Larry Elder: Tariffs and Economic Populism: Good Politics, Bad Economics

By Larry Elder, Mar. 08, 2018

We came to expect economic illiteracy from left-wing President Barack Obama.

For example, in attempting to explain away his tepid economic recovery, Obama blamed the emergence of new technologies, which he claimed killed more jobs. "When you go to a bank you use the ATM; you don't go to a bank teller," Obama said. "Or you go to the airport and you use a kiosk instead of checking in at the gate."

As to Obama's claim that ATMs kill teller jobs, Tamar Jacoby of Opportunity America, a pro-growth nonprofit, wrote three years ago: "The number of bank tellers working in the U.S. has risen since the 1970s, when ATMs were introduced. How could that be? The average bank branch used to employ 20 workers. The spread of ATMs reduced the number to about 13, making it cheaper for banks to open branches. Meanwhile, thanks in part to the convenience of the new machines, the number of banking transactions soared, and banks began to compete by promising better customer service: more bank employees, at more branches, handling more complex tasks than tellers in the past."

Again, this is how Democrats think. But what about the faulty economic thinking of conservatives? For example, Fox's usually astute Tucker Carlson recently scolded Amazon for not paying any federal income taxes and for supposedly killing competitors and throwing their workers out of work. "I did (pay federal taxes)," said Carlson, "but also I haven't put tens of thousands of people out of work, like Amazon has. They've hired a lot, but they've put many more out of work. They've destroyed many more businesses than they've created. Look, I get it, that's the nature of market capitalism, but they feel no obligation to give back at all to the federal treasury — at all?"

Is Amazon guilty, as Carlson claims, of destroying "many more businesses than they've created"? Not according to the Foundation for Economic Reform, a free-market think tank. The FEE writes: "As of January (2017), Amazon had 306,800 employees and a promise to hire an additional 100,000 full-time employees by mid-2018. On their own these numbers are impressive, but they do not account for the additional employees who will find future part-time employment via Amazon's participation in the sharing economy." New Federal Reserve Chairman Jerome Powell even credits Amazon with helping to keep inflation low.

What about Carlson's insistence that Amazon possesses an obligation to pay more in taxes than legally required? Learned Hand served as a federal judge from 1909 to 1951. A brilliant thinker and writer, Hand's decisions are studied by law students and frequently cited by other courts. As to a person's obligation to pay taxes, Hand, in one decision, wrote: "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes." In another tax case, he wrote: "Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."

This brings us to President Donald Trump's plan to impose a 25 percent tariff on imported steel and 10 percent on aluminum. We've seen this movie before.

In 2002, President George W. Bush imposed a 30 percent tax on steel imports. The result? The following year, the Heritage Foundation concluded: "Domestically, the steel tariffs ... have hurt more workers than they have helped. That's because industries that use steel to manufacture other products such as auto parts, appliances and buildings produce more products and employ more people than the steel industry does. In fact, according to the Consuming Industries Trade Action Coalition ... for every employee in the steel-producing industry, 59 work in the steel-using industry. The tariffs increased prices in these industries, lowering demand. That's why the Institute for International Economics estimates that as many as 52,000 jobs have been lost in the steel-using industry since the tariffs were enacted." The Peterson Institute for International Economics put the cost of one steel-making industry job saved at $400,000 — per job.

Economist Milton Friedman, a Reagan friend and unofficial adviser, argued that protectionism discriminates against cheap prices. Friedman, paraphrasing 19th-century economist Henry George, said: "In time of war, we blockade our enemies in order to prevent them from getting goods from us. In time of peace, we do to ourselves by tariffs what we do to our enemy in time of war." Tariffs may be good politics, but they are bad economics.

Obama majored in political science. But Trump has a BS degree in economics from the Wharton School of Finance and Commerce. What's his excuse?

Larry Elder is a best-selling author and nationally syndicated radio talk-show host. To find out more about Larry Elder, or become an "Elderado," visit www.LarryElder.com. Follow Larry on Twitter @larryelder. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate webpage at www.creators.com.

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