George Will continues to decry the U.S. government’s fiscal incontinence. Two slices:
The International Monetary Fund forecasts the U.S. government debt will be above 7 percent of GDP every year until 2029, with the debt reaching 143.4 percent of GDP by the decade’s end. The Congressional Budget Office projects the debt increasing for decades. As a percentage of their GDPs, Italy’s and Greece’s debts are expected to decline, and to be exceeded by the U.S. debt’s percentage in 2030.
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With annual deficits approaching $2 trillion even with the economy humming, and with defense spending down to around 3 percent of GDP (above 13 percent during the Korean War; above 9 percent during peak Vietnam), what can cause sustained economic growth of at least 5 percent to cope with the debt’s growth? Artificial intelligence? A risky reliance. Revenue from the president’s perhaps unconstitutional tariffs? A net drag on the economy.
A nation that used to borrow for emergencies now is mired in a perpetual emergency because it is borrowing — $2.6 trillion annually projected by 2034 — to fund current consumption of government goods and services.
John Puri reports on the Trump administration’s punitive taxes – a.k.a. protective tariffs – on Americans’ purchases of pasta. Three slices:
Another week, another imported product the administration thinks Americans consume too much of. The president’s doctrine of protectionism requires that citizens be shielded from their own economic preferences, redirecting their money toward things the government finds more appropriate. Today’s forbidden purchase is Italian pasta.
Under his highly questionable IEEPA authorities, President Trump has unilaterally imposed a blanket tariff of 15 percent on imports from European Union members, including Italy. Now, his administration is slapping an additional 92 percent tariff on 13 companies that supply the bulk of the $770 million in pasta that Italy exports to the United States. In conjunction, these duties will ensure that no American can enjoy Italian-origin spaghetti or macaroni without paying a 107 percent tax.
This staggering tax is expected to function as an embargo, effectively barring Italian pasta from the U.S. market. Chefs and shoppers will be forced to turn to domestic producers. The U.S. pasta lobby (yes, that is a real thing) is no doubt ecstatic that a large chunk of their competition — the birthplace of their product, in fact — is being kneecapped by the federal government. In addition to limiting the inconvenient choices available to consumers, the new pasta tax will likely enable domestic producers to raise their own prices.
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Antidumping laws are yet another example of Congress delegating its Article I tariff power to the executive branch. On paper, the president is limited in the duties he can impose by the need for factual determinations — of too-low foreign prices, injury to domestic producers, and calculation of the dumping margin. In practice, however, because Congress vested these fact-finding powers in the executive branch, the president is limited only to what his bureaucracy’s creative accounting can justify.
As anyone versed in public choice theory would expect, antidumping laws are fertile ground for lobbyists and government favoritism — rewarding well-connected firms with dampened competition. Companies seeking protectionism often use antidumping duties as a means to get around international agreements that limit U.S. tariff rates. In fact, antidumping investigations are typically initiated by a domestic company, supposedly “on behalf of” its industry. In the case of Italian pasta, the investigation that led to the 92 percent duty was triggered by two U.S. companies that make pasta domestically.
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Any law that empowers a single body — all too often the executive branch — to decide which consumer products Americans are permitted to buy should be incompatible with a republican system of government designed to secure natural rights. Conservatives appreciated this principle when President Obama attempted to unilaterally ban incandescent lightbulbs and functional appliances by regulatory fiat, purportedly for the customer’s benefit. Regrettably, it’s now a Republican administration that is trying to banish Italian pasta from Americans’ kitchen tables.
“Trump plays defense on tariffs as Americans face rising food prices.” Two slices:
Prices on many everyday items, however, continue to soar. Through September, the most recent data available, coffee prices were up 19 percent over the previous 12 months, according to the Bureau of Labor Statistics. Bananas were up 7 percent.
Treasury Secretary Scott Bessent told “Fox & Friends” on Wednesday that tariff cuts would “bring the prices down very quickly.” Bessent previously has said that foreign exporters and U.S. retailers were bearing most of the tariff burden, leaving consumers mostly unscathed.
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Having effectively conceded that tariffs are contributing to high prices, the administration has opened the door to demands for further modifications in its strategy, said Ed Gresser, vice president at the Progressive Policy Institute in Washington.
U.S. importers this year have paid far more in tariffs on a wide range of consumer products, including automobiles, vacuum cleaners and makeup, Gresser said. Tariffs on imported coffee have cost Americans $358 million so far this year, up from $1.3 million last year, according to U.S. International Trade Commission data.
But tariffs on automobiles have cost more than 36 times as much — amounting to $13 billion.
“There is a heavy price for this policy, and families are paying a lot of it,” said Gresser, who was a trade official in the first Trump administration.
The moves announced Thursday may help make coffee more affordable, but this is ultimately less than a half-measure. As Axios notes, those four countries account for just 7 percent of U.S. coffee imports. Most coffee (and many other items) will still face higher tariffs. Trump’s tariffs are estimated to cost the average American household around $1,800 this year—so some small relief on grocery prices might be appreciated, but that is hardly solving the problem the White House has created.
Samuel Gregg continues, with this new paper, to write insightfully about trade. A slice:
Protectionism, however, is detrimental to America’s economic and national security interests. This paper lays out a framework for how the United States can advance a trade liberalization agenda for the Asia–Pacific that reflects present geopolitical conditions. National security considerations always shape trade policy and a full liberalization of trade throughout the region is unlikely. Nevertheless, American efforts to promote a strategic liberalization of trade with nations throughout the Asia–Pacific region will serve America’s economic interests, as well as strengthen America’s position in its geopolitical contest with China.
In response to Trump insisting that trade deficits are an “emergency” and Thomas Piketty insisting that differences in monetary incomes are an “emergency,” Clifford Asness tweets: (HT Scott Lincicome)
Trade balances are not an “emergency” and shouldn’t be used to arbitrarily imperially impose tariffs.
Inequality is not an “emergency” (that doesn’t mean it’s not a serious issue) and shouldn’t be used by this debunked socialist to try to impose his views through world government.
Horseshoe theory never loses these days.
Democrats will run against Republicans next year on the cost of healthcare and enhanced pandemic-era subsidies for ObamaCare. Republicans can dodge the subject and hope voters don’t notice, which is a losing strategy. Or they could offer a health freedom agenda that would create more private insurance options. If any Republicans have been thinking about this, we haven’t heard it.
How about pro-growth tax policy? Republicans have a rare chance to use budget reconciliation again during this Congress to dodge the Senate 60-vote rule for tax and spending bills. The news here is that Republicans don’t seem to have any idea what they would put in such a bill.
They won’t index capital-gains income for inflation because that might be seen as helping the affluent. They won’t cut spending because Democrats will object and call them mean. They won’t try more welfare reforms for, well, the same reason. They won’t even try to reform the budget process that automatically increases spending each year in the “budget baseline.”
