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Wednesday, August 01, 2018

Reaganauts love Trump's trade policy

Arthur Laffer wrote the Republican tax policy on a cloth napkin in D.C. restaurant on September 13, 1974. It read, "If you tax a product less results/ If you subsidize a product more results./ We've been taxing work, output and income and subsidizing non-work, leisure and unemployment./ The consequences are obvious!" with an image of the Laffer Curve in the middle."

The bottom of the napkin read, "To Don Rumsfeld/at our Two Continents/Rendezvous/ 9/13/74/Art B. Laffer."

Dick Cheney also was there. Journalist Jude Wanniski too.

That became Reagan's tax policy, which George H.W. Bush called voodoo economics. Reagan cut taxes. Bush raised them. His son cut them.

President Trump cut them even further by dropping our high corporate tax down to Europe's average. It needs to drop again.

So what does Laffer think of President Trump's trade policy? Laffer answered that today in a column written with Reagan administration alumnus Stephen Moore and Steve Forbes of the magazine that bears his name.

"President Trump won a victory for freer trade last week when he and the president of the European Commission, Jean-Claude Juncker, agreed to find ways to lower tariffs and other barriers to each other’s exports. The outlines of the deal are still sketchy, but it calls for the Europeans to buy more American petroleum, soybeans and manufactured goods and for Mr. Trump to reduce his auto and steel tariffs," they wrote.

"We were particularly heartened that Mr. Trump and the Europeans now have a handshake agreement to aim for zero tariffs on both sides of the Atlantic."

"This was Mr. Trump’s idea. The night before the agreement, he proposed in a tweet that 'Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies! That would finally be called Free Market and Fair Trade!' Amen."

Bu-bu-but he raised tariffs which will lead to a depression, the Never Trump crowd whined.

I explained that was a bargaining chip.

I also explained that Reagan used tariffs 18 times in his eight years to protect American industry. We have had tariffs for 200 years.

You know who opposed tariffs? Slave owners.

Just saying.

Back to Laffer and company.

"The next step should be to extend this zero tariff offer to other key allies, including Britain, Canada, Mexico and South Korea,"they wrote.

Likely that is already in the works, although the Republic of Korea accepted steel quotas rather than dropping tariffs.

President Trump is not pushing this for altruistic, Kumbaya reasons.

"If Mr. Trump’s goal is‎ more jobs and higher wages, America comes out the big winner under the zero tariff scenario. Most of our major trading partners have higher tariffs than we do. A study by the president’s Council of Economic Advisers calculates that the average American tariff is 3.5 percent, while the average European Union rate is 5 percent, China’s is nearly 10 percent and the world average is around 10 percent. On a level playing field, American companies can compete with anyone, and our exporters will gain advantage if trade barriers are abolished," they wrote.

But the optics, as they say, would be perfect.

"A no-tariffs trade strategy would also allow the United States to seize the moral high ground in the debate. Mr. Trump would be transformed from the evil disrupter of international commerce to a potential savior — just as 30 years ago Mr. Reagan’s international image changed from superhawk to peacemaker almost overnight," Laffer, Moore, and Forbes wrote.

I get the feeling that somewhere there is another napkin with Laffer's explanation of this.

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4 comments:

  1. By the time Trump is through disrupting the old order, Laffer is going to need an entire tablecloth to explain what PDJT is accomplishing.

    ReplyDelete
  2. Signs his napkin and wipes his mouth on the check.

    The restaurant must love this guy.

    ReplyDelete
  3. Before the 16th Amendment blessed us with the income tax, tariffs provided much of the financing of the federal government. Lower tariffs is another way the Wall Street crowd manages to maximize profits. This basically replaces money going into the U.S. Treasury from tariffs to money going in from the taxpayers. - Elric

    ReplyDelete
  4. I’ll take Laffler and Moore on my side any day.

    ReplyDelete