MCViewPoint

We have seen this before. It is worth repeating.

Tariffs make imported cars $4000 more expensive. Domestic manufacturers jack their price to $1000 less. You lose, again. Tariffs are a bankster issue.

Steel tariffs mandate buying expensive domestic steel. Only often it does not get bought. Here is an energy balance equation like you were supposed to learn in school.

High cost + limited budget = no project + no jobs.

Tariffs are the inverse of a septic tank. It all sinks to the bottom, where the consumer lies.

As stated in Mr. North’s post most suffer, selected few profit, you pay the final bill.

For the most part no one cares much about buy American when price is (always) the issue. If we did Walmart wouldn’t exist.

https://www.garynorth.com/public/14789.cfm

Gary North – January 28, 2016

If I were to come to you and say “What this country needs is higher taxes in order to make us all rich,” you would correctly conclude that I had lost my mind or my principles. But if I were to come to you and say, “What this country needs is higher tariffs to make us all rich,” a considerable number of you would say, “You know, he’s absolutely right.”

What you need to understand is that these two statements are the same, economically speaking: “What this country needs is higher taxes to make us rich” and “What this country needs is higher tariffs to make us rich.”

Why are they the same? Because a tariff is a tax. This is the “dirty little secret” that every promoter of higher tariffs never tells you. It is the secret revealed by economic analysis ever since Adam Smith’s Wealth of Nations (1776), which is why those people who publicly promote tariffs are very seldom trained economists, and why those few who are economists are devoted followers of John Maynard Keynes and hostile to the idea of economic freedom.

Something for Nothing?

The fundamental principle of economics is the fact of scarcity: “At zero price, there will be greater demand for most goods than there is supply of these goods.” This means that whenever we hear someone offer a scheme that promises us something for nothing, especially a scheme enforced by the State, we should be on the alert. “Put your hand upon your wallet and your back against the wall!”

The defenders of tariffs insist that tariffs are the one remarkable exception to the logic of economics. We can raise tariffs (get the government to collect more sales taxes on imported goods), and in doing so, stimulate the economy and increase our nation’s per capita wealth. Let’s think about this for a moment. Higher sales taxes are beneficial to the economy? That is what the tariff advocate is saying, though he never says it this way. (If he said it this way. nobody would believe him.)

This is Keynesianism with a vengeance: tax and tax, spend and spend. This is the tax collectors’ siren song. “We’ll take your money, and you’ll be so much better off!” This is the economics of the New Deal: tax ourselves rich. Yet conservatives buy this argument almost every time when the word “tariff” is substituted for “tax,” unless they have read and have also understood Henry Hazlitt’s Economics in One Lesson or some similar free market economics book. They instinctively have faith in word magic: substitute a different word, and the laws of economics no longer apply.

The argument for tariffs as wealth-creating devices is the equivalent of the logic of the perpetual motion machine. It is the logic of something for nothing. Only a few pathetic, naïve, and misinformed souls ever get taken in by the professional hustlers who sell them on the idea of investing in some perpetual motion machine project. Unfortunately, millions upon millions of voters are quite willing to open their wallets to the Federal government whenever the politicians promise endless wealth for all Americans–through higher tariffs…

If the government imposes tariffs, it collects the money for its own purposes, and those few domestic manufacturers that had faced stiff foreign competition can prosper awhile longer. Import quotas are ‘tax-less tariffs,’ but they have the same effect on consumers that tariffs do: to increase domestic prices by forcibly reducing the available supply of consumer goods. Both quotas and tariffs reduce the number of goods that producers are able to offer for sale prices that consumers are willing to pay.

Yet voters continually cheer when the government imposes tariffs and quotas, despite the fact that such laws are laws against their freedom and their pocketbooks. Why? Because they desperately want to believe in the economics of perpetual motion. They truly believe in something for nothing, what Prof. Ludwig von Mises called the economics of stones into bread. They resent the economic restraints imposed on the by creation, and they also resent the intellectual restraints imposed by economics thought. They hate economics.

You would be hard-pressed to find any economist after Adam Smith who has been a defender of tariffs, and none in this century, except John Maynard Keynes (after 1929). But you can find legions of non-economists who. praise the increase in per capita wealth that supposedly comes from the coercive wealth-redistribution effects of tariffs and import quotas…

You can make a weak case tor tariffs as tax devices, but a tariff is a selective sales tax, and such selectivity is by nature discriminatory against some groups, while it implicitly subsidizes the groups that are not taxed. So the subsidized (untaxed) group (a few producers) has an economic incentive to promote this form of tax, while the bulk of the people who pay the tax (consumers) are not aware that it is a tax. They will not fight it, and as victims of false economic reasoning offered by non-economists, Keynesian statists, journalists, and well-paid public relations hirelings of various protected industries, they masochistically promote the tariff tax, too. They enthusiastically vote for politicians who impose these discriminatory sales taxes on them, all the while cheering themselves up with the thought that they are forcing other less “public spirited” U.S. citizens to “buy American.”

Bear in mind that only about 15 per cent of the American economy is trade-related. We are therefore talking about a small minority of domestic producers. But they love to tell their story as if they were the representatives of the national interest.

Buy American!

The basic theme that the beneficiaries of this involuntary wealth transfer (read: theft by selective taxation) use so effectively to promote their cause in the United States is the slogan, “Buy American.” To make the issue clearer, let us consider the logic of this phrase. Understand, cause-and-effect logic is what the defenders of tariffs never give you.

“Americans have to pull together,” we are told. “They ought to help each other. If they don’t stop buying those foreign imports, they’re going to kill the U.S. economy.” In other words, “What’s good for General Motors is good for America.”

But Americans have this distressing tendency–one shared by buyers in every nation in the world–to buy what they regard as bargains, irrespective of “Made in U.S.A.” stickers. When Americans “buy American,” they have in mind something very specific: “Buying what this American–yours truly–chooses lo buy.” They seldom worry about the supposed wisdom (let alone the supposed moral excellence) of buying only what another American chooses to manufacture.

Does this indicate a lack of patriotism? Did all those people who bought Volkswagens in the 1950’s deal the national interest a body blow? After all, they could have bought DeSotos, or Studebakers, or Packards. Why, they could even have bought Hudsons. But they didn’t.

Are we willing to modify ex-GM President Charles Wilson’s famous phrase? Are we willing to declare, retroactively, the “What’s good for Hudson is good for America”? Would anyone buy that bumper sticker? I doubt it…

Consumers Change Their Minds

What wiped out Detroit’s profits overnight twice in the 1970’s was a pair of overnight shifts in car-buying preferences on the part of American consumers, in 1974 and 1979. The, presence of foreign imports allowed them to exercise their preferences. Millions of car buyers had previously been unable to make up their minds about whether to give up the long-preferred gas-guzzler. They had vacillated. The gasoline lines and high prices of 1974 and again in 1979 convinced them. They didn’t need Federally mandated mileage standards; they didn’t need Washington Post editorials about the necessity of national conservation (by means of Federally funded rapid transit systems); all they needed was a quick look at their monthly charges from their oil companies…

Twisting Arms

A lot of automobile workers in the United States are threatened with the fate that struck Hudson’s employees! I will be a gentleman, and refrain from mentioning any corporate names. I will simply lump them all under the category, Son of Hudson.

Workers and management at Son of Hudson Motors are concerned. They find their share of the market declining, their unit costs of production rising, and their pension hopes fading. They look for an answer. The main cause of their problems is that the American public is buying fewer cars, or different brands of cars. They buy every four years, or even five years, instead of honoring the older rule: “Trade it in after three years or 60,000 miles, whichever comes first.” What is the obvious way to revive immediately the sagging fortunes of Son of Hudson Motors? Twisting some arms…

“Educating” the Consumer

Picture this scene. Joe Lunchbucket goes down to his friendly Toyota agency to check out the new models. As he steps up to look at the price sticker on one car whose style pleases him, a giant of a man steps up next to him. “You interested in this car, Mac?” Joe gulps. “Why, yes. Are you the salesman?” Howls of laughter greet him. The goon gets hysterical.

Joe looks at the price. It is the price of the car as it rolled off the boat in California, plus shipping to his town. “That price ain’t no good here, Mac. It costs 20 percent more.” Joe, startled, wants to know why. “These unpatriotic foreign cars cost more, that’s why.” Joe wants to know who gets the 20 per cent. “Funny you should ask, Mac. I do. It’s all part of a program to save America. I’m here to help you to save America. You want to save America, don’t you? What’s good for Son of Hudson Motors is good for America.” (Who keeps the extra 20 percent? If it is a tariff system, Congress does, but Son of Hudson Motors may be able to hike its prices by 18 percent. if it is a quota system, Son of Hudson keeps it all if the guy walks away from the import and then buys a new Son of Hudson car.)

Of course, this is all exaggerated. Nothing like this actually happens…

“To buy” is always “to sell.” It is the same transaction. It is an exchange. The person who suggests that Americans should buy only from Americans is inevitably suggesting the absolute abolition of international exchange. He is advocating the destruction of the international division of labor. He is advocating the abolition of international economic specialization. He is advocating international economic disintegration, given the key position of American trade, American capital markets, and American technology. He is advocating economic collapse. He is advocating a return to barbarism.

We can save Son of Hudson, but only at the expense of some other American manufacturer. The more “freedom from foreign sellers” we give to one industry, the more “freedom from foreign buyers” we impose on another. The time has come to think through the economic, political, and moral implications of the slogan, “buy American.” If we are upset by the implications, we had better abandon the slogan.

Be seeing you

Is that Sean Penn?