Tag Archives: taxes

Tariffs and Reindustrialization

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This seems to be my day for letter-writers. Another writer in The Wall Street Journal‘s Sunday Letters section wrote about the current lack of effectivity of (protectionist) tariffs in stimulating moves toward reindustrialization in our economy.

Through initiatives such as Operation Warp Speed and strategic invocation of the Defense Production Act, the government took risk out of domestic production through substantial direct investment, guaranteed purchase agreements, prioritized allocation of critical materials and equipment, and streamlined regulatory processes.

He then proposed a similar program to spur reindustrialization.

He’s right as far as he went, but it’s too one-sided, lacking as it does any requirement for the targeted industries to do their part. Aside from the addictive nature of protectionist tariffs, it’s far too often the case that the “protected” industry companies merely take advantage of the increased prices of tariffed imports to raise their own prices accordingly, collect the increased revenue, and do nothing to improve their own competitiveness.

What’s also needed, as a part of these tariffs, is a requirement that the “protected” industry companies use the large majority (60%-75%, say, just to have a starting point for discussion) of the increased revenues accruing from the increased sales at their immediately pre-tariff prices to achieve the following:

• increase market share via their largely unchanged price
• increase spending on innovation
• increase spending on capital plant maintenance, improvement, and expansion
• increase spending on line worker wages
• increase spending on line worker hiring

And one more fillip: a hard expiration date of the protectionist tariff, in the range of 5-10 years, that cannot be extended except by Congressionally enacted statute.

That’s the route to actually reindustrializing: doing concrete things to achieve concrete goals.

Tariffs and Economic Growth

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The good editors at The Wall Street Journal spent a lot of ink and pixels decrying President Donald Trump’s (R) tariff moves. They saved the money bit for the end, though maybe not in the way they intended.

The best response to the warning from the first-quarter GDP decline would be for Mr Trump to call the whole tariff thing off. Short of that, settle for 10% across the board and call it a day. If that’s too much of a come-down, Republicans will need to pass a pro-growth tax cut and accelerate their deregulatory push as their best chance to liberate the economy from its tariff kidnapping.

Those first two sentences are irrelevant, whatever one might think of Trump’s tariff moves. Republicans need to pass a pro-growth tax cut and accelerate their deregulatory push—and pass serious spending cuts—independently of any tariff moves.

Responsibility

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The Republican caucuses in the Senate and House are considering restrict[ing] the [provider] taxes’ use to finance state Medicaid contributions entirely, which would have the effect of putting more of a State’s expenditures under Medicaid on the State itself: overall, the restriction would save the Federal government—which is us taxpaying citizens writ nationwide—some $600 billion over 10 years.

There are objections, of course, by those whose money tree would be severely pruned. Ryan Cross, Franciscan Missionaries of Our Lady Health System’s Government Affairs VP:

If you end provider taxes, you’re going to shift that burden to the state, either harming Medicaid patients and healthcare-provider reimbursement, or leading to higher state and local taxes[.]

This is disingenuous. Any harm done Medicaid patients, who as citizens of their State are the responsibility of that State, and of healthcare providers, who as operators in that State also are the responsibility of that State, is done by that State through its own decisions regarding the tax remittals of that State’s own citizens. Regarding those decisions, it apparently is inconceivable to Cross and the rest of the Leftists that the State could reallocate its spending to cover the costs rather than just knee-jerk and willy-nilly raise its taxes.

These are $600 billion dollars for which us taxpaying citizens of our nation have better use.

More on Birthright Citizenship

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Jed Rubenfeld, Professor of Law at Yale Law School, had an op-ed in Sunday’s Wall Street Journal in support of the concept of birthright citizenship. In it, he hung his hat on the “visitor” aspect of our Constitution’s 14th Amendment jurisdiction phrasing.

The 14th Amendment guarantees citizenship to everyone “born or naturalized in the United States, and subject to the jurisdiction thereof.” The opacity of the “jurisdiction” language allows reasonable people to land on either side of this issue. But in 19th-century legal usage, being “subject to the jurisdiction” of the US had a long-settled, straightforward meaning. As Chief Justice John Marshall explained in Schooner Exchange v McFaddon (1812), it meant being subject to US law.
Could you be prosecuted in an American court and imprisoned in an American jail for violating American law? If so, you were subject to US jurisdiction.

That “vulnerable to prosecution and jail” means “subject to US law” is at the core of the misunderstanding here (I’m eliding the question of whether a then-56-yr-old “settled meaning” remained settled after the 14th Amendment was ratified), including to birth tourism—whereby a pregnant woman enters the US for the express and sole purpose of giving birth on US soil so as to garner citizenship for her baby, after which the now-mother leaves with her baby to return to her home nation. Such “visitors,” while so subject, are not subject to US jurisdiction, but only to US government power and authority.

Birth tourists subject themselves only to some of our laws—that small subset of them that lets them enter our nation legally and then avail themselves of our medical-related duty of care laws. They otherwise remain within the control of their home nation laws and so retain the jurisdiction of their home countries, to which they fully intend to return as soon as they’re able to travel after giving birth. They’re holding themselves apart from and outside of our nation’s full and complete jurisdiction—which is what our 14th Amendment requires, even for birth tourists.

Illegal aliens go even farther: they hold themselves completely outside our jurisdiction by holding themselves completely outside our laws: they’ve disregarded our laws from the outset by their entering illegally. They render themselves subject only to the power of our government even as they, too, are subject prosecution and jail—or deportation.

This misunderstanding by Rubenfeld (and others) expands on the matter:

When a foreign army invades and conquers another country’s territory, that land becomes subject to the conquering country’s laws.

Not at all. That conquered territory becomes subject only to the conquering country’s power and ability to impose its laws. Even as long ago as Emer de Vattel, in his The Law of Nations, this was well understood.

The Left’s repeated ignoring of these simple facts does not make those facts nonexistent.

Unfortunately (cynically?), Rubenfeld, like others pushing this argument, leave wholly unaddressed those last.

“Austerity”

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I do not think this means what some news writers think it means. In a Wall Street Journal article, the news writer used the term this way:

A budget deficit contributes…by injecting more demand into the economy via spending than it subtracts via taxes.
…
But deliberately shrinking the budget deficit, via fiscal austerity, or expanding it, via fiscal stimulus….

What he’s talking about here is reducing government spending as austerity. Government spending is one component of the overall spending that is the demand component of GDP; the other component of demand at the GDP level is consumption spending by us citizens. But reducing government spending, while reducing that overall component of demand, isn’t austerity. That reduction simply reduces the level of competition between government on the one hand and us citizens and our private enterprises on the other hand for the same goods and services. That reduction in the government’s side of that competition at the very least reduces upward pressure on the price we citizens and our businesses face for those same goods and services, even eliminates pricing pressure in some areas, and in some few areas, allows prices to fall.

That’s not austerity, that’s an early step in prosperity.

The news writer again misused the term:

Fiscal austerity does the job with much less collateral damage than tariffs. Inflation goes down instead of up. Trading partners don’t retaliate. There’s no special-interest lobbying or corrosive uncertainty over who gets hit with tariffs for how long.
Austerity’s main drawback is that it slows growth.

Reducing government spending isn’t the only path to private prosperity, and done by itself can be decidedly reductive of that. Taxes directly take money away from both us citizens and our private enterprises. Some taxation is necessary for our government to do the things we hire it to do—pay our national debt, see to a defense capability adequate to the threats we face, and satisfy our nation’s general welfare in the ways delineated in our Constitution. Leaving taxes alone—or raising them—whether in isolation or in order to fund spending unrelated to those three purposes takes money away from us and our businesses that we’re better situated to allocate to our actual needs and wants.

Those taxes are the source of austerity inflicted on us by government. Reducing those taxes to the more minimal level needed to satisfy those three Constitutional requirements reduces austerity far more directly than reducing spending: every dollar left in our and our businesses’ pocketbooks and not taken by government is a dollar we can allocate more efficiently than government is capable of doing.

Reducing government spending—the news writer’s definition of austerity—actually indirectly facilitates prosperity if not actually increases it, and reducing taxation—not addressed at all by the news writer—directly increases prosperity by reducing real austerity, the taking of money from private coffers and putting it in government coffers. Doing both in concert with each other—that’s the far opposite of austerity.