IF IT SOUNDS GOOD DOES THAT MAKE IT GOOD???


BLOG POST - Questions

I have asked and been asked that question most of my life regarding virtually everything.  However, today we are talking about politics and proposed policies suggested by various candidates.  It would be impossible for me to successfully separate what I am going to address from particular candidates but I tread lightly because my purpose is not to offend or attack any candidate but to attempt to gain a complete understanding of suggested policies regarding “Trade and Tariffs”. 

I like boldness and often find that aggressiveness is a strong plus in dealing with problems that are being ignored and addressed with timidity fearing opposing sides might be offended.  There is a time to consider the risk of offending less problematic than addressing the problem.  I have found that although I was somewhat offended in a situation, the direct approach forced me to ultimately address the problem and come to a reasonable solution.

Candidates, greatly disagree on the issue of “Trade and Tariffs” and that has caused me dig deeper into this history and effect of “Tariffs” in a nation’s economy.  Again, the idea of applying heavy “tariffs” to goods imported may be an effective tool to bring about a balance in trade but it also may cause some negative consequences.  Punitive action is not always the best remedy to a problem.  Sometimes alleviating that which created the problem is the best approach.  Standing her on this thin ice,  I fear that I have already lost some and they will not hear the “conclusion of the whole matter” as I attempt to discuss this topic.  Let me ask the question, “How Do Tariffs Affect the Economy?”

BLOG POST - Tariffs

I am appalled and angry about the number of companies or corporations that have taken their business or products offshore.  However, I fully realize that their decision is usually was based on economics and profitability and in our current situation with government regulations, corporate taxes, and costs of production some have determined that in order to be profitable they must.  The cheap goods coming in from other countries because of the open market, low cost of goods and labor in those countries along with the taxes, fees, and regulations in America have made relocating to an offshore environment appealing.  We could address that immediately by reducing the corporate tax rate which is one of the highest in the world and address the overregulation.  Now, that will not address labor costs which I hope to address here or later.

How Do Tariffs Affect the Economy?  In a short but incomplete answer, tariffs make foreign-produced goods more expensive for domestic users and in that sense makes the foreign goods more competitive with American produced goods.  If that were the totality of the issue I would, too soon would not be soon enough.  However, that is not the full effect for there are some consequences that cannot be overlooked.

  • Although domestic producers would face less competition than without the tariffs; higher prices would occur on the protected goods and services for the consumer.
  • It is absolutely accurate that with the lower competition from foreign-produced goods domestic producers would employ people and that would naturally increase wages.  However, higher wages would also increase the price of goods and reduce the rate of innovation to produce goods outside the protected sector.
  • It would also affect the ability of foreign producers to purchase American goods and our exports would decrease and with lower demand comes lower production and lower employment rates and wages

BLOG POST - How Much

What happens if Company X decides to move its production facilities to Mexico, China, Vietnam, Japan or some other nation where the cost of goods and labor is much lower than America and the government decides that as a punishment a hefty tariff would be imposed on every item the import to America?  Who pays that tariff?  Company X may write the check to the government but they will pass that cost along to the consumer doing so in each step of the process.  Ultimately, it is you and I that must pay the fine, fee, or tariff imposed and thereof I ask, “Who is really being punished?” 

Historically, tariffs do not affect only the company of a particular product but the residual effect is widespread.  The “Sugar Tariff” that Marco Rubio supports because it impacts some of his constituents in Florida has saved jobs in the sugar production industry but cost jobs in the residual industries such as confectioners, etc.

Is the solution imposing hefty tariffs on products imported to force companies to return to our shores for production?  It sounds good to “make them pay” for their disloyalty to America and Americans but we need to consider who the action hurts the most.  I would suggest that a more long-term solution would be to dramatically and drastically lower the corporate tax rate and resist the temptation to allow the federal government to manipulate the labor rate giving the free-market the opportunity to work.  I am convinced that if we dramatically lowered the tax rate and reduced the crippling regulations we would find more businesses staying in America and some returning.  The result would be a competitive market, a boost in the economy, and while we consumers might see somewhat higher prices we could and many would balance that with the knowledge and pride that we are helping to “grow the American economy” and in the end, the residual effect would mean more jobs, more innovation, more revenue for the federal government and “made in America” would become the norm, not the oddity.  I desire to “Buy American” and will pay a higher price to do so, but while I am an American I am also responsible for my family and must be prudent and responsible toward them.

BLOG POST - Bottom Line

If we simply take the approach of “tariffs” I fear we will see a negative ripple in the economic waters and rather than forcing businesses to stay or return to our shores we will see fewer jobs, higher prices, less availability of goods and services and a continuation of a bad economy.  Short-term, tariffs might be a useful tool but are they truly a long-term solution?  In any industry one can readily see the potential loss of jobs in that industry without tariffs and see the jobs saved by the action.  However, there may be 8 jobs lost in other industries for each job saved in the protected field because of the tariff(s) and those dots are difficult to connect.  Thus, the proponents argue that businesses are saved in the industry because of the tariff and argue that you cannot make a concrete connection to the residual impact on other industries as a result.  They are right and they are wrong.

THE BOTTOM LINE for me, I believe that we would be best served in dramatically lowering the corporate tax rate, lifting and reducing many of the crippling restrictions and regulations that are killing small business and helping drive business into the arms of other nations.  I can see the positive and negative in tariffs and would ask the next president to weigh the matter carefully and seek long-term solutions, not simply punitive actions.  This is one issue of many that, hopefully, the GOP will think and rethink as we seek to find the best and lasting solution to the problem of “lost jobs” to offshore localities. We are not wrong to be angry over the loss but we dare not misdirect our anger and simply blame corporations when the taxes, regulations and restrictions mandated by the federal government is a major player.

I want, long-term solutions, as do you.  So, let’s encourage our elected officials to take positive actions to bring about economic stability and confidence in America.  God bless you and God bless America!

 

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