(C) Daily Kos
This story was originally published by Daily Kos and is unaltered.
 . . . . . . . . . .



Trump "All Tariff" Policy Would Wreck Economy [1]

['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.']

Date: 2024-06-15  

On Thursday, Donald Trump “floated the idea of an all-tariff federal revenue system, large enough to replace the income tax, during a morning session with the House GOP, according to a GOP lawmaker in attendance.” Trump Floats ‘All-Tariff’ Federal Revenue System in Return to Capitol Hill.

How much would an “all tariff” revenue increase prices? Some not so liberal financial publications made initial estimates. The (Murdoch owned) Wall Street Journal reported it is an “arithmetically challenged plan.” The Journal calculates that the “U.S. imports less than $4 trillion of goods annually and it collects $2.5 trillion in individual income taxes, which means it would take tariff rates of 70% or higher to fill the void left by repealing income taxes.” (If you can get behind the paywall, Trump Has Tossed Out Some Unorthodox Tax Proposals—With Scant Details.) Forbes calculates that an “average tariff rate of nearly 85% on all imports would be required to replace income tax revenue with tariffs—leading to widespread economic disruption, trade retaliation, revenue instability and the aforementioned concerns regarding economic equity.” Can Trump Eliminate The Income Tax? Maybe With An 85% Tariff. (Note: These are not estimates of tariffs on only Chinese imports, but imports on raw and finished goods from every nation.) In my opinion, both calculations are low, because they implicitly assume that consumer demand remains constant as prices rise. The imposition of tariffs would raise prices, reducing demand for imported goods and consequently reducing collections below those simple estimates.

What will happen if Trump wins and gets his way? Bloomberg interviewed former Treasury Secretary Prof. Larry Summers about the proposal. The five minute interview is here: Trump Tax Ideas Could Cause 'Economic Warfare,' Summers Says

Without being dramatic, he called it the “worst macroeconomic policy proposal in US history.” (Video: 3:37) The impact upon inflation is obvious. Summers reminds us that the Smoot-Hawley tariffs were one of the major causes, if not the major cause, of the Depression. He explains:

“Think about it this way. The Smoot-Hawley tariffs, which did enormous damage, some people would say made the Depression great, were 6/10 of 1% of GDP. If you replace half of income tax revenues--not all like he talked about--If you replaced half of income tax revenues with tariffs... those would be tariffs six times Smoot-Hawley levels.”

Video 4:18 (The entire video is interesting. Analyzing Trump’s plans, he explains why “I don't think there's been a more inflationary presidential economic policy platform in my lifetime.”)

There is also the question of equity. Our federal income tax is designed to be progressive, with tax rates rising as income increases. Taxing imports has the greatest impact upon the poor and middle class, because those groups spend the greatest percentage of their income buying food and goods.

Thus far, the press has let Donald Trump’s policies for America go completely unexamined. He did not participate in Republican primary debates, and never had to answer a single policy question there. Since then, the press has been hyperfocused on his many civil and criminal trials. Trump gets almost no questions about what he would do if elected, and there is even less analysis when he answers a rare policy question. The focus has to change. Voters need to understand the harm this man wants to impose upon our nation.

I used to think Make America Great Again looked back to the 1950s. Increasingly, it seems like he is looking back to the 1930s.

[END]
---
[1] Url: https://www.dailykos.com/stories/2024/6/15/2246870/-Trump-All-Tariff-Policy-Would-Wreck-Economy?pm_campaign=front_page&pm_source=more_community&pm_medium=web

Published and (C) by Daily Kos
Content appears here under this condition or license: Site content may be used for any purpose without permission unless otherwise specified.

via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/dailykos/