The paranoid style in tariff policy

The paranoid style in tariff policy
The paranoid style in tariff policy

A US flag on container ships in Los Angeles, California. EFE/EPA/Etiene Laurent

Some days ago, donald trump proposed a truly terrible and, in fact, unviable economic proposal. I realize that many readers will say, “What else is new?” But by doing so, you are allowing trump benefit from the gentle bigotry of rock-bottom expectations, without forcing him to meet the standards that should be applied to any presidential candidate. A politician should not be overlooked for nonsense because he says nonsense all the time.

But in some ways the most interesting thing about the latest terrible political idea of trump is the way his party responded, with the kind of servility and paranoia normally expected in places like North Korea.

Which trump He supposedly proposed was a “fully tariff policy” in which import taxes replaced income taxes. Why is it a bad idea?

First, the math doesn’t work. Annual income tax revenues are around $2.4 trillion; Imports are around 3.9 billion dollars. At first glance, this might seem to suggest that the idea of trump would require an average tariff rate of around 60%. But high tariffs would reduce imports, so tariff rates would have to rise even higher to raise the same amount of revenue, which would reduce imports even more, and so on. How high would tariffs eventually have to rise? I made a rough calculation using assumptions very favorable to trump and I got a tariff rate of 133%; In reality, there is probably no tariff rate high enough to replace income tax.

Former U.S. President and Republican presidential candidate Donald Trump speaks during a campaign event, in Racine, Wisconsin, U.S., June 18, 2024. REUTERS/Brendan McDermid

And to the extent that we replaced income taxes with tariffs, we would actually dramatically raise taxes on working-class Americans and at the same time give the rich a big tax cut, because the income tax is quite progressive and falls primarily on wealthy taxpayers, while tariffs are a de facto kind of sales tax that falls primarily on the working class.

So this is a really bad idea that would be very unpopular if voters knew about it. But here’s the trick: How did the Republican National Committee respond when asked about it?? By having his representative declare: “The notion that tariffs are a tax on American consumers is a lie pushed by subcontractors and the Chinese Communist Party.”

Now, economists have been saying that tariffs are a tax on domestic consumers for the last two centuries or so.; I guess they’ve been working for China all the time. Yes, there are exceptions and caveats, but if you imagine that trump is thinking about the optimal tariff theory, I have a degree from the Trump University that you might want to buy.

Anyway, look how he responded. Republican National Committee to a substantive political issue: insisting not only that the Dear Leader’s nonsense is true, but also that anyone who disagrees is part of a sinister conspiracy.

Don’t ignore this. It is further proof that MAGA has become a dangerous cult.

© The New York Times 2024

 
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