Tariffs – Retuning Another Engine that isn’t Broken

By Janice Barlow

“Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government” – Milton Friedman

 

AS OUR NATION ROLLS ALONG, it seems that not a day goes by without some new drama hitting the airwaves from Washington. If it isn’t someone being fired or resigning, it’s a knee-jerk reaction to a horrific event, like modifying the Second Amendment because of a school shooting in Parkland, Florida, or a tweet-storm from the Commander-in-Chief about North Korea.

We awaken each morning and check our news files to see what will be discussed throughout the day – things that hardly mattered in years past; issues that would never have crossed our minds.

And yet, some things were working pretty darn well deep into last year. The economy, for instance. The GOP-dominated House, Senate and of course, Oval Office were having difficulty owning any legislation after the failed “Repeal” (renamed, “Repeal and Replace”) Obamacare, so they moved on to the Budget. They hastily and what seemed haphazardly threw President Trump‘s budget draft into legislation because it was “temporary” and they really needed to get to what was important! Revamping the Tax Code!

LAST DECEMBER I addressed in an article, why a redo of the tax system in a thriving economy was so unnecessary. The economy was doing just fine, cruising along at a good pace. Job numbers were up, the markets were ascending, and consumer confidence was good. Those backing Donald Trump were crediting him with a fine job as his presidency was underway.

But, and it’s a big BUT…like anything the government gets its hands on, it had to go and mess with what was working. Again, from Milton Friedman, famed free market economist:

“If you put the Federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.”

There was not only no need to give corporations such massive and sweeping permanent income tax breaks, but the lesser ones given to the public at large are only temporary. We know what that means. Just wait until the Democrats are back in power. Remember when Bill Clinton said that we all had to “sacrifice” as he imposed his new tax increases?

Well, it had been calculated that the government will not be able to sustain itself with these tax cuts, so President Trump has sought new and not so popular ways to get taxes into the coffers.

NEXT ON TRUMP’S AGENDA to balance out the loss of tax inflows, was his recommendation to raise tariffs on steel and aluminum imports by 30% and 10% respectively.  Most of our steel flows from our very friendly trading partner, Canada. But they don’t even produce all their own steel. Some of theirs comes from overseas. So there is a very delicate trade balance that would be disrupted if this steep and imposing tariff becomes a reality.

Tariffs are a barrier to a free market system.

People will continue to buy merchandise where it is available to them at the least cost. (Assuming the quality is acceptable). Raising tariffs will not necessarily equate to more American jobs.

THE ARGUMENT CAN BE SEEN RIGHT HERE in America in the automotive industry. Tariffs are a problem for car manufacturing. With the advancement of technology, many “Made in America” vehicles are loaded with parts that are made overseas. And yet, overseas manufacturers such as Toyota, and Nissan, have plants here in the states. There are American car manufacturers though, with plants in Canada. The lines have become grayed out and this is a good thing. Vehicle production is more free flowing, shipping costs are way down, and the consumer has enjoyed wider ranges of choice at competitive prices. Tariffs on steel will mess this up dramatically.

In this video from 1973, Milton Friedman is spot-on regarding a free market economy and why almost all economists agree with him (and still do). Please excuse the video quality. It is old, but relevant.

 

In the advent of the recent departure of Trump’s chief economic advisor, Gary Cohn, Trump has somewhat backed off on his tariff stance, once again turning his flip flop over. Cohn disagreed with Trump on imposing tariffs, for all the right reasons. But it is likely that some form of the tariff will be imposed. The tax dollars are needed.

Also, he is mulling over a 25 cent per gallon national gas tax. That smells of socialism like nothing else I can think of.

IF SOMETHING ISN’T BROKEN and is tampered with, it sets of a chain reaction that continues on down the line. The economy has been messed with. It is now in a volatile mode and the boat is rocked with every announcement bullhorned out of the White House.

The American consumer needs to recognize that a free market economy is slipping through our fingers. We are becoming Socialized. The free flow of goods and services should never be taken for granted nor altered to the extent that it harms our wallets while benefiting the special interest lobbyists who were the ones who actually sent your politicians to Washington. It’s probably too late.

“Underlying most arguments against the free market is a lack of belief in freedom itself” – Milton Friedman

Janice Barlow is a true crime author (J.M. Barlow) and has been a Financial Advisor for over 35 years. She has degrees in both Economics and Finance from the University of Michigan, and Secondary Education degrees in Chemistry and English as a Second Language.

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One Thought to “Tariffs – Retuning Another Engine that isn’t Broken”

  1. Ellen Elmore

    The way Trump is acting you would think it was his goal to destroy the economy along with free markets. Since he is a liberal at heart, we are living with an R president who is really a D.

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