Phil Magness decries the NatCons’ insistence on playing with economic fire. A slice:
At a little over a hundred days in, the Trump White House’s economic policy decisions are already chaotic enough to give even the casual observer a case of whiplash. Oscillating tariff policies have imposed astronomical rates on imports from the rest of the world, only for the White House to partially walk them back a few days later after triggering a succession of meltdowns on the stock market. The net effect has been a continuous upward ratcheting of tariff rates, with Americans now paying a new “baseline” tax of ten percent on almost all imported goods as well as substantially higher rates on certain products and goods from specifically targeted countries.
Income-tax cuts have suffered from similar whiplash effects in recent weeks, imperilling the renewal of the 2017 Tax Cuts and Jobs Act before it expires at the end of the year. Trump publicly committed himself to “no new taxes” during his campaign, and his party has the congressional majorities to make the 2017 rates permanent. But a faction in the White House is pressing the president to allow a “millionaire tax” that raises the top bracket from 37 percent to 39.6 percent, or possibly even higher. The resulting fiscal picture is grim. Meaningful efforts to rein in federal spending have all but stalled—Congress is continuing to raise the debt ceiling and the much-touted DOGE initiative has failed to secure permanent spending cuts through legislation.
None of these tax-and-spend policies is set in stone, but they’re sufficient to ring alarm bells. Voters rejected the economic central planning of the Biden-Harris administration and Trump’s tariffs have reached double-digit disapproval levels among voters in recent polling. So, why are we now seeing protectionist trade wars and redistributive income-tax proposals that look like they came straight out of the campaign platforms of Bernie Sanders and Elizabeth Warren? The answer is that the Trump administration has a National Conservative economics problem.
National Conservatives, or NatCons for short, are a recently emergent branch of the American political Right. They emphasise conservative social and cultural values but also embrace the tools of big government to manage and manipulate the economy, and to reinforce a nebulous concept of “national identity.” They reject the free-market tenets of the old Reagan Republican coalition, and 20th-century conservatism in general. Instead, NatCons offer an economic platform emphasising goals like high protectionist tariffs, federally funded industrial programs, and even redistributive tax policies that aim to “soak the rich” and thereby finance an expansive agenda of public spending in other areas. Many NatCons favour aggressive regulatory actions by the government in the name of antitrust enforcement. Some have even floated traditionally left-wing ideas like price controls and the nationalisation of strategic industries.
As our editorial this morning noted, the Trump administration appears to be backing off from its maximalist anti-trade position. The deal the U.S. struck with China basically took away the retaliatory tariffs from both sides in exchange for basically nothing, a sign that negotiators realized that it isn’t a good idea to have an effective embargo in both directions between the world’s two largest economies.
…..
I’d rather that they rolled back the tariffs after reading up on the benefits of free trade and the follies of protectionism, but at this point, whatever it takes to get them to a more positive place is fine by me. It’s certainly true that longshoremen would have been hammered by a significant reduction in international trade, and the political calculation by Wiles and Bessent seems sound.
This in no way makes up for the dockworkers’ unions’ pettiness, Luddism, bullying, integration with organized crime, harming other supply-chain workers, keeping U.S. ports among the least efficient in the world, and political self-serving that makes the country poorer. But just this once, they had the president’s ear on an important topic, and they used their influence for good. Credit where it’s due.
Populist politicians rail against the notion of “creative destruction.” They claim the supposedly cruel churn of dynamic market capitalism erases good jobs from hometown factories and hands increasing wealth to distant shareholders. The people versus the powerful, with the former as big losers from economic disruption.
Yet a deep dive by consultant McKinsey into nearly 10,000 large companies across the United States, Germany, and the United Kingdom tells the opposite story: Joseph Schumpeter’s wrecking ball is hardly the zero-sum mechanism the critics suggest. Rather, it’s key to broad national economic success.
McKinsey’s research undermines that zero-sum narrative: Firms with the highest productivity growth also had the strongest profit and wage growth. Rather than exploiting workers, employees and customers are typically the biggest and most immediate beneficiaries of productivity growth. McKinsey: “Productivity growth is a win-win for all.”
If you voted for President Donald Trump last November because you believed he’d increase economic freedom, it’s safe to say you were fooled. Following a reckless tariff barrage, the White House and its allies are preparing a new wave of tax code gimmickry that has more in common with progressive social engineering than pro-growth reform. And don’t forget a fiscal recklessness that mirrors the mistakes of the left.
Defend these policies if you like, but let’s be clear: The administration shows no coherent commitment to free market principles and is in fact actively undermining them. Its approach is better described as central planning disguised as economic nationalism.
…..
Tariffs remain the administration’s most visible economic sin after Trump launched the most extreme escalation of protectionism since the infamous Smoot-Hawley Tariff Act of 1930. Unlike the 1930s economy, however, today’s economy is deeply integrated with global supply chains, making the damage extensive and far more immediate. Tariffs are only nominally imposed on imports. Ultimately, they’re taxes on American consumers, workers, and businesses.
The president has made it clear that he’s fine with limiting consumer choice, blithely telling parents they might have to “settle” for two dolls instead of 30 for their children. Smug pronouncements about how much we should shop (not much) or which sectors we should work in (manufacturing) are economic authoritarianism.
They’re also indicative of a deeper government rot. Policymaking is now done by executive orders as comatose congressional Republicans, like some Biden-era Democrats, allow the president to rule as if he’s a monarch.
…..
And then there are the administration’s misleading, populist talking points about raising taxes on the rich to reduce taxes on lower- and middle-income workers. The U.S. income tax system is already one of the most progressive in the developed world. According to the latest IRS data, the top 1 percent of earners pay more in federal income taxes than the bottom 90 percent combined. These high earners provide 40 percent of federal income tax revenue; the bottom half of earners make up only 3 percent of that revenue. Thankfully, the House of Representatives steered away from that mistake in its bill.
Bob Graboyes offers some wise suggestions to Democrats. A slice:
If you reflexively ignore or reject what I say, you won’t persuade me. I agree that President Trump’s behavior on January 6 was deeply unsettling, but, personally, I’m just as bothered by President Biden’s decision to allow protestors to surround the private residences of Supreme Court justices, day and night, for months. Dismiss my view out-of-hand, and your power to persuade evaporates. Acknowledge that my point is legitimate—even if you disagree—and you may still sway me.
