Everybody's got an opinion on tariffs, but I'm not convinced anyone really grasps all of their implications over differing periods of time. A tariff is a multifaceted economic concept that you can point to excitedly, from multiple perspectives, as a decisive, causal difference-maker.
All of this tariff-talk has reminded me how an economic…
Everybody's got an opinion on tariffs, but I'm not convinced anyone really grasps all of their implications over differing periods of time. A tariff is a multifaceted economic concept that you can point to excitedly, from multiple perspectives, as a decisive, causal difference-maker.
All of this tariff-talk has reminded me how an economic/political issue can be an absolutely core value of one party -- and then somehow morph, surprisingly quickly, into a foundational belief of the other party.
I also understand that is difficult now with a few baked in entitlements blowing out any budget on day 1. I'd hate to be cynical enough to say that massive remigration and a demographic collapse may be the only way these can get under control in the long run, or else deficits forever.
You can say it, I just don't think you'll get 1950 again. What you'll get is massive inflation from the tariffs and a flight from the dollar and depression from the crash in the market. Beyond that who knows. The last batch of stagflation defeated the economic left for a few decades and led to the prior neoliberal era, but now the right (or at least the GOP) is going to be responsible, so I'm guessing we'll see either some kind of woke neoliberalism or a union-based leftism when the Democrats finally get back into power.
Yes, one reason I didn't write at length about tariffs is because I was having trouble juggling all the conceptual balls at the same time in my brain. For example, in this short piece, I didn't touch at all on the tax revenue aspect.
Similarly, I have written some in the past about tariffs as particularly good for corporate campaign donations, as Mark Hanna would tell you. But I also like the idea of a flat tariff on everything to keep corruption down. But I also like the idea of a policy focusing on some industries (e.g., we want to be good at making drones) more than others (garments are good for the third world, and what little good reshoring shirt-making would do Americans, I'd rather the people in tropical poverty have that as the first step on the ladder into the industrial era.
The question of how much national self-sufficiency in certain manufacturing areas is needed is obviously a big one. But then that opens up huge vistas of other maybe this/maybe that factors: for example, is it better for the USA to have, say, steel mills and ship-building capacities safe at home, just in case they're needed for a war later?
And don't even get me started on agricultural products. In vauntedly-Republican Sioux County, Iowa, my ancestral homeland, everybody's all for free trade (or they were until recently, I guess) and no government interference in the market via tariffs, subsidies, etc. -- until you bring up corn and the other ag products on which the local economy largely depends. Then suddenly everybody sounds like a Bolshevik.
What it comes down to is that once your society reaches a certain level of economic security (i.e. nobody's starving or living at subsistence level), defining 'a high quality of life' is open to lots of not entirely compatible interpretations. This is one lesson that living overseas as an expat for many years has taught me.
We stole the IP for automated textile manufacturing from England, and after its first century in the US, we have been offshoring it for the last century. The solution to the dilemma in Norma Rae wasn't a union but offshoring. Getting rid of the bottom 1/3-1/2 of jobs that left was a blessing. Meanwhile, we coulda promoted exports of high wage stuff like passenger aircraft and other capital intensive high wage stuff. But that was too nuanced for a binary legislature. So we defaulted to a 'free trade' position.
Absolutely correct, but oddly tariffs are not a good example. I made this very mistake in an argument with a democrat friend a few weeks ago. Raised in the era of Ronnie Reagan I assumed Republicans were always free trade fetishists but it turns out that tariffs were always a big thing with republicans. You'd think late 20th century labor democrats would be into tariffs but I guess the reputation of tariffs was damaged by one tariff act during the great depression. Anyway that was the only example of tariffs I was ever taught about and I was taught about it repeatedly.
Didn't Ben Stein blame it for worse ning the depression in 'Ferris Beuler's Day off?'
Doesn't this just mean that Republicans in the early 20th century, following their general isolationist bent, were for tariffs, but then that impulse shifted to the Democrats later on, i.e. when the desire to put up trade barriers was characteristic of union-dominated Democrats in the 1970s, and now it's back with Republicans again?
Or am I completely misremembering the sonorous news updates of my youth?
I wouldn't be surprised if your democrat friend is reporting media talking points that emphasize the Republican predilection for tariffs in the past, and elide the intervening years.
A commenter on Unz/iSteve posted an old paper refuting the impact of S-H. It was not much higher than the existing expiring tariff, and the majority of imports by $ were exempt.
looks like post WWII tariffs were out of favor. The US was kicking ass until the late 1970s and even then labor went with quotas on japanese cars rather than tariffs. So yes in the 1980s a protectionist was more likely to be a democrat but tariffs were not their choice. This could be due to their association with the GD.
Goes to show how we all fall for the trick of filling in facts about the past to fit our stories. It's just like people assume Reagan started all the deregulation when it was begun on Carter.
The War of the Rebellion started because Lincoln's election meant the Morill Tarrif Act would be kept, thus eventually (it was feared) destroying the South.
The Rep/Dem divide on tariffs began before the parties did. The North wanted protection for its nascent industries, the agrarian South wanted cheaper goods. States in both regions threatened nullification or secession well before The War.
Some Dems in the 80s-90s talked about "Fair Trade"--negotiating environmental and labor constraints on foreign countries essentially to protect US union jobs, but Clinton went for the money. The UAW prevented the Big Three from outsourcing too much vehicle production to Mexico or the Far East, one of the many reasons Two went bust in 2009, as they couldn't make competitive small cars profitably in the unionized US/Canada.
I have this vague impression that American auto unions were worse at suppressing productivity improvements than German or Swedish auto unions for technical reasons, but I've never dug deep enough into the subject to feel insightful.
Don't you mean "better at suppressing improvements?" Germanic blood will tell.
American auto manufacturing quality dropped so low in the 70s, it looked like a Commie or Japanese plot to ruin the industry, but it was just hungover, careless, and spiteful workers and cost-cutting engineering.
Wasn't a big part of it the introduction of the catalytic converter and then the oil embargo? Detroit was all geared up to make huge displacement engines and suddenly you need to lower pollution and get good gas mileage. Also, as always, I blame the baby boom.
Many things happened at once, beginning in the late 60s. Expensive re-engineering for safety, pollution, plastic parts, inflation/cost-cutting, and labor troubles began before the '73 gas crisis, the first sudden shock. The catalytic converter in '75 was a godsend, because they could keep selling profitable large cars and engines a few more years as they downsized them for '78 CAFE. Emissions controls had made larger '73-4 cars drive horribly with frequent repairs, and the regs got stricter every year.
Detroit got stuck catering mostly to pre-Boomers. Yuppies bought imported to look down on them. "You can't sell a young man an old man's car."
How about rust? The cars of my youth would rust (back in Chicago) at the slightest provocation. Nowadays I think of car rust the same way I think about polio.
OTOH, I read about a decade ago that GM then had about a tenth the number of blue collar workers it had in the early 1980s, producing a similar number of more complicated vehicles. It was the huge number of retirees that killed the company. Plus the Aughts' gas price jump crushing big vehicles sales.
I don't recall the exact figures, but some large fraction of each new vehicle purchase was just headed to pension payments for former workers.
This itself was the result of short-termism of auto execs. Rather than seeking a sustainable settlement with their unions, they preferred to hand unions concessions that would come due in the hazy future (pension payments) in exchange for meeting near-term earnings forecasts.
Well, that hazy future eventually arrived where new cars were just underwriting old pensions, but no one wanted to recall how that happened because most of them had literally retired on its largesse.
I was under the impression that the Big Two that went belly up (GM and Chrysler), had, in the intervening 20 years leading up to 2009, becoming giant financial companies as well as auto makers (Ford as well). Subsequent bad balance sheets in the financing segment put GM and Chrysler in severe financial distress, but Ford's balance sheet was healthy enough to avoid it. That is not to say your points aren't true as well, just that I believe it was their finances that tipped the balance into bankruptcy and bailout.
Side note, that is when I made one of my best investment decisions. In 2009 Ford's bonds (debt) were valued significantly below par; since they didn't take a bailout, I figured the execs had a good handle on the business and I bought some of their 50 year bonds with a good part of my investment account. They started trading well above par within 18 months, and I've doubled my investment, plus earned ~10% (the bonds' fixed rate is 9.98%) a year on them too. As Warren Buffet famously said, there are opportunities when there is blood in the street.
Ford survived because they borrowed as much as they could before the credit crunch of 08. Glad your bonds did well--my stock sure hasn't since then (previous spinoffs somewhat made up for it). Wiki says GM sold half of their financing arm GMAC (started 1919) in 2006 to Cerberus Capital, which foolishly bought much of Chrysler in 2007, so it hurt both of the dying Two.
One of the Rothschilds supposedly said something similar--buy when there's blood in the street, even when some of it is your own.
It also helped that their brand name is "Ford" which most Americans associate (rightly or wrongly) with American ingenuity, progress, and American entrepreneurial success. They also have among the top selling consumer pick-up trucks (well loved by a big segment of us) for a long time. I still remember riding around the farm with my Granddad in his 1973 F-150, which he called Ol' Blue, since it was painted Sky Blue, lol.
Everybody's got an opinion on tariffs, but I'm not convinced anyone really grasps all of their implications over differing periods of time. A tariff is a multifaceted economic concept that you can point to excitedly, from multiple perspectives, as a decisive, causal difference-maker.
All of this tariff-talk has reminded me how an economic/political issue can be an absolutely core value of one party -- and then somehow morph, surprisingly quickly, into a foundational belief of the other party.
One thing I've rarely seen emphasized is that for most things, it's a voluntary tax. The domestic price level may rise, but you could also do without.
Quite true, but that also makes it less effective at raising revenue.
Good. You can only spend what you raise.
I also understand that is difficult now with a few baked in entitlements blowing out any budget on day 1. I'd hate to be cynical enough to say that massive remigration and a demographic collapse may be the only way these can get under control in the long run, or else deficits forever.
You can say it, I just don't think you'll get 1950 again. What you'll get is massive inflation from the tariffs and a flight from the dollar and depression from the crash in the market. Beyond that who knows. The last batch of stagflation defeated the economic left for a few decades and led to the prior neoliberal era, but now the right (or at least the GOP) is going to be responsible, so I'm guessing we'll see either some kind of woke neoliberalism or a union-based leftism when the Democrats finally get back into power.
Hasn't inflation been dropping?
Yes, one reason I didn't write at length about tariffs is because I was having trouble juggling all the conceptual balls at the same time in my brain. For example, in this short piece, I didn't touch at all on the tax revenue aspect.
Similarly, I have written some in the past about tariffs as particularly good for corporate campaign donations, as Mark Hanna would tell you. But I also like the idea of a flat tariff on everything to keep corruption down. But I also like the idea of a policy focusing on some industries (e.g., we want to be good at making drones) more than others (garments are good for the third world, and what little good reshoring shirt-making would do Americans, I'd rather the people in tropical poverty have that as the first step on the ladder into the industrial era.
The question of how much national self-sufficiency in certain manufacturing areas is needed is obviously a big one. But then that opens up huge vistas of other maybe this/maybe that factors: for example, is it better for the USA to have, say, steel mills and ship-building capacities safe at home, just in case they're needed for a war later?
And don't even get me started on agricultural products. In vauntedly-Republican Sioux County, Iowa, my ancestral homeland, everybody's all for free trade (or they were until recently, I guess) and no government interference in the market via tariffs, subsidies, etc. -- until you bring up corn and the other ag products on which the local economy largely depends. Then suddenly everybody sounds like a Bolshevik.
What it comes down to is that once your society reaches a certain level of economic security (i.e. nobody's starving or living at subsistence level), defining 'a high quality of life' is open to lots of not entirely compatible interpretations. This is one lesson that living overseas as an expat for many years has taught me.
Decolonize Robert Conquest (he literally needs it): Everyone's Communist about what he knows best.
We stole the IP for automated textile manufacturing from England, and after its first century in the US, we have been offshoring it for the last century. The solution to the dilemma in Norma Rae wasn't a union but offshoring. Getting rid of the bottom 1/3-1/2 of jobs that left was a blessing. Meanwhile, we coulda promoted exports of high wage stuff like passenger aircraft and other capital intensive high wage stuff. But that was too nuanced for a binary legislature. So we defaulted to a 'free trade' position.
Absolutely correct, but oddly tariffs are not a good example. I made this very mistake in an argument with a democrat friend a few weeks ago. Raised in the era of Ronnie Reagan I assumed Republicans were always free trade fetishists but it turns out that tariffs were always a big thing with republicans. You'd think late 20th century labor democrats would be into tariffs but I guess the reputation of tariffs was damaged by one tariff act during the great depression. Anyway that was the only example of tariffs I was ever taught about and I was taught about it repeatedly.
Didn't Ben Stein blame it for worse ning the depression in 'Ferris Beuler's Day off?'
Smoot-Hawley!!!
Doesn't this just mean that Republicans in the early 20th century, following their general isolationist bent, were for tariffs, but then that impulse shifted to the Democrats later on, i.e. when the desire to put up trade barriers was characteristic of union-dominated Democrats in the 1970s, and now it's back with Republicans again?
Or am I completely misremembering the sonorous news updates of my youth?
I wouldn't be surprised if your democrat friend is reporting media talking points that emphasize the Republican predilection for tariffs in the past, and elide the intervening years.
A commenter on Unz/iSteve posted an old paper refuting the impact of S-H. It was not much higher than the existing expiring tariff, and the majority of imports by $ were exempt.
Yep. Even the wikipedia article on US tariffs says economists don't think it was a significant cause of the depression.
anyone? Anyone? They did not work and the US sank deeper into the depression.
https://en.wikipedia.org/wiki/History_of_tariffs_in_the_United_States
looks like post WWII tariffs were out of favor. The US was kicking ass until the late 1970s and even then labor went with quotas on japanese cars rather than tariffs. So yes in the 1980s a protectionist was more likely to be a democrat but tariffs were not their choice. This could be due to their association with the GD.
Goes to show how we all fall for the trick of filling in facts about the past to fit our stories. It's just like people assume Reagan started all the deregulation when it was begun on Carter.
The War of the Rebellion started because Lincoln's election meant the Morill Tarrif Act would be kept, thus eventually (it was feared) destroying the South.
The Rep/Dem divide on tariffs began before the parties did. The North wanted protection for its nascent industries, the agrarian South wanted cheaper goods. States in both regions threatened nullification or secession well before The War.
Some Dems in the 80s-90s talked about "Fair Trade"--negotiating environmental and labor constraints on foreign countries essentially to protect US union jobs, but Clinton went for the money. The UAW prevented the Big Three from outsourcing too much vehicle production to Mexico or the Far East, one of the many reasons Two went bust in 2009, as they couldn't make competitive small cars profitably in the unionized US/Canada.
I have this vague impression that American auto unions were worse at suppressing productivity improvements than German or Swedish auto unions for technical reasons, but I've never dug deep enough into the subject to feel insightful.
Don't you mean "better at suppressing improvements?" Germanic blood will tell.
American auto manufacturing quality dropped so low in the 70s, it looked like a Commie or Japanese plot to ruin the industry, but it was just hungover, careless, and spiteful workers and cost-cutting engineering.
Wasn't a big part of it the introduction of the catalytic converter and then the oil embargo? Detroit was all geared up to make huge displacement engines and suddenly you need to lower pollution and get good gas mileage. Also, as always, I blame the baby boom.
Many things happened at once, beginning in the late 60s. Expensive re-engineering for safety, pollution, plastic parts, inflation/cost-cutting, and labor troubles began before the '73 gas crisis, the first sudden shock. The catalytic converter in '75 was a godsend, because they could keep selling profitable large cars and engines a few more years as they downsized them for '78 CAFE. Emissions controls had made larger '73-4 cars drive horribly with frequent repairs, and the regs got stricter every year.
Detroit got stuck catering mostly to pre-Boomers. Yuppies bought imported to look down on them. "You can't sell a young man an old man's car."
How about rust? The cars of my youth would rust (back in Chicago) at the slightest provocation. Nowadays I think of car rust the same way I think about polio.
GM gave the catalytic converter technology away to everybody else. A noble deed.
OTOH, I read about a decade ago that GM then had about a tenth the number of blue collar workers it had in the early 1980s, producing a similar number of more complicated vehicles. It was the huge number of retirees that killed the company. Plus the Aughts' gas price jump crushing big vehicles sales.
I don't recall the exact figures, but some large fraction of each new vehicle purchase was just headed to pension payments for former workers.
This itself was the result of short-termism of auto execs. Rather than seeking a sustainable settlement with their unions, they preferred to hand unions concessions that would come due in the hazy future (pension payments) in exchange for meeting near-term earnings forecasts.
Well, that hazy future eventually arrived where new cars were just underwriting old pensions, but no one wanted to recall how that happened because most of them had literally retired on its largesse.
I was under the impression that the Big Two that went belly up (GM and Chrysler), had, in the intervening 20 years leading up to 2009, becoming giant financial companies as well as auto makers (Ford as well). Subsequent bad balance sheets in the financing segment put GM and Chrysler in severe financial distress, but Ford's balance sheet was healthy enough to avoid it. That is not to say your points aren't true as well, just that I believe it was their finances that tipped the balance into bankruptcy and bailout.
Side note, that is when I made one of my best investment decisions. In 2009 Ford's bonds (debt) were valued significantly below par; since they didn't take a bailout, I figured the execs had a good handle on the business and I bought some of their 50 year bonds with a good part of my investment account. They started trading well above par within 18 months, and I've doubled my investment, plus earned ~10% (the bonds' fixed rate is 9.98%) a year on them too. As Warren Buffet famously said, there are opportunities when there is blood in the street.
Ford survived because they borrowed as much as they could before the credit crunch of 08. Glad your bonds did well--my stock sure hasn't since then (previous spinoffs somewhat made up for it). Wiki says GM sold half of their financing arm GMAC (started 1919) in 2006 to Cerberus Capital, which foolishly bought much of Chrysler in 2007, so it hurt both of the dying Two.
One of the Rothschilds supposedly said something similar--buy when there's blood in the street, even when some of it is your own.
It also helped that their brand name is "Ford" which most Americans associate (rightly or wrongly) with American ingenuity, progress, and American entrepreneurial success. They also have among the top selling consumer pick-up trucks (well loved by a big segment of us) for a long time. I still remember riding around the farm with my Granddad in his 1973 F-150, which he called Ol' Blue, since it was painted Sky Blue, lol.
Any financial tips today?