Category Archives: Economics

Miscellaneous economy stuff

Tariffs as Foreign Policy Tools

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President-elect Donald Trump’s nominee for Treasury, Scott Bessent, understands the nature of properly done tariffs. In a recent speech, he noted, as cited by The Wall Street Journal,

…Bessent argued for increasing tariffs on national-security grounds and for inducing other countries to lower trade barriers with the US. He criticized trade policy with China for enriching Wall Street, weakening domestic industrial might, and failing to lead to Chinese economic overhauls.
Bessent called for tariffs to resemble the Treasury Department’s sanctions program as a tool to promote US interests abroad. He was open to removing tariffs from countries that undertake structural overhauls and voiced support for a fair-trade block for allies with common security interests and reciprocal approaches to tariffs.
“President Trump is right that actual free trade is desirable,” Bessent said in prepared remarks at the time. “It might seem counterintuitive from a free market perspective, but he is also right that in order to actually create a freer and more extensive trading system over the long term, we need a more activist approach internationally.”

Yewbetcha, to coin a phrase. Bessent, and Trump, are among the few who understand that international trade is not only about economics—in fact it has little to do with economics—and is mostly about foreign policy.

Even protectionist tariffs—when not done solely for mercantilist reasons—have their foreign policy uses: that removing tariffs from countries that undertake structural overhauls and voiced support for a fair-trade block for allies bit, for instance.

Bessent has serious weaknesses, though, and I did not support his open, public campaigning for the position. That politicking, his penchant for speaking out of turn, is the sort of behavior that was so counterproductive in Trump’s first term. Hopefully, he’ll curb his tongue once installed (if he’s confirmed).

Still, I look forward to his reopening Trump’s proposal to the G-7, made during his first term, of a no-tariff-at-all free-trade agreement.

“No tariffs, no barriers. That’s the way it should be. And no subsidies. I even said, ‘no tariffs’,” the US president said, describing his meetings with fellow Group of Seven leaders as positive “on the need to have fair and reciprocal trade[.]”

That offer was wholly ignored at the time, except by the executives of the German car industry.

We’ll see.

Drilling and Restrictions

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President-elect Donald Trump (R) wants to greatly relieve, if not eliminate, Federal restrictions on oil and natural gas producers so they can “drill, drill, drill.” Lots of folks, including shortsightedly, lots of major (and not so major) oil and gas producer executives think that’s a bad idea.

But some donors grimace when they hear Trump promise that under his watch, crude-oil producers would open the floodgates. He has also promised to cut Americans’ energy costs by 50% or more.
Oil backers’ skepticism stems from the fact that Wall Street has successfully pressured chronically indebted frackers to stop burning through cash, and return it to shareholders via buybacks and dividends instead of reinvesting it to frack more wells.
“Our stocks will be absolutely crushed if we start growing our production the way Trump is talking about it,” said Bryan Sheffield, a Texas oilman who contributed more than $1 million to Trump’s latest campaign.

That argument is a bit of a non sequitur, and so it presents no reason to not remove the restrictions. The removal wouldn’t force the oil and gas producers to drill with abandon or to increase drilling or to drill at all. It would, however, let the producers adjust their drilling from sound business reasons rather than be confined to Government’s political reasons for any adjustment.

Another Misapprehension

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Some tax cuts are better than others goes the headline, and that’s true enough. But then the newswriter wanders afield.

…extending the lower individual tax rates that expire after 2025—by far the largest component of any likely tax bill and the one that directly affects the most voters—would put more money in consumers’ pockets without driving a meaningful change in the economy’s long-run trajectory. There is broad bipartisan support for retaining those lower tax levels that Republicans created in 2017, but keeping individual tax rates in place is unlikely to change most people’s decisions about whether and how much to work.

It’s certainly true that not all tax cuts would change, or have any effect, on us taxpayers’ spending behavior. So what? Those favoring higher taxes have yet to articulate a coherent government need for the money, beyond expansive welfare payments and expansive welfare transfers to the States—all without any sort of work requirement.

At bottom, too, it’s our money, not government’s, and we should be the ones who decide how to spend it, or not. Nor do the taxers and government bureaucrats and politicians get to tell us how or whether to spend our money—not directly (that’s part of the intrusiveness of Obamacare that has yet to be corrected), and not indirectly by taxing us and spending our money in government’s name. We’ll allocate our money to our financial needs and desires far more efficiently and with far more specificity than government can ever be capable of.

Full stop.

Regulatory Oversight

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The Wall Street Journal outlined what its newswriters think are the four priorities of the incoming FCC chairman Brendan Carr, assuming he gets confirmed. On the whole, those priorities foster reduced government involvement in business decisions and increased business competition. One of those priorities drew my eye, though:

Clearing a path for media consolidation

One consolidation possibility: Meta or Alphabet or Truth Social acquiring one or more of the legacy broadcast media: ABC, or ESPN (OK, that’s a legacy cable medium, but my point stands), or….

That would create some serious consolidation, and I’m not convinced that degree, or consolidation across those milieus, would be a good idea.

Still, let the markets determine the utility of such acquisitions, within government’s optimal oversight: blocking abuse of monopoly power rather than blocking the monopoly itself. Aside from the economic forces involved, the one is a reaction to an actual misbehavior, the other would be a preemptive action regarding a purely speculative outcome.

One of those would remain consistent with the American style of jurisprudence, and that’s to the general good.

Labor Unions, Labor Workers, and Employers

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The lately formed Republican Party coalition, led by President-elect Donald Trump, consists of business-friendly and labor-friendly folks from opposite wings of the party.

Opposite, though, is not the same as opposing, a distinction the misconception of what’s involved masks. For instance:

People close to the transition said Trump’s potential appointments to key labor positions could include old-guard Republican functionaries, corporate executives, or individuals who are closer to the New Right and see themselves as more pro-worker.

Maybe and individuals who are pro-worker.

This makes plain the misconception:

[U]nion officials said Trump’s record is at odds with his pro-worker rhetoric. “It’s going to be a rude awakening for a lot of folks who wanted to take Trump at his word,” said Steve Smith, a spokesman for the AFL-CIO, which campaigned for President Biden and, subsequently, for Vice President Kamala Harris. “They talk a big game when it comes to workers, but…they’re going to attack the working class.”

Not at all. It’s entirely possible—useful, too—to be both pro-company and pro-working class while simultaneously opposing today’s unions. This is especially the case with today’s unions, where union management, far from concerning themselves with their membership—those working class folks—concern themselves more with what’s good for them personally.

That misplaced concern includes threatening employers with destruction of their businesses—striking and denying the businesses’ ability to function at all unless and until the union managers get their demands satisfied—and with ripping off workers with their efforts to force unionization in businesses where employees continually reject unions in labor votes. Union management in the past ripped off workers even more blatantly by exacting tribute union dues from workers whether they were union members or not. Court rulings have slowed that particular abuse, but they’ve not eliminated it.

What’s needed, and what becomes possible with the incoming administration, is bringing those pro-business and pro-labor folks into the same room to work out processes that benefit both, without the middle man union management in the room clouding things up and constantly trying to pit the one against the other, rather than helping them collaborate on business-labor policies.