Tag Archives: economic ignorance

R.I.P. GOP….

I often disagree with Bret Stephens of the New York Times on the issues, but I appreciate his intellectual honesty. Stephens is a genuine political conservative, appalled by Donald Trump and clear-eyed about the transformation of the GOP from a center-right political party into an unrecognizable cult held together by grievance.

As he observed in a recent exchange with liberal columnist Gail Collins:

If there were truth in advertising, Republicans would have to rename themselves the Opposite Party. They were the party of law and order. Now they want to abolish the F.B.I. They were the party that revered the symbols of the nation. Now they think the Jan. 6 riots were like a “normal tourist visit.” They were the party of moral character and virtue. Now they couldn’t care less that their standard-bearer consorted with a porn star. They were the party of staring down the Evil Empire. Now they’re Putin’s last best hope. They were the party of free trade. Now they’re protectionists. They were the party that cheered the Supreme Court’s 2010 Citizens United decision, which argued that corporations had free speech. Now they are being sued by Disney because the company dared express an opinion they dislike. They were the party that once believed that “family values don’t stop at the Rio Grande,” as George W. Bush put it. Now some of them want to invade Mexico.

The party that used to defend the right of businesses to run their own affairs–the party that, as Stephens notes, was committed to free trade– is relentlessly attacking corporations that have recognized the importance of diversity and inclusion, and is in the process of embracing tariffs–aka trade war tactics.

According to the Washington Post,  in a recent interview with Fox Business’s Larry Kudlow, Trump explained that he favors a universal 10% tariff on all goods imported into the US:

“I think we should have a ring around the collar” of the U.S. economy, Trump said in an interview with Kudlow on Fox Business on Thursday. “When companies come in and they dump their products in the United States, they should pay, automatically, let’s say a 10 percent tax … I do like the 10 percent for everybody.”

The Post reported that Trump and his advisers are promoting the imposition of a universal tariff on all imports as “a central plank in his 2024 bid for a second term.” 

As virtually all economists–conservative and/or liberal– will insist, tariffs are a terrible idea. (In his daily newsletter, Robert Hubbell characterized a 10% universal tariff as “an economy-destroying debacle of generational proportions.”) Hubbell quoted one expert  on the subject who characterized the idea as “lunacy.”

What is wrong with tariffs, you ask? Well, other than leading other major economic powers  to conclude the United States cannot be trusted as a trading partner, tariffs are basically a hidden tax ultimately paid by US consumers. Also, history confirms that the imposition of tariffs by one country inevitably triggers retaliatory tariffs by others.

We saw the effects of such tariffs when Trump imposed a number of them on China during his disastrous Presidency. They wreaked havoc on U.S. farmers. The impact was so severe that the administration had to make massive grants to farmers to offset the losses.

As  Forbes reported at the time, 

The Trump administration gave more taxpayer dollars to farmers harmed by the administration’s trade policies than the federal government spends each year building ships for the Navy or maintaining America’s nuclear arsenal, according to a new report. A National Foundation for American Policy analysis concluded the spending on farmers was also higher than the annual budgets of several government agencies. “The amount of money raises questions about the strategy of imposing tariffs and permitting the use of taxpayer money to shield policymakers from the consequences of their actions,” according to the analysis.

According to experts, the value of US imports in 2022 approached $4 trillion. A 10% universal tariff imposed on that amount would cost consumers $400 billion.

This insane tariff proposal is just one more bit of evidence–as if we needed any– that Trump hasn’t the foggiest idea how economies work. His behavior during the four years he was President convincingly demonstrated that he also lacks any understanding of how government operates. He may well be the most profoundly ignorant person ever to occupy the Oval Office (and we’ve had some clunkers…)

Given Stephens’ entirely accurate description of the “Opposite Party,” and given the loyalty of MAGA Republicans to a self-obsessed clown whose positions are, indeed, “opposite” of those traditionally held by the GOP, all I can conclude is that grievance–primarily racial grievance–has Trumped sanity. (Double-entendre intended..)

The GOP that once was is dead. R.I.P.

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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.”

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