Posted on 03/14/2018 9:27:08 AM PDT by Kaslin
There are a couple of important economic lessons that the American people should learn. I'm going to title one "the seen and unseen" and the other "narrow well-defined large benefits versus widely dispersed small costs." These lessons are applicable to a wide range of government behavior, but let's look at just two examples.
Last week, President Donald Trump enacted high tariffs on imports of steel and aluminum. Why in the world would the U.S. steel and aluminum industries press the president to levy heavy tariffs? The answer is simple. Reducing the amounts of steel and aluminum that hit our shores enables American producers to charge higher prices. Thus, U.S. steel and aluminum producers will earn higher profits, hire more workers and pay them higher wages. They are the visible beneficiaries of Trump's tariffs.
But when the government creates a benefit for one American, it is a virtual guarantee that it will come at the expense of another American -- an unseen victim. The victims of steel and aluminum tariffs are the companies that use steel and aluminum. Faced with higher input costs, they become less competitive on the world market. For example, companies such as John Deere may respond to higher steel prices by purchasing their parts in the international market rather than in the U.S. To become more competitive in the world market, some firms may move their production facilities to foreign countries that do not have tariffs on foreign steel and aluminum. Studies by both the Peterson Institute for International Economics and the Consuming Industries Trade Action Coalition show that steel-using industries -- such as the U.S. auto industry, its suppliers and manufacturers of heavy construction equipment -- were harmed by tariffs on steel enacted by George W. Bush.
Politicians love having seen beneficiaries and unseen victims. The reason is quite simple. In the cases of the steel and aluminum industries, company executives will know whom to give political campaign contributions. Workers in those industries will know for whom to cast their votes. The people in the steel- and aluminum-using industries may not know whom to blame for declining profits, lack of competitiveness and job loss. There's no better scenario for politicians. It's heads politicians win and tails somebody else loses.
Then there's the phenomenon of narrow well-defined large benefits versus widely dispersed small costs. A good example can be found in the sugar industry. Sugar producers lobby Congress to place restrictions on the importation of foreign sugar through tariffs and quotas. Those import restrictions force Americans to pay up to three times the world price for sugar. A report by the U.S. Government Accountability Office estimated that Americans pay an extra $2 billion a year because of sugar tariffs and quotas. Plus, taxpayers will be forced to pay more than $2 billion over the next 10 years to buy and store excess sugar produced because of higher prices. Another way to look at the cost side is that tens of millions of American families are forced to pay a little bit more, maybe $20, for the sugar we use every year.
You might wonder how this consumer rip-off sustains itself. After all, the people in the sugar industry are only a tiny percentage of the U.S. population. Here's how it works. It pays for workers and owners in the sugar industry to come up with millions of dollars to lobby congressmen to impose tariffs and quotas on foreign sugar. It means higher profits and higher wages. Also, it's easy to organize the relatively small number of people in the sugar industry. The costs are borne by tens of millions of Americans forced to pay more for the sugar they use. Even if the people knew what the politicians are doing, it wouldn't be worth the cost of trying to unseat a legislator whose vote cost them $20 a year. Politicians know that they won't bear a cost from sugar consumers. But they would pay a political cost from the sugar industry if they didn't vote for tariffs. So they put it to consumers -- but what else is new?
Stossel just convinced me he is an idiot.
This was written by Walter Williams. It’s pretty amazing that so called “conservatives” have no problem with American workers getting the shaft. If Trump is successful on trade, it’s the death knell for the Democrats.
Larry Elder was saying the other night, Trump promising to help workers, those largely being in states like Pennsylvania and Ohio is what helped him swing the election. This is very important.
Tariffs do not have to be an either/or. I agree with Walter Williams on the principle of trade restrictions harming the economy overall. But I also agree with Trump that reciprocal trade restrictions can be used to force other nations to drop restrictions on us. I would prefer to see low, even tariffs across the board for imports to America and on exports from other countries to America.
I’m good with a level playing field, but truthfully, how does an American worker compete with either the low wage, low skilled employees in South and Central America and Asia or the worker in Europe who company doesn’t have to pay the benefits that American companies pay here? When your company doesn’t have to pay for your health care or contribute to an 401K or pension, because you have cradle to grave care from the government, it’s a lose/lose for the American worker.
They even say "only a small percentage of US imports are Chinese steel," without mentioning how China ships almost finished steel to third countries that do very little processing and cross-ship to the US to avoid the previous tariffs on Chinese steel.
They also fail to mention the impact of the tariffs on US steel consumers: How much is the raw steel price affecting the price of a $500,000 combine? $500?
The alternative is that the US loses the ability to produce steel in any quantity, unless the US government decides to directly subsidize US government purchases. This (of course) would cede the entire domestic consumer market to foreigners, and starve US companies of the profits needed for R&D and new plant and equipment. Then critics would say, "US steel producers are technologically backward." Of course they are, because unlike their foreign competitors they have no guaranteed market to pay for R&D and upgrades.
It's a thoroughly dishonest argument, so once again, Trump is right.
I used to buy the whole “John Galt/free trade” argument, but as I get older, I understand that it is just as naive as Marxism. Unilateral free trade is not a good deal if you are up against un-free trading partners. The best you can manage for the world is to trade as free as the other guy will allow. Trump’s tariffs are very targeted to address specific grievances and not a sign of a closed economic system.
What a bunch of clap trap.
I hope it is the death knell of Free Trader economists.
Me too.
Why are tariffs an incentive to raise wages? Higher profits? Sure. More workers? Perhaps. But doesn't number three negate number one?
The current situation where we have an income tax and almost zero tariffs is EVIL.
It takes a while to train new personnel and as the become more productive they will get raises. Where you born yesterday or the day before?
Most workers wages are set by contract, bot merit.
Steel using manufacturers move? Why that would be positively unpatriotic. /S
The professor so solidly defeats your constant stream of balderdascious faux patriotic Free Traitor drivel it is amazing.
This piece is just getting him warmed up
LOL! Sure.
Bert, the hey day of the Free Traitor™ is over.
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