economy (whether directly in taxes or indirectly in inflation). We may very well see the infrastructure as necessary for other reasons, e.g. we decide there must be roads or public schools or poor relief - but we have to recognize that these all cost us ultimately. It is foolish to use public spending to boost employment; the only way to boost employment is to reduce taxes and public spending, put money on a sound footing, and allow the market to liquidate debt from previous bubbles.

    …..a lot of tariff supporters don’t see that far and imagine the costs will only be borne by foreigners, or by the domestic companies that import.

    Tariffs also protect domestic industries from foreign nations who have a low wage or even slave wage scale with no health benefits. Libertarians and most conservatives rarely see that far.

    It is also indisputable that, by limiting foreign competition, tariffs protect inefficient domestic businesses, which also imposes costs on everyone…..,

    This is a highly debatable and disputable claim and the issue is much more complicated and comprehensive than anti-tariff hardliners make it. U.S. domestic industry is “inefficient” only insofar as they can’t compete with slave wages like industries in China, Indonesia, Pakistan, etc.

    Other considerations in favor of protective tariffs:
    1) Other nations underwrite and subsidize their industries which puts U.S. industry at a distinct disadvantage, and thus making them artificially “inefficient”. China, Japan and Europe all subsidize certain industries they deem vital which helps with R&D and boosts profit and loss. In Europe’s case it’s their aerospace industries and AIRBUS. This puts Boeing at a disadvantage in the commercial airline industry.

    2) The cost of “cheap” untaxed imports invariably rise when once weaken or destroy their American competitors. A dry cleaner I used had suddenly increased his price by 15% when the last American makers of plastic bags and hangers went out of business. He told me that Chinese competitors were underselling their American competitors and one by one they went out of business. When the last American supplier went belly up the Chinese raised the price to a level higher than what any “inefficient” American manufacturer previously charged.

    3) Tariffs can encourage foreign manufacturers to relocate part or all of their operation to America to avoid paying it. America is a huge market that is vital for everyone.

    4) “Efficient” foreign manufacturers got that way largely by American companies transferring their hard won technology and spending tens of millions of dollars tooling up and training companies and employees in various foreign (mostly Asian) nations.

    5) Then there’s the panoply of taxes and regulations, EPA or other, that hamstring “inefficient” U.S. industries that their “efficient” foreign competitors don’t have to contend with.

    6) Sometimes a tariff is hardly noticeable and is mere pennies on the dollar. Or, for example, if Chinese television manufacturer Hisense is slapped with a 25% tariff that means 32” HDTV’s increase from $200.00 to $225.00. Not much in the grand scheme of things and still easily affordable for the vast majority of buyers. And if Trump’s protectionist and America First economic plans raise the average wage & salary by 10% or more than people are still coming out way ahead.

    It was the tariff imposed by Ronald Reagan that rescued Harley-Davidson from the brink of ruin in the early 1980′s. I have just over 20yrs working in three different industries and have seen firsthand how the lack of a tariff can harm U.S. companies and make their standing in a given industry more tenuous.

    Read More
    • Replies: @jtgw

    Tariffs also protect domestic industries from foreign nations who have a low wage or even slave wage scale with no health benefits. Libertarians and most conservatives rarely see that far.
     
    I understand that; I'm just trying to explain to you that this policy also imposes costs on Americans. Those same workers whose jobs might be saved at those particular factories now have to spend more for goods that they need. The question is whether they gain on net from the policy, and I think the evidence suggests that, while some domestic producers gain on net, the entire country loses on net.

    This is a highly debatable and disputable claim and the issue is much more complicated and comprehensive than anti-tariff hardliners make it. U.S. domestic industry is “inefficient” only insofar as they can’t compete with slave wages like industries in China, Indonesia, Pakistan, etc.
     
    High labor costs can be an aspect of inefficiency if they are not matched by high labor productivity. High wages may be something we want, but boosting them by artificial means, whether through protective tariffs or minimum wage laws, makes businesses less efficient. That's just how it is.

    1) Other nations underwrite and subsidize their industries which puts U.S. industry at a distinct disadvantage, and thus making them artificially “inefficient”. China, Japan and Europe all subsidize certain industries they deem vital which helps with R&D and boosts profit and loss. In Europe’s case it’s their aerospace industries and AIRBUS. This puts Boeing at a disadvantage in the commercial airline industry.
     
    Those nations are imposing costs on themselves by those policies, since those subsidies can only be funded by depriving other sectors of needed capital. However, I do grant that a country with a large economy can probably play a lot of havoc with a neighbor that depends on it for trade. The general principle remains true, which is that, even if another country uses subsidies to lower costs of some exports, that doesn't stop the market in our own country from reallocating resources away from the industries that cannot compete to those that can compete. Moreover, if we ourselves avoid subsidies, then we will using resources more efficiently than our rivals who are misallocating resources through subsidies.

    At least, this is how it works out in the long term. I think where the protectionists have a point is that there is always a transition period while outcompeted businesses close down and capital and labor are reallocated to new businesses. The transitions can be painful for a lot of people and as I said, another country with a large economy can better afford to use these kinds of policies to mess with others.

    2) The cost of “cheap” untaxed imports invariably rise when once weaken or destroy their American competitors. A dry cleaner I used had suddenly increased his price by 15% when the last American makers of plastic bags and hangers went out of business. He told me that Chinese competitors were underselling their American competitors and one by one they went out of business. When the last American supplier went belly up the Chinese raised the price to a level higher than what any “inefficient” American manufacturer previously charged.

     

    The interesting question for me from your example is why American manufacturers didn't re-enter the market as soon as the Chinese competitors raised their prices above the former competitive rate. I wouldn't be surprised if domestic regulation were not partially responsible for artificially raising barriers to entry. But aside from specific examples like your own, it is hard to deny that the reason Chinese imports won was because they were cheaper than American products, and that imports are still winning because they're still cheaper.

    3) Tariffs can encourage foreign manufacturers to relocate part or all of their operation to America to avoid paying it. America is a huge market that is vital for everyone.
     
    That could be true in some cases, but if the company would have located elsewhere without the tariff, that still means that costs are higher in the US, meaning that anything produced in the US would be more expensive than if it were produced outside the US without the tariff.

    4) “Efficient” foreign manufacturers got that way largely by American companies transferring their hard won technology and spending tens of millions of dollars tooling up and training companies and employees in various foreign (mostly Asian) nations.
     
    If it's their intellectual property, it's theirs to sell to willing customers. Anyway, you're still going to raise costs for consumers if you try to force IP to remain in the country.

    5) Then there’s the panoply of taxes and regulations, EPA or other, that hamstring “inefficient” U.S. industries that their “efficient” foreign competitors don’t have to contend with.

     

    I agree, but the scare quotes around "inefficient" are unnecessary. All these regulations do make domestic industries more inefficient, which is why companies try to outsource to remain competitive.

    6) Sometimes a tariff is hardly noticeable and is mere pennies on the dollar. Or, for example, if Chinese television manufacturer Hisense is slapped with a 25% tariff that means 32” HDTV’s increase from $200.00 to $225.00. Not much in the grand scheme of things and still easily affordable for the vast majority of buyers. And if Trump’s protectionist and America First economic plans raise the average wage & salary by 10% or more than people are still coming out way ahead.
     
    Who will these price increases harm more? The consumers for whom an extra $25 is nothing, or those for whom that amount is a crucial part of the monthly budget? Tariffs are a regressive tax, and if your intent is to help the most economically vulnerable, then you do not want to rely on tariffs.

    It was the tariff imposed by Ronald Reagan that rescued Harley-Davidson from the brink of ruin in the early 1980′s. I have just over 20yrs working in three different industries and have seen firsthand how the lack of a tariff can harm U.S. companies and make their standing in a given industry more tenuous.
     
    This exemplifies the kind of restricted thinking I'm talking about. Sure, if you're only looking at one industry or one aspect of the economy, or even three industries, which are still just one small part of the whole system, protective tariffs might make sense. When you're looking at the whole thing, however, you start to see the costs involved. How did saving Harley-Davidson help Americans as a whole, apart from a vague sense of national pride?

    The reasoning behind free trade, the law of comparative advantage, is very straightforward. Even if your rival nation is more efficient at everything, it still benefits them to trade with you. This is because they get more return by focusing exclusively on where they are most productive, and allowing you to focus on where they are less productive, even if you are still less productive than they are. So it is very hard to lose in free trade, since you are almost always going to be able to produce something.

    The issue that I do think is worth addressing is the cost of things like retraining and transitioning to new jobs. If your factory closes, in a free market you could certainly find some new job that would pay you to do something, even if just to clean toilets; our labor market suffers from a lot of taxes and regulations that make transitioning more difficult than it should be. But ultimately transitions are difficult; they are generally costs that have to paid for out of the worker's own savings. I think there can be a discussion about whether some Americans should be subsidizing certain producers, but we have to be frank about the costs involved and not imagine that such protections come for free, or only at the expense of those we don't care about, like foreigners.
  9. @jtgw
    I've been going back and forth in my mind on the tariff question. On the one hand, there is no doubt that a tariff is just another tax, since the added costs to imports will be passed on to consumers; a lot of tariff supporters don't see that far and imagine the costs will only be borne by foreigners, or by the domestic companies that import. It is also indisputable that, by limiting foreign competition, tariffs protect inefficient domestic businesses, which also imposes costs on everyone, since resources are being diverted to less efficient uses, not only costing consumers but also other domestic businesses that could have used those resources more profitably.

    On the other hand, there is the question of whether what one buys with this tax will pay for itself in other ways. One relatively straightforward example is domestic arms manufacturers. While it could be more efficient to import arms, that makes the country vulnerable if a war should break out and trade should be disrupted, leaving the armed forces with no means to obtain weapons. More sophisticated proponents of tariffs might also suggest that the political tranquility purchased with some protection of domestic producers is worth the cost to consumers. The retort would be that such politically necessary tariffs get exploited by special interests; a more politically powerful lobby will get strong protection for its producers, while less savvy producers get exposed to the full force of international competition.

    I think maybe the best (and quite Utopian) compromise would be a low, uniform tariff (e.g. 5%) that gathers just enough revenue for the purposes of a limited central government. It would offer a bit of protection to domestic producers, but would not play favorites among different industries. Additional protection to strategically important industries, like arms manufacturing, could be had by legislation requiring e.g. the central government to buy only from businesses based in the country; American taxpayer money should not go to foreign governments or foreign companies.

    The "invade the world" doctrine is responsible for the perception that we are not spending enough on defense. We're spending quite enough on it if our purpose was simply to defend ourselves from attack; we are probably not spending enough if the goal is to police the world.

    The federal government should not be involved in most domestic infrastructure spending; that is the responsibility of the states. Unfortunately, Trump's administration is probably stuck with it. What's more worrying is that some of the reasoning for boosting infrastructure spending is Keynesian, which I agree with RP is quite misguided. Public spending cannot create a net gain in employment or wealth, because the spending is only made possible by diverting wealth and resources from other sectors of the economy (whether directly in taxes or indirectly in inflation). We may very well see the infrastructure as necessary for other reasons, e.g. we decide there must be roads or public schools or poor relief - but we have to recognize that these all cost us ultimately. It is foolish to use public spending to boost employment; the only way to boost employment is to reduce taxes and public spending, put money on a sound footing, and allow the market to liquidate debt from previous bubbles.

    The “invade the world” doctrine is responsible for the perception that we are not spending enough on defense.

    Agreed. We spend more than anyone and our imperial ambitions have led to a highly bloated “defense” budget. If we returned to non-interventionism we could cut the 600 billion budget in half at least. But the “America must lead” crowd is firmly in charge and based on his SOU speech Trump has now converted to this way to thinking.

    The federal government should not be involved in most domestic infrastructure spending; that is the responsibility of the states.

    I mostly agree but the die has been cast with previous projects funded by the federal government. If Trump can pay for it without adding to the debt then great, but if not then he needs to scale back his trillion dollar plan.

    Read More
  10. @KenH

    .....a lot of tariff supporters don’t see that far and imagine the costs will only be borne by foreigners, or by the domestic companies that import.
     
    Tariffs also protect domestic industries from foreign nations who have a low wage or even slave wage scale with no health benefits. Libertarians and most conservatives rarely see that far.

    It is also indisputable that, by limiting foreign competition, tariffs protect inefficient domestic businesses, which also imposes costs on everyone.....,
     
    This is a highly debatable and disputable claim and the issue is much more complicated and comprehensive than anti-tariff hardliners make it. U.S. domestic industry is “inefficient” only insofar as they can’t compete with slave wages like industries in China, Indonesia, Pakistan, etc.

    Other considerations in favor of protective tariffs:
    1) Other nations underwrite and subsidize their industries which puts U.S. industry at a distinct disadvantage, and thus making them artificially “inefficient”. China, Japan and Europe all subsidize certain industries they deem vital which helps with R&D and boosts profit and loss. In Europe’s case it’s their aerospace industries and AIRBUS. This puts Boeing at a disadvantage in the commercial airline industry.

    2) The cost of “cheap” untaxed imports invariably rise when once weaken or destroy their American competitors. A dry cleaner I used had suddenly increased his price by 15% when the last American makers of plastic bags and hangers went out of business. He told me that Chinese competitors were underselling their American competitors and one by one they went out of business. When the last American supplier went belly up the Chinese raised the price to a level higher than what any "inefficient" American manufacturer previously charged.

    3) Tariffs can encourage foreign manufacturers to relocate part or all of their operation to America to avoid paying it. America is a huge market that is vital for everyone.

    4) “Efficient” foreign manufacturers got that way largely by American companies transferring their hard won technology and spending tens of millions of dollars tooling up and training companies and employees in various foreign (mostly Asian) nations.

    5) Then there’s the panoply of taxes and regulations, EPA or other, that hamstring “inefficient” U.S. industries that their “efficient” foreign competitors don’t have to contend with.

    6) Sometimes a tariff is hardly noticeable and is mere pennies on the dollar. Or, for example, if Chinese television manufacturer Hisense is slapped with a 25% tariff that means 32” HDTV’s increase from $200.00 to $225.00. Not much in the grand scheme of things and still easily affordable for the vast majority of buyers. And if Trump’s protectionist and America First economic plans raise the average wage & salary by 10% or more than people are still coming out way ahead.

    It was the tariff imposed by Ronald Reagan that rescued Harley-Davidson from the brink of ruin in the early 1980's. I have just over 20yrs working in three different industries and have seen firsthand how the lack of a tariff can harm U.S. companies and make their standing in a given industry more tenuous.

    Tariffs also protect domestic industries from foreign nations who have a low wage or even slave wage scale with no health benefits. Libertarians and most conservatives rarely see that far.

    I understand that; I’m just trying to explain to you that this policy also imposes costs on Americans. Those same workers whose jobs might be saved at those particular factories now have to spend more for goods that they need. The question is whether they gain on net from the policy, and I think the evidence suggests that, while some domestic producers gain on net, the entire country loses on net.

    This is a highly debatable and disputable claim and the issue is much more complicated and comprehensive than anti-tariff hardliners make it. U.S. domestic industry is “inefficient” only insofar as they can’t compete with slave wages like industries in China, Indonesia, Pakistan, etc.

    High labor costs can be an aspect of inefficiency if they are not matched by high labor productivity. High wages may be something we want, but boosting them by artificial means, whether through protective tariffs or minimum wage laws, makes businesses less efficient. That’s just how it is.

    1) Other nations underwrite and subsidize their industries which puts U.S. industry at a distinct disadvantage, and thus making them artificially “inefficient”. China, Japan and Europe all subsidize certain industries they deem vital which helps with R&D and boosts profit and loss. In Europe’s case it’s their aerospace industries and AIRBUS. This puts Boeing at a disadvantage in the commercial airline industry.

    Those nations are imposing costs on themselves by those policies, since those subsidies can only be funded by depriving other sectors of needed capital. However, I do grant that a country with a large economy can probably play a lot of havoc with a neighbor that depends on it for trade. The general principle remains true, which is that, even if another country uses subsidies to lower costs of some exports, that doesn’t stop the market in our own country from reallocating resources away from the industries that cannot compete to those that can compete. Moreover, if we ourselves avoid subsidies, then we will using resources more efficiently than our rivals who are misallocating resources through subsidies.

    At least, this is how it works out in the long term. I think where the protectionists have a point is that there is always a transition period while outcompeted businesses close down and capital and labor are reallocated to new businesses. The transitions can be painful for a lot of people and as I said, another country with a large economy can better afford to use these kinds of policies to mess with others.

    2) The cost of “cheap” untaxed imports invariably rise when once weaken or destroy their American competitors. A dry cleaner I used had suddenly increased his price by 15% when the last American makers of plastic bags and hangers went out of business. He told me that Chinese competitors were underselling their American competitors and one by one they went out of business. When the last American supplier went belly up the Chinese raised the price to a level higher than what any “inefficient” American manufacturer previously charged.

    The interesting question for me from your example is why American manufacturers didn’t re-enter the market as soon as the Chinese competitors raised their prices above the former competitive rate. I wouldn’t be surprised if domestic regulation were not partially responsible for artificially raising barriers to entry. But aside from specific examples like your own, it is hard to deny that the reason Chinese imports won was because they were cheaper than American products, and that imports are still winning because they’re still cheaper.

    3) Tariffs can encourage foreign manufacturers to relocate part or all of their operation to America to avoid paying it. America is a huge market that is vital for everyone.

    That could be true in some cases, but if the company would have located elsewhere without the tariff, that still means that costs are higher in the US, meaning that anything produced in the US would be more expensive than if it were produced outside the US without the tariff.

    4) “Efficient” foreign manufacturers got that way largely by American companies transferring their hard won technology and spending tens of millions of dollars tooling up and training companies and employees in various foreign (mostly Asian) nations.

    If it’s their intellectual property, it’s theirs to sell to willing customers. Anyway, you’re still going to raise costs for consumers if you try to force IP to remain in the country.

    5) Then there’s the panoply of taxes and regulations, EPA or other, that hamstring “inefficient” U.S. industries that their “efficient” foreign competitors don’t have to contend with.

    I agree, but the scare quotes around “inefficient” are unnecessary. All these regulations do make domestic industries more inefficient, which is why companies try to outsource to remain competitive.

    6) Sometimes a tariff is hardly noticeable and is mere pennies on the dollar. Or, for example, if Chinese television manufacturer Hisense is slapped with a 25% tariff that means 32” HDTV’s increase from $200.00 to $225.00. Not much in the grand scheme of things and still easily affordable for the vast majority of buyers. And if Trump’s protectionist and America First economic plans raise the average wage & salary by 10% or more than people are still coming out way ahead.

    Who will these price increases harm more? The consumers for whom an extra $25 is nothing, or those for whom that amount is a crucial part of the monthly budget? Tariffs are a regressive tax, and if your intent is to help the most economically vulnerable, then you do not want to rely on tariffs.

    It was the tariff imposed by Ronald Reagan that rescued Harley-Davidson from the brink of ruin in the early 1980′s. I have just over 20yrs working in three different industries and have seen firsthand how the lack of a tariff can harm U.S. companies and make their standing in a given industry more tenuous.

    This exemplifies the kind of restricted thinking I’m talking about. Sure, if you’re only looking at one industry or one aspect of the economy, or even three industries, which are still just one small part of the whole system, protective tariffs might make sense. When you’re looking at the whole thing, however, you start to see the costs involved. How did saving Harley-Davidson help Americans as a whole, apart from a vague sense of national pride?

    The reasoning behind free trade, the law of comparative advantage, is very straightforward. Even if your rival nation is more efficient at everything, it still benefits them to trade with you. This is because they get more return by focusing exclusively on where they are most productive, and allowing you to focus on where they are less productive, even if you are still less productive than they are. So it is very hard to lose in free trade, since you are almost always going to be able to produce something.

    The issue that I do think is worth addressing is the cost of things like retraining and transitioning to new jobs. If your factory closes, in a free market you could certainly find some new job that would pay you to do something, even if just to clean toilets; our labor market suffers from a lot of taxes and regulations that make transitioning more difficult than it should be. But ultimately transitions are difficult; they are generally costs that have to paid for out of the worker’s own savings. I think there can be a discussion about whether some Americans should be subsidizing certain producers, but we have to be frank about the costs involved and not imagine that such protections come for free, or only at the expense of those we don’t care about, like foreigners.

    Read More
    • Replies: @KenH

    I’m just trying to explain to you that this policy also imposes costs on Americans. Those same workers whose jobs might be saved at those particular factories now have to spend more for goods that they need.
     
    Tariffs don't always impose burdensome cost on Americans. As you are probably aware, the founders desired the use of tariffs to fund the government and if income taxes can be lessened across the board because of tariff revenues then even though workers are spending slightly more for some products they are paying less in federal income taxes. Pick your poison.

    High labor costs can be an aspect of inefficiency if they are not matched by high labor productivity.
     
    High demand figures into this as well. If a company has too high a wage scale relative to their competitors then people will buy from those competitors if the product quality of the higher wage company isn't superior. But you can't throw American manufacturers into Darwinian competition with the slave labor of the third world then say they're inefficient.

    The interesting question for me from your example is why American manufacturers didn’t re-enter the market as soon as the Chinese competitors raised their prices above the former competitive rate.
     
    So re-enter the business and just have your Chinese competitors undersell and bankrupt you for a second time? A protective tariff of say, 50%, would punish these sharp Chinese practices and allow American competitors to get back on their feet.

    I wouldn’t be surprised if domestic regulation were not partially responsible for artificially raising barriers to entry.
     
    That is always a possibility but the dry cleaner owner did not indicate that hat was the issue. The amazing thing is that, generally speaking, "inefficient" American manufacturers managed to stay as competitive as long as they did in spite of U.S. government creating a hostile business climate with their onerous taxing and regulatory structure.

    If it’s their intellectual property, it’s theirs to sell to willing customers. Anyway, you’re still going to raise costs for consumers if you try to force IP to remain in the country.
     
    True but that's not the point and companies often just give it away for a short term, quarterly boost in profits. This drastically shortens the learning curve so instead of decades to become "efficient" foreign companies are are doing so in a matter of years or sooner depending on the complexity of the product. American companies are investing huge sums of money then using the loopholes in the accounting rules and tax code to soften the blow to cash flow and working capital.

    All these regulations do make domestic industries more inefficient, which is why companies try to outsource to remain competitive.
     
    True, but when all the manufacturers are domestic they all have the same handicap. But when one manufacturer opts to move production elsewhere eventually it forces everyone else in the industry to do the same thing to remain competitive. Contrary to libertarian and free trader lore, the displaced American just don't simply obtain jobs in other industries at a comparable pay scale especially when many industries have left the nation entirely.

    Who will these price increases harm more? The consumers for whom an extra $25 is nothing, or those for whom that amount is a crucial part of the monthly budget?

     

    Virtually no one. The people least likely to afford this are minuscule, but I guarantee most blow $25.00 on other worthless things, so they'll just have to make a choice. And most places now offer 6 month financing on purchases of $199.00 or more which works out to a whopping $4.17 a month.

    How did saving Harley-Davidson help Americans as a whole, apart from a vague sense of national pride?
     
    Employing thousands of Americans and adding to the GDP and national tax base counts for something. The tariff rescued HA from oblivion, protecting them from cheap Japanese imports, and allowed them to invest in R&D and product quality which increased demand for their product. This contravened almost all of libertarianisms's holy tenets.

    If your factory closes, in a free market you could certainly find some new job that would pay you to do something, even if just to clean toilets;
     
    Well, if you're a college professor making 80K and your university decides to fire you and bring in H1-B professors at 30K, would you happily go clean toilets for $10.00/hr?

    our labor market suffers from a lot of taxes and regulations that make transitioning more difficult than it should be.
     
    Yes, our tax and regulatory environment has become an impediment to businesses hiring since each new employee becomes a bigger investment and costs more money.
  11. @jtgw

    Tariffs also protect domestic industries from foreign nations who have a low wage or even slave wage scale with no health benefits. Libertarians and most conservatives rarely see that far.
     
    I understand that; I'm just trying to explain to you that this policy also imposes costs on Americans. Those same workers whose jobs might be saved at those particular factories now have to spend more for goods that they need. The question is whether they gain on net from the policy, and I think the evidence suggests that, while some domestic producers gain on net, the entire country loses on net.

    This is a highly debatable and disputable claim and the issue is much more complicated and comprehensive than anti-tariff hardliners make it. U.S. domestic industry is “inefficient” only insofar as they can’t compete with slave wages like industries in China, Indonesia, Pakistan, etc.
     
    High labor costs can be an aspect of inefficiency if they are not matched by high labor productivity. High wages may be something we want, but boosting them by artificial means, whether through protective tariffs or minimum wage laws, makes businesses less efficient. That's just how it is.

    1) Other nations underwrite and subsidize their industries which puts U.S. industry at a distinct disadvantage, and thus making them artificially “inefficient”. China, Japan and Europe all subsidize certain industries they deem vital which helps with R&D and boosts profit and loss. In Europe’s case it’s their aerospace industries and AIRBUS. This puts Boeing at a disadvantage in the commercial airline industry.
     
    Those nations are imposing costs on themselves by those policies, since those subsidies can only be funded by depriving other sectors of needed capital. However, I do grant that a country with a large economy can probably play a lot of havoc with a neighbor that depends on it for trade. The general principle remains true, which is that, even if another country uses subsidies to lower costs of some exports, that doesn't stop the market in our own country from reallocating resources away from the industries that cannot compete to those that can compete. Moreover, if we ourselves avoid subsidies, then we will using resources more efficiently than our rivals who are misallocating resources through subsidies.

    At least, this is how it works out in the long term. I think where the protectionists have a point is that there is always a transition period while outcompeted businesses close down and capital and labor are reallocated to new businesses. The transitions can be painful for a lot of people and as I said, another country with a large economy can better afford to use these kinds of policies to mess with others.

    2) The cost of “cheap” untaxed imports invariably rise when once weaken or destroy their American competitors. A dry cleaner I used had suddenly increased his price by 15% when the last American makers of plastic bags and hangers went out of business. He told me that Chinese competitors were underselling their American competitors and one by one they went out of business. When the last American supplier went belly up the Chinese raised the price to a level higher than what any “inefficient” American manufacturer previously charged.

     

    The interesting question for me from your example is why American manufacturers didn't re-enter the market as soon as the Chinese competitors raised their prices above the former competitive rate. I wouldn't be surprised if domestic regulation were not partially responsible for artificially raising barriers to entry. But aside from specific examples like your own, it is hard to deny that the reason Chinese imports won was because they were cheaper than American products, and that imports are still winning because they're still cheaper.

    3) Tariffs can encourage foreign manufacturers to relocate part or all of their operation to America to avoid paying it. America is a huge market that is vital for everyone.
     
    That could be true in some cases, but if the company would have located elsewhere without the tariff, that still means that costs are higher in the US, meaning that anything produced in the US would be more expensive than if it were produced outside the US without the tariff.

    4) “Efficient” foreign manufacturers got that way largely by American companies transferring their hard won technology and spending tens of millions of dollars tooling up and training companies and employees in various foreign (mostly Asian) nations.
     
    If it's their intellectual property, it's theirs to sell to willing customers. Anyway, you're still going to raise costs for consumers if you try to force IP to remain in the country.

    5) Then there’s the panoply of taxes and regulations, EPA or other, that hamstring “inefficient” U.S. industries that their “efficient” foreign competitors don’t have to contend with.

     

    I agree, but the scare quotes around "inefficient" are unnecessary. All these regulations do make domestic industries more inefficient, which is why companies try to outsource to remain competitive.

    6) Sometimes a tariff is hardly noticeable and is mere pennies on the dollar. Or, for example, if Chinese television manufacturer Hisense is slapped with a 25% tariff that means 32” HDTV’s increase from $200.00 to $225.00. Not much in the grand scheme of things and still easily affordable for the vast majority of buyers. And if Trump’s protectionist and America First economic plans raise the average wage & salary by 10% or more than people are still coming out way ahead.
     
    Who will these price increases harm more? The consumers for whom an extra $25 is nothing, or those for whom that amount is a crucial part of the monthly budget? Tariffs are a regressive tax, and if your intent is to help the most economically vulnerable, then you do not want to rely on tariffs.

    It was the tariff imposed by Ronald Reagan that rescued Harley-Davidson from the brink of ruin in the early 1980′s. I have just over 20yrs working in three different industries and have seen firsthand how the lack of a tariff can harm U.S. companies and make their standing in a given industry more tenuous.
     
    This exemplifies the kind of restricted thinking I'm talking about. Sure, if you're only looking at one industry or one aspect of the economy, or even three industries, which are still just one small part of the whole system, protective tariffs might make sense. When you're looking at the whole thing, however, you start to see the costs involved. How did saving Harley-Davidson help Americans as a whole, apart from a vague sense of national pride?

    The reasoning behind free trade, the law of comparative advantage, is very straightforward. Even if your rival nation is more efficient at everything, it still benefits them to trade with you. This is because they get more return by focusing exclusively on where they are most productive, and allowing you to focus on where they are less productive, even if you are still less productive than they are. So it is very hard to lose in free trade, since you are almost always going to be able to produce something.

    The issue that I do think is worth addressing is the cost of things like retraining and transitioning to new jobs. If your factory closes, in a free market you could certainly find some new job that would pay you to do something, even if just to clean toilets; our labor market suffers from a lot of taxes and regulations that make transitioning more difficult than it should be. But ultimately transitions are difficult; they are generally costs that have to paid for out of the worker's own savings. I think there can be a discussion about whether some Americans should be subsidizing certain producers, but we have to be frank about the costs involved and not imagine that such protections come for free, or only at the expense of those we don't care about, like foreigners.

    I’m just trying to explain to you that this policy also imposes costs on Americans. Those same workers whose jobs might be saved at those particular factories now have to spend more for goods that they need.

    Tariffs don’t always impose burdensome cost on Americans. As you are probably aware, the founders desired the use of tariffs to fund the government and if income taxes can be lessened across the board because of tariff revenues then even though workers are spending slightly more for some products they are paying less in federal income taxes. Pick your poison.

    High labor costs can be an aspect of inefficiency if they are not matched by high labor productivity.

    High demand figures into this as well. If a company has too high a wage scale relative to their competitors then people will buy from those competitors if the product quality of the higher wage company isn’t superior. But you can’t throw American manufacturers into Darwinian competition with the slave labor of the third world then say they’re inefficient.

    The interesting question for me from your example is why American manufacturers didn’t re-enter the market as soon as the Chinese competitors raised their prices above the former competitive rate.

    So re-enter the business and just have your Chinese competitors undersell and bankrupt you for a second time? A protective tariff of say, 50%, would punish these sharp Chinese practices and allow American competitors to get back on their feet.

    I wouldn’t be surprised if domestic regulation were not partially responsible for artificially raising barriers to entry.

    That is always a possibility but the dry cleaner owner did not indicate that hat was the issue. The amazing thing is that, generally speaking, “inefficient” American manufacturers managed to stay as competitive as long as they did in spite of U.S. government creating a hostile business climate with their onerous taxing and regulatory structure.

    If it’s their intellectual property, it’s theirs to sell to willing customers. Anyway, you’re still going to raise costs for consumers if you try to force IP to remain in the country.

    True but that’s not the point and companies often just give it away for a short term, quarterly boost in profits. This drastically shortens the learning curve so instead of decades to become “efficient” foreign companies are are doing so in a matter of years or sooner depending on the complexity of the product. American companies are investing huge sums of money then using the loopholes in the accounting rules and tax code to soften the blow to cash flow and working capital.

    All these regulations do make domestic industries more inefficient, which is why companies try to outsource to remain competitive.

    True, but when all the manufacturers are domestic they all have the same handicap. But when one manufacturer opts to move production elsewhere eventually it forces everyone else in the industry to do the same thing to remain competitive. Contrary to libertarian and free trader lore, the displaced American just don’t simply obtain jobs in other industries at a comparable pay scale especially when many industries have left the nation entirely.

    Who will these price increases harm more? The consumers for whom an extra $25 is nothing, or those for whom that amount is a crucial part of the monthly budget?

    Virtually no one. The people least likely to afford this are minuscule, but I guarantee most blow $25.00 on other worthless things, so they’ll just have to make a choice. And most places now offer 6 month financing on purchases of $199.00 or more which works out to a whopping $4.17 a month.

    How did saving Harley-Davidson help Americans as a whole, apart from a vague sense of national pride?

    Employing thousands of Americans and adding to the GDP and national tax base counts for something. The tariff rescued HA from oblivion, protecting them from cheap Japanese imports, and allowed them to invest in R&D and product quality which increased demand for their product. This contravened almost all of libertarianisms’s holy tenets.

    If your factory closes, in a free market you could certainly find some new job that would pay you to do something, even if just to clean toilets;

    Well, if you’re a college professor making 80K and your university decides to fire you and bring in H1-B professors at 30K, would you happily go clean toilets for $10.00/hr?

    our labor market suffers from a lot of taxes and regulations that make transitioning more difficult than it should be.

    Yes, our tax and regulatory environment has become an impediment to businesses hiring since each new employee becomes a bigger investment and costs more money.

    Read More
    • Replies: @jtgw
    I think your first point is best: tariffs are clearly more affordable economically if they are offset by lower taxes elsewhere, e.g. lower income taxes. In the past, e.g. late 19th century, when the US had very high tariffs, we also had a generally low tax and regulatory burden. It is the latter, not the high tariffs, that primarily accounts for the enormous increase in productivity and real income of that period.

    What I feel you are having trouble admitting is that the costs of tariffs don't simply fall on foreign producers or domestic importers; the costs are passed on to the American consumer, and the consumer's interests are just as important as the producer's. Why did working and middle class Americans switch to buying cheaper imports? Because they need those savings, while protectionism will take those savings away. To me that is a cause for concern; whatever money you give back to Americans in terms of higher wages you will take away in the form of more expensive goods.

    There's an argument that an economy needs a solid manufacturing base to thrive, but I don't see good evidence for this. Hong Kong got very wealthy through being a trade hub and financial center, letting other places do the actual manufacturing; there is no reason you can't be wealthy while being a primarily service-sector economy. It is true that in the US, service sector jobs often don't come with the benefits of traditional factory jobs, but that seems to have more to do with how factory jobs were regulated than with anything intrinsic to the manufacturing sector. E.g. if manufacturing jobs by law have offer a certain number of hours and come with high overtime pay and big pensions, while service sector jobs don't have any of these requirements, it will be easier to create the latter. But note also that, because the no-benefit service jobs will be more abundant, while manufacturing jobs are artificially restricted, there will be more demand for the service jobs, which will depress wages below the level they would have been in a free market.

    I think your premise is that the middle class was better off in an earlier era and that was entirely or mostly due to higher tariffs on imports. I agree the middle class was better off, but there are many things that have changed in the past 50 years. Some tariffs are lower because of agreements like NAFTA, but we have also seen e.g. adoption of pure fiat money in 1971, ever increasing regulatory burdens, and ever increasing complication of the tax code. Which of these bears the most blame for what has changed?

    What I fear is that this exclusive focus on tariffs will not be accompanied by a lowering of taxes or regulations elsewhere. Unless those other burdens are lifted, we will indeed only see the costs of tariffs land on the consumer, making it even harder than it is currently to save money. Instead of protectionism, I recommend focusing on relieving domestic businesses from those taxes and regulations that compel them to relocate.
  12. If you liked the above article, you’ll like even more Ron Paul’s updated critique here:

    http://thefreethoughtproject.com/ron-paul-destroyed-trumps-speech/

    It’s a trashing that Trump richly deserves.

    Read More
  13. @KenH

    I’m just trying to explain to you that this policy also imposes costs on Americans. Those same workers whose jobs might be saved at those particular factories now have to spend more for goods that they need.
     
    Tariffs don't always impose burdensome cost on Americans. As you are probably aware, the founders desired the use of tariffs to fund the government and if income taxes can be lessened across the board because of tariff revenues then even though workers are spending slightly more for some products they are paying less in federal income taxes. Pick your poison.

    High labor costs can be an aspect of inefficiency if they are not matched by high labor productivity.
     
    High demand figures into this as well. If a company has too high a wage scale relative to their competitors then people will buy from those competitors if the product quality of the higher wage company isn't superior. But you can't throw American manufacturers into Darwinian competition with the slave labor of the third world then say they're inefficient.

    The interesting question for me from your example is why American manufacturers didn’t re-enter the market as soon as the Chinese competitors raised their prices above the former competitive rate.
     
    So re-enter the business and just have your Chinese competitors undersell and bankrupt you for a second time? A protective tariff of say, 50%, would punish these sharp Chinese practices and allow American competitors to get back on their feet.

    I wouldn’t be surprised if domestic regulation were not partially responsible for artificially raising barriers to entry.
     
    That is always a possibility but the dry cleaner owner did not indicate that hat was the issue. The amazing thing is that, generally speaking, "inefficient" American manufacturers managed to stay as competitive as long as they did in spite of U.S. government creating a hostile business climate with their onerous taxing and regulatory structure.

    If it’s their intellectual property, it’s theirs to sell to willing customers. Anyway, you’re still going to raise costs for consumers if you try to force IP to remain in the country.
     
    True but that's not the point and companies often just give it away for a short term, quarterly boost in profits. This drastically shortens the learning curve so instead of decades to become "efficient" foreign companies are are doing so in a matter of years or sooner depending on the complexity of the product. American companies are investing huge sums of money then using the loopholes in the accounting rules and tax code to soften the blow to cash flow and working capital.

    All these regulations do make domestic industries more inefficient, which is why companies try to outsource to remain competitive.
     
    True, but when all the manufacturers are domestic they all have the same handicap. But when one manufacturer opts to move production elsewhere eventually it forces everyone else in the industry to do the same thing to remain competitive. Contrary to libertarian and free trader lore, the displaced American just don't simply obtain jobs in other industries at a comparable pay scale especially when many industries have left the nation entirely.

    Who will these price increases harm more? The consumers for whom an extra $25 is nothing, or those for whom that amount is a crucial part of the monthly budget?

     

    Virtually no one. The people least likely to afford this are minuscule, but I guarantee most blow $25.00 on other worthless things, so they'll just have to make a choice. And most places now offer 6 month financing on purchases of $199.00 or more which works out to a whopping $4.17 a month.

    How did saving Harley-Davidson help Americans as a whole, apart from a vague sense of national pride?
     
    Employing thousands of Americans and adding to the GDP and national tax base counts for something. The tariff rescued HA from oblivion, protecting them from cheap Japanese imports, and allowed them to invest in R&D and product quality which increased demand for their product. This contravened almost all of libertarianisms's holy tenets.

    If your factory closes, in a free market you could certainly find some new job that would pay you to do something, even if just to clean toilets;
     
    Well, if you're a college professor making 80K and your university decides to fire you and bring in H1-B professors at 30K, would you happily go clean toilets for $10.00/hr?

    our labor market suffers from a lot of taxes and regulations that make transitioning more difficult than it should be.
     
    Yes, our tax and regulatory environment has become an impediment to businesses hiring since each new employee becomes a bigger investment and costs more money.

    I think your first point is best: tariffs are clearly more affordable economically if they are offset by lower taxes elsewhere, e.g. lower income taxes. In the past, e.g. late 19th century, when the US had very high tariffs, we also had a generally low tax and regulatory burden. It is the latter, not the high tariffs, that primarily accounts for the enormous increase in productivity and real income of that period.

    What I feel you are having trouble admitting is that the costs of tariffs don’t simply fall on foreign producers or domestic importers; the costs are passed on to the American consumer, and the consumer’s interests are just as important as the producer’s. Why did working and middle class Americans switch to buying cheaper imports? Because they need those savings, while protectionism will take those savings away. To me that is a cause for concern; whatever money you give back to Americans in terms of higher wages you will take away in the form of more expensive goods.

    There’s an argument that an economy needs a solid manufacturing base to thrive, but I don’t see good evidence for this. Hong Kong got very wealthy through being a trade hub and financial center, letting other places do the actual manufacturing; there is no reason you can’t be wealthy while being a primarily service-sector economy. It is true that in the US, service sector jobs often don’t come with the benefits of traditional factory jobs, but that seems to have more to do with how factory jobs were regulated than with anything intrinsic to the manufacturing sector. E.g. if manufacturing jobs by law have offer a certain number of hours and come with high overtime pay and big pensions, while service sector jobs don’t have any of these requirements, it will be easier to create the latter. But note also that, because the no-benefit service jobs will be more abundant, while manufacturing jobs are artificially restricted, there will be more demand for the service jobs, which will depress wages below the level they would have been in a free market.

    I think your premise is that the middle class was better off in an earlier era and that was entirely or mostly due to higher tariffs on imports. I agree the middle class was better off, but there are many things that have changed in the past 50 years. Some tariffs are lower because of agreements like NAFTA, but we have also seen e.g. adoption of pure fiat money in 1971, ever increasing regulatory burdens, and ever increasing complication of the tax code. Which of these bears the most blame for what has changed?

    What I fear is that this exclusive focus on tariffs will not be accompanied by a lowering of taxes or regulations elsewhere. Unless those other burdens are lifted, we will indeed only see the costs of tariffs land on the consumer, making it even harder than it is currently to save money. Instead of protectionism, I recommend focusing on relieving domestic businesses from those taxes and regulations that compel them to relocate.

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  14. What I feel you are having trouble admitting is that the costs of tariffs don’t simply fall on foreign producers or domestic importers; the costs are passed on to the American consumer, and the consumer’s interests are just as important as the producer’s.

    I think I acknowledged that in an earlier post but as I said the impact tariffs can vary and in some cases can easily be absorbed by consumers or businesses. As a libertarian purist I think you are failing to see that tariffs aren’t always universally bad and icky and do have their place in economic and trade policy especially in protecting American manufacturers from cheap imports.

    Why did working and middle class Americans switch to buying cheaper imports?

    Because they lost their high paying manufacturing jobs through free trade and that’s all they can now afford with their lower paying replacement job scrubbing toilets (if they even have a job). Further, practically everything sold in stores these days is imported from Mexico or the Pacific rim so it’s not as if the middle class has made a conscious choice in the matter.

    Automobiles haven’t gotten cheaper relative to the average salary since the industry began outsourcing in earnest. Neither have shoes, clothes and other goods. This is where corporate greed, which doesn’t exist in the libertarian lexicon, comes into play. And it does exist.

    There’s an argument that an economy needs a solid manufacturing base to thrive, but I don’t see good evidence for this.

    So 95 million working age people out of the workforce isn’t a strong argument? The “permanent recession” as the new normal? How about the bankruptcy and closure of major retailers and stores in just the last decade? The fact is that manufacturing pays higher wages than service jobs and free trade policies and the closure and relocation of U.S. factories has impoverished the working and middle class who can no longer afford to buy things these places sell.

    The working and middle classes were clearly better off when we had a strong manufacturing sector. The offshoring of manufacturing has concentrated wealth at the top.

    Hong Kong got very wealthy through being a trade hub and financial center, letting other places do the actual manufacturing

    You honestly think the USA should mimic Hong Kong?

    The USA is not Hong Kong. The USA is very vast and resource rich while Hong Kong is puny and resource poor, so Friedmanian free trade probably suits them better since they simply don’t have the means or the manufacturing skills to provide most of their domestic needs. While their ports are duty free they do impose licensing fees for importers in various industries. Since import licenses often require approval from several government departments this really means that you will be stuck bribing several government officials for the requisite license.

    I agree that tariffs alone are not the answer and need to be combined with lowering taxes and regulations but they still play a positive role in some cases. And the latter two by themselves would not be sufficient given the enormous disparity in wage scales between America and third world manufacturing centers.

    The bottom line is that libertarian economic theory has many merits in explaining the dynamics of competitive business within the U.S. But its hallowed theories break down when trying to explain the rapid decline of U.S. manufacturing and tends to unfairly blame them for being “inefficient” of their own doing when they were saddled with many handicaps while at the same time China and other nations were beneficiaries of U.S. corporate largesse, technology and removal of import duties. Therefore, it was only a matter of time before U.S. manufacturers began losing ground and failing.

    So there is a great deal of artificiality in the world economy and much of it is the work of the 1% who Jeff Sessions called “the masters of the universe”.

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