George Washington. Thomas Jefferson. Abraham Lincoln. Theodore Roosevelt. When you hear their names what comes to mind? The White House? Possibly. Mount Rushmore? Probably. How blasé.
What ought to come to mind are tariffs. Yes, tariffs.
Despite the mainstream media’s copious efforts to cast President Trump and those who support tariffs as economically illiterate at best — and as wannabe-Stalinists at worst — in reality most of America’s Founding Fathers and former presidents favored tariffs. In fact, America’s first major piece of legislation was the Tariff Act of 1789. Why?
Tariffs are the form of taxation most consistent with the principles of small government.
There are three main reasons for this. First, tariffs increase the demand for domestic labor, thereby creating jobs and boosting wages for American workers. Second, people with jobs are less likely to vote for big government. Third, economic integration inevitably erodes national sovereignty.
You don’t know what you’ve got ‘til it’s gone. This is as true of romance as it is of tariffs. Case-in-point: NAFTA.
In 1993 President Bill Clinton promised that the North American Free Trade Agreement would create “a million [American] jobs in the first five years.” How?
NAFTA would deconstruct America’s tariff wall with Mexico so that the two nations could trade freely (Canada and the U.S. already had a bilateral agreement). Theoretically, this would allow both countries to maximize their comparative advantage and thus produce more material wealth.
Win-win.
Some prescient few feared that this was the death-knell for American manufacturing — U.S. labor was up-in-arms. How could Americans cope with Mexicans working for pennies on the dollar? How could Michigan outcompete Matamoros when Mexico looked the other way on industrial pollution?
Clinton assured the doomsayers that NAFTA’s “side agreements” would not only protect American industry and workers, but would actually “make it harder than it is today for businesses to relocate [to Mexico] solely because of very low wages or lax environmental laws.”
Bill Clinton lied.
Since NAFTA took effect a net 840,000 American manufacturing jobs have moved to Mexico “solely because of very low wages or lax environmental laws.” The alarmists were right.
Of course, you didn’t need to be Tiresias to predict that faceless multinational corporations — with no unique affection for, or allegiance to, America — would move their factories to Mexico to save billions for their shareholders. Nor to prophesy that Mexican robber barons had little interest in moving their Dickensian factories into bourgeois Oregon.
Wealth is like water: it flows downhill to the lowest point until all levels are equal. This explains why American consumers chased Mexican manufacturing and multinational corporations hired Mexican workers. Tariffs were the dam, and once it burst Mexico was awash with American investment. Meanwhile, the good old United States were left high and dry!
This same process played out on an even larger scale after China joined the World Trade Organization in 2001. In fact, China has so thoroughly ravaged our industry that America’s export profile is transforming into that of a mercantile colony. Was 1776 in vain?
NAFTA not only displaced nearly one million manufacturing jobs, it also killed off millions of additional service jobs. How?
There are two types of industries: anchors and predicates. Anchor industries create exportable wealth ex nihilo and thereby support local economies. Good examples of these include mines or factories. Predicate industries, like restaurants or banks, diversify the economy and make it more efficient. However, predicates cannot sustain an economy any more than clownfish can sustain a tropical reef — no anchors (coral), no economy (reef).
The logic of anchors and predicates explains why barbers move to mining towns and not vice versa. More importantly it explains why NAFTA destroyed far more American jobs than even the most pessimistic shop stewards expected.
The Bureau of Economic Analysis estimates that each dollar of manufacturing output supports roughly $1.48 in spinoff service output — and no, this so-called multiplier effect is not subject to Henry Hazlitt’s popular “broken windows fallacy” critique for the simple fact that factories don’t redistribute wealth, they create it.
When the lost predicate jobs are accounted for it becomes clear that NAFTA cost America a net 2.1 million jobs — jobs which tariffs had previously protected.
Of course, the problem of offshoring is not unique to NAFTA. Many millions of good-paying American manufacturing jobs have moved to China, and with them the services that they supported.
To make matters worse, these millions of jobless Americans flooded and saturated the labor market. The lucky ones found new jobs, although these didn’t pay as well as the jobs they lost. In fact, in 2011 an economist at Princeton University found that the average wage cut for displaced American manufacturing workers was a staggering 17.5 percent — waiting tables isn’t as lucrative as building cars.
Likewise, increased labor competition resulted in wage stagnation for everyone else. This goes a long way to explaining why real median wages actually peaked in 1973 — during the zenith of America’s manufacturing industry.
Meanwhile, many others could not find new jobs. They became chronically unemployed and were subsequently removed from the labor force statistics by government bureaucrats — effectively hiding the real unemployment rate. This is why the U.S. labor force participation rate is the lowest it has been since 1977. Millions of Americans have simply given up.Thank God we got rid of those pesky tariffs!
A favorite cure of 19th century physicians was leeching. They thought that thirsty leeches could rebalance their patient’s bodily fluids and cure their tuberculosis, pneumonia — anything. Doctor’s orders. Of course, bloodletting polio patients rarely improves their condition.
Eventually physicians figured this out and invented a term to describe situations where their treatments actually harmed their patients: iatrogenics.
Now for the weird part. Although many people — physicians included — were well-aware that leeching was harmful, this didn’t stop physicians from prescribing it, nor patients from requesting it. Why?
People are predisposed towards action — not non-action. We are doers. When confronted with a problem, be it illness or poverty, our instinct is to take positive steps towards solving it, rather than simply waiting or removing negative stimuli.
The logic of leeching explains why those hurt by deindustrialization in America’s former industrial heartland turned to socialism en masse. Factory closure after factory closure flooded the already-constricted labor market with fresh job-seekers. Men who worked steadily for decades lost everything overnight. Chronic unemployment took hold. Wages stagnated.
In their despair, the rust belt’s populous turned to the government for help. Within a few short years the former Republican stronghold turned blue.
Again, this is unsurprising. The Democrats promised to care for the unemployed. They would give those honest, hard-working Americans who were just “down on their luck” the leg-up they needed. Perhaps most importantly, they would exact revenge on the greedy corporate fat cats who stole their livelihoods — just what the doctor ordered.
Once in power the Democrats splurged on social programs and welfare, which they paid for by raising taxes and accumulating debt, which further dragged the economy. An autocatalytic process took root: poverty led to welfare, welfare led to big government, big government led to poverty.
In the end, only the Democrats benefited from this experiment in political iatrogenics.
America’s conservatives rally behind free trade because they despise big government — tariffs are a tax, and taxes are bad! This logic is mistakenly applied.
Tariffs actually promote small government. How? They normalize the price disparities between America and the Third World. This prevents offshoring and thereby protects American jobs from asymmetrical competition.
As we have seen, the elimination of tariffs with Mexico cost America millions of jobs. In their despair, the unemployed masses turned to the government for help. The rust belt, formerly a Republican stronghold, turned blue. And of course, the Democrat’s “cures” were worse than original malady — welfare led to taxes, taxes led to poverty, and poverty led to more welfare.
Political independence is impossible without economic independence. This is precisely why most of America’s Founding Fathers and greatest presidents — including every face on Mount Rushmore — supported tariffs. Conversely, Robert Schuman and Karl Marx supported free trade because it destroyed those “old nationalities” that may resist their new utopia.
If America is to survive, conservatives must reject their rigid fidelity to the doctrine of free trade, and embrace that ancient romanticism that animated our forefathers to trade their colonial gold for revolutionary lead, and mortal blood for undying freedom.
We must remember that no cage is worth its gilding. No silver shackle is worth its weight.
Freedom has a price.
That price is tariffs.
More at: https://dailycaller.com/2019/09/18/t...osed-together/
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Originally Posted by brushfire
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