Posted on 08/25/2016 3:45:08 AM PDT by expat_panama
You work and get paid. To whom do your after-tax earnings belong? Do they all belong to you or does some portion of them belong to the neighborhood grocer whose store you patronize? Who should have first dibs on the money you've earned: you or the auto dealer who sold you the last car you bought?
In both cases the correct answer indisputably seems to be “you.” But not so fast. Typical discussions of trade policy imply that the answers are “the grocer” and “the auto dealer.”
When politicians promise to raise tariffs on imports, they are promising to penalize you for spending too little of your money on products sold by domestic suppliers. The presumption is that domestic suppliers of steel, of textiles or of tires are entitled to a portion of your income. And if you, by buying goods from foreign suppliers, refuse to turn over that portion of your income to domestic suppliers, you must pay a penalty.
Clearly, supporters of tariffs believe that certain domestic producers have a higher claim on some portion of your income than you have.
Does there exist a legitimate justification for this belief? I think not, for none of us supposes that when we patronize a merchant we thereby encumber ourselves with an obligation to continue to patronize that merchant indefinitely.
Suppose that a new supermarket — call it “Jack's” — opens up nearby. Upon your entering Jack's for the first time, the owner informs you that a condition of your shopping at his store is that you must continue, each and every week from here on in, to spend at his store an amount of money that equals the amount of money that you'll spend on your first visit to the store. Would you accept? Surely not.
While nothing in law or ethics prevents Jack from demanding those terms, you'd find it intolerably burdensome to saddle yourself with such a legal obligation.
In fact, while it would be valuable for Jack to secure such a legally enforceable promise from you, he doesn't demand it because he knows that you'd not grant it. Or Jack knows that he'd have to offer to you something remarkably valuable in return, such as his contractual commitment to always charge you prices dramatically lower than those charged by rival supermarkets.
So in reality the deal is that by shopping at Jack's supermarket, you incur no obligation to continue to do so. If Jack wants your continued patronage, he must earn it.
Eventually an even newer supermarket opens just outside of town. This one's owned by Jill. Jill's selection is better and her prices are lower than Jack's. So you start shopping at Jill's supermarket.
Unhappy with your choice, Jack successfully lobbies the city council to slap a special tax on you for every dollar's worth of groceries that you buy from Jill's. You're penalized by the state for spending your money as you choose. The implicit premise behind this special tax is that Jack has a right to a portion of your income.
There is no difference whatsoever between this special tax and a tariff on imports.
Donald J. Boudreaux is a professor of economics and Getchell Chair at George Mason University in Fairfax, Va. His column appears twice monthly.
I think the point is to make it less desirable for consumers to purchase the imported product.
Of course, if the imported item is purchased anyway, the money collected from the tariff goes to Washington.
Buying the American made product sends no money to Washington.
Then let’s get rid of those deductions. Good for jobs, good for liberty. Are you with me?
Your trade policy is better than most. Mine is a little different. I would take 1. from your list even if 2. was not granted. It doesn’t seem fair I know. But I don’t care about fairness. I care about the US being an economic and military powerhouse.
I'm talking economics not money. There are a lot of very, very rich liberal marxist-leaning people out their who are working hard to elect Hillary Clinton. They are big money makers and the policies they promote would ruin. They know money. They don't know economics and they don't like freedom.
Don't confuse building an empire like Trump has with having a deep understanding of economics and foreign trade. Different skill set altogether. Trump understands how capital works and he understands what his customers want. He won't like foreign competition for those customers. I wouldn't either. But that doesn't make him Milton Friedman.
Sorry to disagree. You are with a 99% to 1% majority here at FR. I understand that. I don't expect to win the argument. But Freepers need to know that there are some pretty smart people who we respect here that disagree with the Trump Pro-Tariff policy.
Well your theory where the U.S. pays tariffs to China and they pay zip has been tried and tested for the last 20 years. It’s been great for China and Mexico and horrible to the United States.
We led the world in many things before these rigged trade deals that screws our country that you love. If we continue this path, then it will lead to end of our Free Republic and Global government.
No thanks, but I like a Free Republic and not a Globalist Third World $hit Hole that you want.
You sure are a one trick pony and completely uninterested in beating Hillary Rotten Criminal. Are you a Democrat by chance?
It’s not easy to become a Billionaire. You have to understand economics and what actual works vs. theory. Being smart does not equal to intelligence. It just means you are good at memorizing like a computer. A calculator for instance is not intelligent.
Your rigged plan of a command and control global economy has been in practice for the last 20 years. It is leading our country down that rat hole and has been disastrous. The only reason we have not collapsed is because we were a very strong country before.
True “Free Market” is what you see within the States. That’s it.
Doing the same thing over and over again, as you are advocating, is insanity unless you want to see the fall of our Free Republic.
say hello to soros when you see him for dinner.
I could not read the entire column, it is nonsensical.
For one thing, trade is not just about the consumer buying stuff. Trade policy is about the larger picture.
I can use a grocer example, also.
Suppose your friendly local grocer sells from an inventory that consists of local goods. So the money you spend there is plowed right back into the local economy. You are supporting your local farmers, schools, restaurants, etc., because the money that grocer earns from selling local goes into local people’s pockets. The local economy depends on the activity of local people.
Now suppose that local people are getting bored with local carrots, apples, and peaches. They want variety. So the farmers and grocers get together and form a trade cooperative, and begin trading a portion of the local carrot, apple, and peach crop for oranges, bananas, and rice that are grown somewhere else. People now have more variety, and, even though there is trade, it is equitable on both sides, and the local economy stays healthy.
Next, suppose that the grocer discovers that he can stock his market with carrots, apples, and peaches grown overseas (cheaply with slave labor), and that, even with the cost of shipping, they cost 10% of what it used to cost to stock from local sources. Now the local farmers no longer compete with each other, but with cheap foreign farmers. They cannot stay in business trying to undercut the cheap foreign produce, because they have houses to maintain, clothes to buy, etc. So the source of local wealth—the production of local goods—disappears, and the economy tanks. Sure, everything is cheaper, but no one can afford it.
Tariffs are all about charging the foreign sources a fee for selling in the local market so that they cannot grossly undercut the local producers and put them out of business. Tariffs help to make trade equitable on both sides.
On the large scale, a country that produces nothing cannot trade forever, because there is no domestically produced wealth to give its money value.
How long do our politicians think the US economy can survive, when so many people are put out of work by unfair trade practices that cause manufacturers to go out of business? Conversely, how long until the foreign countries undercutting our local markets figure out that if the US is not a producing country, its money is basically just paper?
Small town in Maine, about 10 years ago. Has a small, local grocery store that's been there in one form or another for 100 years +. Next nearest grocery store is 30 miles away, give or take.
Then Wal-Mart moves into the area. It's still 30 miles away, but it's Wal-Mart. Good selection, good prices. Some real competition for this small-town grocery store. Especially, since the store is 100+ years old, and frankly, showing its age.
Owner of the small-town grocery store goes to the townspeople at the yearly town meeting. Says (approximately), "Look. I can't compete with Wal-Mart. Not on price, not on inventory. But I promise to invest some money into inventory and fixing the place up, and I promise to do my best on prices .... if you promise to keep shopping at my little small town grocery store."
The townspeople, most of whom had grown up with the owner, said, "Sure, We'll do that."
Store owner invests some money, spruces the place up, invests in inventory (place has great meat, he found a really good butcher). Town keeps shopping there. Everyone is happy.
Then ... gas prices go to $4.00+ a gallon. All of a sudden, driving 60 miles round trip to get a loaf of bread and a 6-pack, isn't real feasible. The townspeople are *especially* happy that they have a local place to shop.
Gas prices have come back down, thankfully. But the little store is still prospering. It's a good place, I was there when I visited this summer.
Moral of the story? When people do right by each other, without political coercion, things turn out OK.
Let's be sure we're both talking about the same things here. A tariff is a tax on a specific import and the goal is to change the market for that import. All tariffs manipulate markets on behalf of outside interests.
It is not just those countries. I know that the EU uses their VAT as sort of a tariff. Goods exported outside of the EU are not assessed VAT and everything being imported is assessed the VAT at the rate of the country importing it. That makes American goods cost 15-27% more while their goods come to the US costing 15-27% less than a consumer pays for them in their country of origin. How is that not a tariff and how would it be unfair to charge those countries a tariff equal to their VAT rate on their goods we import?
Better statists for better statism!
My take is that tariffs are not imposed because of ‘outside’ interests, but rather ‘internal’ interests.
That's apparently what US negotiators think also.
Trading access to the US market in exchange for empty promises to improve environmental regulations and allow trade union organizing is just one way the proposed TPP agreement undermines the domestic US economy.
You can imagine how hard the commies in Vietnam laughed when they signed off on that one.
Ah. Here I thot the question was whether we got a bad deal or whether America will be able to manufacture arms in time of war or whether the American worker has a good job. Every time we answer one question the question changes, and in the mean time the money I earned by learning a new trade gets taxed to pay for 'protecting' some clown that didn't learn a new trade.
This essay is an example of what libertards call arguing "Economics 101". Their belief is that if their argument passes the "Economics 101" test then anyone who disagrees with it is a complete naif.
As so many on this thread have pointed out, however, we need to get past Economics 101 in order to understand the full implications of economic policy.
The idea that everything else can be held steady and we just need to compare tariffs vs. no tariffs is not even worthy of being called tinker toys economics.
Consider that you are also paying for subsidies made to US producers. For example that ethanol mandated to be in your gasoline is subsidized from the time the farmer plants the corn until it goes into your gas tank. There are government funded boondoggles in lots of industries especially in agriculture. Why does your soda contain corn syrup rather than sugar? Because the US government imposes a tariff on imported sugar to subsidize sugar beet farmers in North Dakota and subsidizes corn producers in the US.
We need to be clear on the fact that the U.S. Treasury is not only still collecting tariffs but it's raking in more money than ever. Just last year alone America collected more than twice the tariff revenue than all the tariff revenue collected tor the first century "from the inception of our free republic in 1787 "
Many people don't seem to understand that when we cut tax rates, the tax revenue increses.
I see the debate presumption starts at step 20 instead of 1.
“You work and get paid. To whom do your after-tax earnings belong?”.
Getting ‘paid’ = YOUR $$. After-tax earnings??
As we have a 5th and 13th A. to contend with in this discussion, just what % of the govt tax (fed, state, local) is ‘just’? Did those that claim the EITC ‘earn’ the $$ they never worked for? Do those that pay 0% tax ‘earn’ that right too; use as many services as one wishes without contributing to the same?
As for tariffs, those are VOLUNTARY, unlike the above.
IMO, we *should* be competitive to the foreign imports that under-cut our exports w/ slave labor and tariffs of their own.
Course, I realize the ‘trade deals’ made by those in D.C. put the U.S. at a disadvantage. The tax policies, regulations, rules, ‘laws’ and the like only further the hindrance.
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