Donald Trump

The Government's Economic Illogic Is on Display

Trump's tariffs are just part of the problem.

|

The Fourth of July holiday is a time to reflect on the courage of our Founding Fathers to pursue independence from the tyrannical British government. Unfortunately, we now get to spend the other 364 days dealing with the tyrannical federal government in Washington.

You see this in our debt and increasing deficits to entitlement programs that redistribute from relatively young and poor to relatively rich and old—or in our corporate welfare programs that subsidize a handful of producers at the expense of everyone else. You also see it in a never-ending stream of contradictory legislation and red tape at the taxpayers' expense.

Consider the oil and gas industry. Over the years, the federal government has adopted many regulations meant to hinder the industry. As Nick Loris, an energy policy analyst at the Heritage Foundation, reminds me, one such regulation is the Merchant Marine Act, also known as the Jones Act, which makes it more expensive to ship oil and natural gas from coast to coast. Then there are the past administrations' outright moratoriums on drilling in certain areas of America's coasts, which massively increases the cost of doing business. As Loris notes, there are many costly bureaucratic delays in issuing leases and processing applications for permits to drill (APDs), which stalls production on federal lands. On average, the federal processing of APDs in the last year of the Obama administration was 257 days, while state processing is typically 30 days or less.

Since Uncle Sam has a lot of regulations in place to make the operations of domestic oil and gas companies more costly, why is the biggest beneficiary of loans from the federal government export credit agency (the U.S. Export-Import Bank) the gigantic Mexico state-owned oil and gas company Pemex? Between 2007 and 2013 (the most complete data set we have), Pemex received over $7 billion in loans backed by American taxpayers to buy U.S. goods. Thanks to Uncle Sam, this discounted borrowing power gives Pemex a leg up on its competition with domestic oil and gas companies.

Then there's the Trump administration tariffs. These import taxes on foreign goods coming from Europe, China, and other countries have not only raised the cost of doing business but also triggered retaliatory measures from foreign governments. For instance, the farm industry is paying a steep price from the tariffs on steel because they increase the cost of farm machinery, lowering profit margins. Farmers are also hurt by the European, Mexican, Canadian, and Chinese governments that have imposed retaliatory export restrictions on U.S. farm products. Many small farms are calling for help to survive. It's so bad that the entire Iowa congressional delegation sent a letter to President Trump on June 25 in which it called the tariffs "catastrophic for Iowa's economy."

A logical response from the administration would be to remove the tariffs and sit down at the negotiating table to argue for lower tariffs by everyone. Instead, the administration is calling for more subsidies for farmers to help them face the government-induced export problems. Deputy Agriculture Secretary Steve Censky said his department was considering options including the purchase of surplus commodities to prop up prices. How should taxpayers feel about that? The administration starts a trade war that makes it harder for farmers to sell their stuff abroad, so taxpayer dollars are then used to buy those unsold goods. Bear in mind that taxpayers are already paying higher prices thanks to the president's import taxes of foreign goods.

And all of this is taking place as the mother of all logical inconsistencies is working its way through Congress: the farm bill. I predict—as is always the case—that the massive spending bill will both raise the price of food artificially and then subsidize food for those who can't afford the government-inflated prices. Many of the farm subsidies that will make their way into the bill, such as those for sugar programs or dairy and corn subsidies, make the cost of food more expensive. At the same time, this bill will also plan to spend hundreds of thousands of dollars on food stamps.

Simple cause-and-effect logic tells us that if you want to lose weight, you don't eat french fries and ice cream at every meal. It's common sense. But every day, legislators pass bills that have opposite and counterproductive effects. So much for logic.

NEXT: Libertarian Party Rebuffs Mises Uprising

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. One thing communist China and socialist europe are know for is removing their trade restrictions because America asks nicely.

    Grow up. Leverage is the name of the trade restriction game and as the most versitile and strong economy in the world, we have some leverage to, well, leverage.

    1. Fuck your leverage. Leverage your own money but stay away from mine.

      1. Re: Kongming,

        You should learn that Trumpistas like LC1789 believe that all property is collwctively owned and that your decisions, specifically your buying decisions, should be consistent with the Trumpista view of what constitutes proper patriotic behavior.

        1. Its a lesson I keep having to learn because on some level, I just can’t accept that so many libertarians turned out to be statists all along.

          1. Libertarians are for small and limited government. If you think that means were ‘statists’ then you might want to brush up on what actual statists are like.

            1. I’m trying to imagine a government that is “small and limited” by discriminating against consumers of some industries while favoring politically connected consumers of other industries. Nope. I don’t think it works that way.

          2. I just can’t accept that so many libertarians turned out to be statists all along.

            It seems like to you, anybody who isn’t an anarchist is a statist. But libertarians aren’t anarchists, we are minarchists. That “min-” refers to “minimum necessary for continued existence”.

            In a world filled with hostile nation states, that means a state that provides for common defense and border protection. It also means restricting the ability of hostile nations to destroy our military capabilities or buy off our politicians.

        2. OML, you are not Libertarian so what would you know. How to troll Libertarians is all you know.

        3. [specifically your buying decisions, should be consistent with the Trumpista view ]

          So, if I’m trying to market my widgets worldwide, but China is dumping their widgets into the U.S. below cost to drive me out of business, while placing “import duties” on my widgets into to China (or simply denying me the China market altogether), the correct method is to do nothing to China and force me to lay off my work force and close up shop, because we should never have YOU pay more for a widget. Why is it that I, and my employees, are worth so far much less than your Beaner ass? Fuck off immigrant.

          1. It is unjust for China to place import duties on your widgets if there is even one Chinese customer, since it violates the property rights of both widget buyer and widget seller.
            Widget sellers and their customers in China would have a right to forcibly (but defensively) prevent Chinese officials from imposing import duties.
            However, no one else should be obligated to support them in such an endeavor. That would be unjust as well.
            And since a logical theory of justice is universal, the above applies mutatis mutandis to the U.S.

          2. If China is dumb enough to sell its goods to us below cost and eat the difference, the correct response is “thank you.”

        4. You should learn that Trumpistas like LC1789 believe that all property is collwctively owned

          You are projecting your own totalitarian and statist beliefs onto others, “Old Mexican”.

      2. Unfortunately for you, in the USA We The People gave up some rights and power to the States. The States in turn gave up some rights and power to a federal government.

        Under the Constitution, the Executive Branch has a lot of discretion in dealing with foreign nations.

        Fuck your outrage.

    2. My closest companion’s ex makes Bucks75/hr on the PC. She has been jobless for eight months yet a month ago her wage with huge extra was over Bucks7000 simply chipping away at the workstation for a couple of hours.
      Read more on this site….. https://howtoearn.club

  2. A logical response from the administration would be to remove the tariffs and sit down at the negotiating table to argue for lower tariffs by everyone. Instead, the administration is calling for more subsidies for farmers to help them face the government-induced export problems.
    Government: If you think the problems we create are bad, wait until you see our solutions.

    1. Most people never survive government’s final solution.

      1. Violence is, in the end, the only leverage government has.

    2. “I’m from the government and I’m here to help.” The worst words you could hear, according to some other “conservative” spendthrift.

    3. A logical response from the administration would be to remove the tariffs and sit down at the negotiating table to argue for lower tariffs by everyone.

      Farm subsidies are about 0.7% of the federal budget. That’s a big amount in absolute terms, but it pales in comparison to other problems with federal spending. It would be foolish for Trump to waste his time on such a politically contentious and fiscally minor issue.

      21% of federal spending are simply unaccounted for. That might be a better place to focus one’s energies.

      1. “It would be foolish for Trump to waste his time on such a politically contentious and fiscally minor issue.”

        Tell that to all the ‘conservatives’ who are all in a dither about a tiny amount of federal money (which is forbidden by the Hyde amendment from going towards abortion) going to Planned Parenthood.

        1. Tell that to all the ‘conservatives’ who are all in a dither about a tiny amount of federal money (which is forbidden by the Hyde amendment from going towards abortion) going to Planned Parenthood.

          The argument for defunding Planned Parenthood isn’t based on economics or the amount of money, but about the uses the organization puts the money to, which many Americans find deeply offensive.

  3. Looking for logic among politicians makes about as much sense as looking for open-mindedness among SJWs.

  4. Foreign countries have demonstrated their indifference, or preference, to trade imbalances with the U.S. for decades – unless that status quo is beneficial for the U.S. as a sovereign state, I don’t see how the imbalance is corrected by the spontaneous benevolence of our trade “partners.” See, e.g., definitions of insanity.

    1. Exactly. The USA does not have free trade. We have managed trade and our trading partners will never adjust the terms without pressure.

      Trump thinks he can get those trading partners to crack and I am inclined to let him try.

    2. how the imbalance is corrected by the spontaneous benevolence of our trade “partners.” See, e.g., definitions of insanity.

      Our trade partners act rationally: most of them are authoritarian regimes that are not profit-maximizing. China can afford to dump steel on the US because it is in China’s strategic interest to do so, even if it makes the Chinese people poorer. Germany can afford to manipulate trade with the US because it helps German politicians stay in power, even if it comes at the cost of the overall economic growth and wealth of the German economy. And politicians all over the world (including most of Europe) have anti-Americanism as part of their platform. Adopting a radical free trade position with countries that want to do you harm is foolish.

      And to be sure, I’m not endorsing any particular trade policy. A lot of trade policies have been corrupt and rooted in rent seeking. However, I’m a realist in that a free nation in a hostile world can’t just open its borders to the rest of the world and stay free for very long.

      1. Tariffs make as much sense as minimum wage laws. A modicum of econ 101 knowledge shows both are detrimental to wealth generation. Leftists come up with complex explanations ( eg monopsony) to justify minimum wage laws . Rightists use “national security” and “managed trade is not free trade ” arguments to justify tariffs. Free markets proponents should oppose both.

      2. Tariffs make as much sense as minimum wage laws. A modicum of econ 101 knowledge shows both are detrimental to wealth generation. Leftists come up with complex explanations ( eg monopsony) to justify minimum wage laws . Rightists use “national security” and “managed trade is not free trade ” arguments to justify tariffs. Free markets proponents should oppose both.

      3. Tariffs make as much sense as minimum wage laws. A modicum of econ 101 knowledge shows both are detrimental to wealth generation. Leftists come up with complex explanations ( eg monopsony) to justify minimum wage laws . Rightists use “national security” and “managed trade is not free trade ” arguments to justify tariffs. Free markets proponents should oppose both.

      4. Tariffs make as much sense as minimum wage laws. A modicum of econ 101 knowledge shows both are detrimental to wealth generation. Leftists come up with complex explanations ( eg monopsony) to justify minimum wage laws . Rightists use “national security” and “managed trade is not free trade ” arguments to justify tariffs. Free markets proponents should oppose both.

  5. Sure, all we have to do to get the feds out of preferential economic manipulation is to make all people behave like non-partisan, unemotional non-interventionists.

    Call me when that happens.

    1. The operative word here is “all” people. If there exists ” some” people, such as for argumen’s sake, trade engineers in foreign countries that remain interventionist, then our “feds” are left in a quandary? Or is it the pure Libertarian dogma that we must not only turn our collective cheeks but to spread them?

  6. Simple cause-and-effect logic tells us that if you want to lose weight, you don’t eat french fries and ice cream at every meal. It’s common sense.

    I eat those breakfast bars that help you lose weight. To lose weight faster, I eat two boxes of them every day. It’s common sense.

  7. Almost the entire article is a utilitarian argument about economic policy, meaning Veronique has already adopted the framework in which progressives reason, she just disagrees about the details. To a libertarian, whether an economic policy improves or hurts the economy would be irrelevant.

    Furthermore, economic policies by our own government are often not justified in economic terms. Most tariffs and trade barriers have been justified with helping specific groups or industries in the US, hurting our enemies, or achieving some social objective.

    So, when you’re saying that “government economic policy doesn’t achieve the best collective economic outcomes”, that’s about as profound a statement as “water is wet”: you are stating the obvious.

    1. “To a libertarian, whether an economic policy improves or hurts the economy would be irrelevant.”

      In that case, if there is such a thing as a libertarian economist, it seems like people would be well advised to ignore them.

      1. In that case, if there is such a thing as a libertarian economist, it seems like people would be well advised to ignore them.

        Because … you believe that science should only be conducted by people with a personal stake in their theories? That makes no sense.

        The thing is, libertarians don’t accept utilitarian arguments as justification for a policy, but we certainly still like to know about the economic consequences of policies we promote. Fortunately, libertarian policies also tend to be economically beneficial. But not every economically beneficial policy is libertarian.

    2. It might be obvious to you, but there are a great many people (like Trump voters) for whom that is not the case. Hence why she said it.

      1. It might be obvious to you, but there are a great many people (like Trump voters) for whom that is not the case.

        Why would it not be obvious to Trump voters? Many Trump and Hillary voters both voted based on their own, narrow economic interests, knowing full well that those did not coincide with the collective economic interests of the country.

        Heck, I vote based on my narrow economic interests and I don’t give a f*ck about the collective economic interest of the country, beyond what affects me.

  8. If it were indeed only hundreds of thousands not hundreds of billions on food stamps, I’d not care…

  9. “These import taxes on foreign goods coming from Europe, China, and other countries have not only raised the cost of doing business but also triggered retaliatory measures from foreign governments.”

    Like Merkel’s newfound support for scrapping auto tariffs against the US.

    Why is Reason against the EU lowering trade barriers against the US?

  10. I am clouds from manchester, i hear how people are talking about The powerful spell caster called DR Ewan in regard of how he bring back ex lover, Winning lottery, getting pregnant and getting married to their dream lover and i also contact him to help me cast a spell in regard of my ex lover whom i love so much that left me 2yrs ago, but today my ex is back to me and we are happily married with 3kids and i am so much happy for the help i found in you DR Ewan. I and my family are very much happy and we are living large now, i am grateful and appreciate your good work . Thank you and may you live long to help people in problems. if you are going through any problem at all he will help you contact him on his email is covenantsolutiontemple@gmail.com or add him on watsapp +2349057353987 check out his webpage http://besthelptosaveyourmarriage.simplesite.com

Please to post comments

Comments are closed.