White House Announces $16 Billion In Aid To Farmers Hurt By China Trade Dispute
Think about the ramifications of this as it exemplifies
Trumpian stupidity. Having little or no grasp of economic theory, Trumpo the
Clown has precipitated the current crisis being experienced by some American
farmers by imposing tariffs on Chinese imports (which is passed on to American
consumers in increased prices. What follows is a brief primer on tariffs and
why they can be mutually destructive.
Few Americans, unless they took my APUS History
course and have memory for details, are aware that the Civil War might well
have started in South Carolina (same place as Fort Sumter, where it did “start”)
but in 1832, not 1861. What drove this controversy wasn’t slavery, but economic
policy, framed in the Tariff of 1828, called by South Carolinians and most
other Southerners the “Tariff of Abominations.”
Congress, controlled by Northerners, passed a
tariff bill which placed high tariffs on manufactured products from overseas, principally England. This was specifically aimed at increasing the price of
finished products (like shoes or furniture or fine fabrics for example) that were actually
cheaper to import from England than to transport from the North, principally
New England, by adding a tariff to these imports. The South, especially the port
of Charleston, along with New Orleans a main import point of entry was
outraged. They correctly understood that they, almost exclusively agricultural,
with relatively little manufacturing, were being taxed (yeah, a tariff is a tax
on imports) to enhance Northern economic competitiveness.
Complicating
this matter was that two particularly aggressive men were POTUS and VPOTUS. Andrew
Jackson, from Tennessee, was determined that the tariff would be enforced and
was also willing (and said so) to send the US Army south to enforce is
collection. Remember, the tariff was imposed on the South Carolinians who
imported the products, and passed that cost onto consumers, not on the British
shippers. This is important, since Trump maintains that manufacturers (China
today) pay the tariffs. This is diametrically wrong and is a rock- solid
example of the man’s sheer incompetence.
The other indomitable force in play was Vice President John
C. Calhoun, a South Carolinian who abhorred the tariff. Beginning in 1828,
South Carolinians began to speak of “Nullifying” the tariff, that is, simply
declaring the Federal law void and unenforceable in South Carolina. This went
on for several years, ultimately leading to Calhoun resigning the Vice
Presidency and Jackson threatening federal military enforcement. When a modest tariff
revision, in 1832, was passed, the
reductions were too little for South Carolina.
In November 1832 the state
called for a convention. By a vote of 136 to 26, the convention overwhelmingly
adopted an ordinance of nullification. It declared that the tariffs of both
1828 and 1832 were unconstitutional and unenforceable in South Carolina. Understand, this was a huge Constitutional
crisis, revolving around a state disputing and rejecting the concept of the Federal
government’s supremacy. The “Nullification Crisis” was resolved with a
compromise (reduction in a wide range of tariffs) known as the Tariff of 1833, but tariff policy would continue to be a national political issue between the
Democratic Party and the newly emerged Whig Party for the next twenty years.
It
is noteworthy that the federal government derived most of its operating funds
from tariffs or excise taxes, which are taxes on domestic products like whiskey,
cigarettes, fuels (19 cents per gallon for gasoline today) at this time before
income tax. Since 1914, however, the primary source of government operating
funds has shifted to other sources (income taxes, primarily) and negative tariff
effects in the 20th century have been highlighted by such
retrograde economic faux pas as the Smoot Hawley Tariff of 1930, which instead
of correcting the sliding US Economy, plunged it farther into the tailspin
which became the Great Depression.
So today, we
have another version, sort of, playing itself out on the national stage. In the
years since the Great Depression tariffs have ceased to be the principal source
of US operating revenue, and in general, among developed countries, attempts to
“protect” one class or industry can, and do, have a Newtonian “equal and
opposite reaction” in others. This is what has happened in this instance. Raising
taxes on some Chinese industrial exports has resulted in China increasing or
imposing tariffs on US agricultural exports, such as wheat and soybeans.
US farmers, and especially agribusinesses, are already to great extent the
richest welfare babies in the nation with the support of yearly Farm Subsidy
Payments. The U.S. government presently pays about $25 billion in cash (that’s
5 “walls” if you’re counting) annually to farmers and owners of farmland. This
is in several forms. One is to guarantee the price level of things like corn,
wheat, sugar, milk, and several other staple consumables. This is also the
exact opposite of the “market economy” Republicans so adore, since it (price controls)
makes consumers pay more for food than a competitive market almost surely would.
Even more “nanny state” like, the government also offers and underwrites crop “insurance.”
Crop insurance is purchased by
agricultural producers, and subsidized by the federal government, to protect
against either the loss of their crops due to natural disasters, such as hail,
drought, and floods, or the loss of revenue due to declines in the prices of
agricultural commodities. So…the price is guaranteed, and if the market price
drops below that level, Insurance makes up the difference! There is almost surely
no industry in America as protected as agriculture, and in the main, these main
commodities aren’t so much family farms as Conagra, Archer Daniels Midland, Monsanto, Dow-Dupont, and
other giant agribusinesses.
The real rub here,
is that Trump’s tariffs have already cost consumers billions in increased prices,
but the Chinese response has been to target mainly agricultural imports. So,
what does China do? They buy soybeans and wheat elsewhere. Brazil has stepped
right up and become China’s new best friend and soybean supplier. Even if tariffs
disappeared tomorrow, why would China go back to the US once a rapport with Brazil
has been established? What are US farmers not insured against? Decreased demand
and excess production. No Chinese market? Where do the US soybeans and wheat go?
How much tofu can the US consume?
This poorly thought out action has, in truth created a few new jobs in steel and Aluminum production
but has fallen far, far short of revitalizing these industries. Trump's one time boast of "6 new steel plants opening" was off by ...6 new steel plants! One recent estimate
is that every new job created in these industries has cost millions in
offsetting increased prices in other sectors.
Of course,
Trump has another opinion which he has been far less vocal about: In an
interview gaffe in 2015 he let his true colors shine: "We have to become competitive with the
world. Our taxes are too high, our wages are too high. Everything
is too high. We have to compete with other countries." So, in Trump world, all we must do to right
the economic ship is for working class individuals to take a pay cut, while he
lowers taxes on his high roller cronies?
At the White
House, recently, surrounded by farmers and ranchers, Trump said, "China has taken
advantage of the United States for too long and has stolen billions in
intellectual property.” It is important
to note that nothing Trump can ever do will correct or undo this last (intellectual property) fact. In fact much of that claim revolves around software and entertainment media. His
administration's 25% tariff on products that Americans import from China was,
he said, necessary to "level the
playing field," He then made the most egregiously optimistic statement
possible, "The $16 billion in funds will help keep our cherished farms
thriving and make clear that no country has veto on our economic and national
security," Trump said. This assumes we regain those lost markets. With no end
in sight and no sign of Chinese capitulation, this means the president just
raised already bloated Agricultural freebies by 64%.
We deserve better and brighter, like, say, Liz Warren and Mayor Pete?
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