Back in 2015, when Trump was a long-shot candidate for the Republican nomination, I criticized him for not signing the no-tax-hike pledge.
But he then pushed through a better-than-expected tax plan after getting the White House. And that package reduces the tax burden (at least for the first nine years).
So is it time for me to retract my 2015 criticism?
Nope.
Look at this horrifying tweet that Trump issued yesterday. The President is actually claiming that the economy is doing well because of higher tax payments.
This has to be Trump’s worst-ever tweet, at least with regards to economic policy.
Normally, only hard-left politicians and international bureaucracies have the gall to claim that you can strengthen an economy by having governments collect more money.
Needless to say, it’s strange to see a Republican president make the same argument.
But Trump’s tweet isn’t just bad from the perspective of fiscal policy.
He also shows that he doesn’t understand trade policy, either from a technical perspective or an economic perspective.
For instance, the tariffs (i.e., trade taxes) technically are paid by those making the purchases (i.e., importers), not by the sellers (i.e., Chinese companies).
But just as the corporate income tax is really a tax on people (either as workers, consumers, or shareholders), the burden of trade taxes also falls on people.
In other words, American consumers are paying for Trump’s tariffs.
Which gives me an excuse to share Trump’s second-worst-ever tweet, which was issued this morning.
At the risk of understatement, the United States doesn’t “lose” $500 billion by trading with China.
Americans voluntarily purchase lots of output from China and both sides benefit (otherwise the transactions wouldn’t occur).
And many Chinese use the dollars they earn to invest in the U.S. economy, another set of win-win transactions.
The net result of all these voluntary transactions is that America has a trade deficit, which is a meaningless figure. Basically the flip side of having a capital surplus.
The bottom line is that Trump should stick to tax policy and regulatory policy, since those are areas where his policies have been beneficial.
P.S. If Trump was focused on Chinese technology theft or Chinese industrial subsidies, I would be at least partly sympathetic. Especially if he utilized the World Trade Organization and included our allies. But he’s mostly attacking China because he doesn’t like the voluntary decisions of American and Chinese consumers and businesses.
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The true tax is the human and physical resources used by governments reliant on implied consent for legitimacy. This true tax is funded by current taxation and borrowing. But, Dan cannot admit this, ever.
Dan, you know darn well that increased borrowing relative to current tax collections increases the size of government and necessarily makes the nation as a whole poorer.
Such an elementary concept but it goes right over Trumps head .. Corporations (importers and exporters) don’t pay tariffs (taxes) consumers do. Why punish Americans? The best policy would be to open up international trade period. Lower US tariffs to zero, then watch America prosper while other less productive Nations scramble to compete.
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It’s hard to argue with the author, but I’ll give it a shot. Trump-apologists would say that he’s not trying to restrict trade. He’s trying to get China to reduce their trade barriers which would benefit not only the Chinese, but also the US.
The problem with that is that it probably won’t work, and the small benefits that we would obtain if it did would not justify the risk of a world-wide trade war instead. I say “small” because the floating dollar does about as much as can be done to even the playing field anyway.
The world economy is never at equilibrium, so you’re naturally going to have long stretches of history when the trade flows did not balance in someone’s estimation. But as long as the US continues to expand its money supply faster than the rest of the world, dollars will continue to flow out and goods will continue to flow in.
If Trump wants to put an end to that, he can slam the breaks on monetary creation or he can stop borrowing money at the federal level. He doesn’t seem to be inclined to do either of those two things, though, so the only alternative is a chronic trade deficit. Any benefit that he sees by changing our trade barriers will be at best transitory.
When the depth of China’s covert war against this country is public, I look forward to your retraction.