David Henderson and Phil Magness warn: “Don’t substitute tariffs for income taxes: you’ll get both.” A slice:
Current income tax revenues are about $2.5 trillion per year. Goods imports are just over $3 trillion per year. So replacing individual income taxes would imply an 83 percent tariff rate. But that’s true only if raising tariff rates by over 2,500 percent (from under 3 percent to 83 percent) would have no effect on the level of imports. Because people would buy fewer imports if they had to pay that tax, the tariff rate would have to be substantially higher or the income tax system would have to be retained.
Eric Boehm tells how Trump’s tariffs will tank tequila.
The balance of trade is perhaps one of the most misunderstood topics in all of economics. Without a nuanced understanding of the factors that result in trade deficits, otherwise well-intentioned policymakers can be led astray and propose policies that inadvertently cause more harm than good. In the end, a trade balance is nothing more than an accounting identity that is often confused for an economic identity.
To improve economic conditions for Americans, policymakers should not focus on reducing trade deficits, nor artificially altering the balance of trade. Doing so only invites further cronyism and favoritism into an economic system. Consumers and producers alike are best served by freely floating and adjusting prices, not manipulated ones.
Phil Magness is understandably no fan of the American Economic Association’s recommendation that its members switch from X to Bluesky. (See also Nobel-laureate Vernon Smith’s comment about the AEA’s bias.)
For three decades you were labeled a crank, a “climate denier,” someone who pigheadedly rejects “settled science,” if you didn’t embrace the belief that life on earth faces imminent extinction from “global warming” and, later, “climate change.” The possibility that an entire academic discipline, climate science, could have gone badly amiss by groupthink and self-flattery wasn’t thought possible. In many quarters this orthodoxy still reigns unquestioned.
That climate ideology was alarmist and in no way settled should have been obvious. For many, it was. The conclusions of genuine scientific inquiry rarely reinforce the social and political biases of power brokers and influencers, but climate science, like some of the softer social sciences, did exactly that. It purported to discover foreboding trends in inscrutable data and assured us that the only way to arrest them was to do what America’s liberal cultural elite wanted to do anyway—amass political and economic power in the hands of credentialed technocrats, supposedly for the good of all.
The ordinary person, though lacking familiarity with the latest peer-reviewed science, wasn’t wrong to regard the whole business with skepticism. His suspicions were further aroused by contemplating the sheer immensity of the data, all correctly interpreted, required to confirm the conclusions asserted by climate science and its media champions.
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These same officials have told us for decades that they accept the direst predictions of climate activists, but they have done little to counter what they now purport to be the effects of climate change. Mayor Karen Bass’s 2024-25 budget proposed a 2.7% cut to the Los Angeles Fire Department, mainly in areas of new equipment purchases. And although the department’s total budget later increased as a result of salary negotiations, it’s pretty obvious that the dangers of wildfires—supposedly the outcome of climate change—weren’t foremost on city leaders’ minds. California has for years underinvested in land management, which might have inhibited the fires from spreading, and water storage, which would have enabled firefighters to put out more fires.
Climate catastrophism has begun to die, the victim of its apostles’ unbelief.
