The Tariffs & The Treasury

By Tyler Cralle, in Blog National Tyler Cralle on . Tagged width: , ,

For weeks, many of President Trump’s economic advisors and supporters have been arguing that Trump is using tariffs as a means to an end.  They said his goal was to get rid of all tariffs and non-tariff barriers completely.  Ramesh Ponnuru was not buying it.  He wrote last week that to believe this you have to omit alot…https://bloom.bg/2LVp2kz

They have to ignore the many times he has said that his goal is to reduce trade deficits, not trade barriers. They have to look past the fact that the Trump administration’s only completed agreement on trade, the one it made with South Korea, involved getting that country to accept quotas on how much steel it can sell to Americans.

They also have to skip over the details of the very agreement that they are touting…

Ponnuru didn’t have to wait long to be proven right.  President Trump sent out a tweetstorm on Saturday morning dealing with tariffs…

Tariffs are working far better than anyone ever anticipated. China market has dropped 27% in last 4months, and they are talking to us. Our market is stronger than ever, and will go up dramatically when these horrible Trade Deals are successfully renegotiated. America First…….

….Tariffs have had a tremendous positive impact on our Steel Industry. Plants are opening all over the U.S., Steelworkers are working again, and big dollars are flowing into our Treasury. Other countries use Tariffs against, but when we use them, foolish people scream!

….Tariffs will make our country much richer than it is today. Only fools would disagree. We are using them to negotiate fair trade deals and, if countries are still unwilling to negotiate, they will pay us vast sums of money in the form of Tariffs. We win either way……

Did anyone catch the real big factual error with these tweets?  “they will pay us vast sums of money in the form of Tariffs.”  One big problem with this.  Foreigners don’t pay taxes, taxpayers do.  Tariffs are taxes on imports.  He is correct that American steel is benefiting from tariffs but only because it is increasing the cost of foreign steel so some domestic producers are then buying American instead.  However, those that choose to buy foreign steel are paying the tariffs on it, not the country they are importing it from.

The President also seems to be bragging about the money flowing into the Treasury because of tariffs.  Let’s look at a hypothetical.  How would Republican voters have acted had President Obama bragged on twitter that raising taxes has resulted in increased money flowing to the treasury?  I can’t imagine they would be happy so why should they be happy about this?  President Trump is bragging about raising taxes on American consumers to raise tax revenue!  However, if the President really wants to really tackle the deficit he should be more concerned about spending than revenue as Veronique de Rugy at Reason explains…

As economist Milton Friedman said, the real size of government is measured by how much the government spends, not by the taxes we pay. Most of us would like our taxes to be lower. But it’s only a matter of time before a continued failure to control spending comes back to bite us where it hurts. Mark my words: The problems we fail to solve now will one day lead Republicans to accept a value added tax perched on top of our income and payroll taxes, a carbon tax, and higher tax rates on all of us.

de Rugy is right.  Low taxes will always be a winner for the right.  However, if we don’t do something about spending they will no longer be an option.  We will have no other choice but to raise taxes to pay for all of the debt we have continued to accumulate.  We have been at this crossroads for some time now.  If we don’t do something soon our journey will continue on a one-way street towards bigger government and even bigger taxes…

 

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