Crisis, Rinse, Repeat: No Longer Fresh at Project Syndicate
What Does Economics Need to Learn Next?

Trump's Tariffs: No Longer Fresh at Project Syndicate

Trump s Tax on America by J Bradford DeLong Project Syndicate

Project Syndicate: Trump’s Tax on America: After a year of serving as a useful idiot for congressional Republicans and their wealthy donors to push through tax cuts and deregulation, US President Donald Trump is now following through on his protectionist promises. Sooner or later, Republicans might realize that inept kleptocracy is not the best form of government after all:

"2017 was the best year for conservatives in the 30 years that I’ve been here. The best year. On all fronts". So said Senate Majority Leader Mitch McConnell (R-KY). "This has turned out to be a very solid, conservative, right of center, pro-business administration. And we’re seeing the results of it." The same sentiments have been echoed over and over again by Republican donors over their shrimp hors d'oevres: the rollback of environmental regulations, and tax cuts for the rich. What is not to like? That Donald Trump and his family are would-be kleptocrats means that they little like the government taking what they want to be their wealth, and so are allies of all those who think America's big problem is that the distribution of income and wealth is not unequal enough. That the Donald Trump administration is incompetent—the tax cut bill was the worst drafted bill anybody can remember seeing—is not a drawback, for incompetence creates opportunities for lawyers to further enlarge loopholes.

2017 was, in the eyes of Mitch McConnell and of large Republican donors, truly the best year in the memory of man: incompetent erratic kleptocracy would appear to be the best of all forms of government for them. Who knew?

Or, at least, the best form of government until March 1, 2018.

Senator Pat Roberts (R-KS), at least, may have changed his mind about Trump:

This is not going to go down well in farm country. What’s really ironic here—it’s a real paradox of irony — that we have a tax reform package that’s bringing a lot of benefits to the business community not the mention individuals, and this is a policy move that is contrary to that....I hope we’re not seeing a trade policy that will basically result in all the benefits of the tax reform being taken away by higher manufacturing costs being passed on to consumers. The consumers are going to pay for this. All manufacturers are going to be affected by this, and they’re not going to pay for it. They’re going to pass that cost onto consumers, so it’s a consumer tax, not a tariff. These are the people who voted for the president. These are his people. One county in Kansas even voted for him 90 percent, and they’re not going to be happy at all about this...

Lindsay Wise of the Kansas City Star wrote that Roberts: "struggled to find words to describe his state of mind.... He and other Republican senators received no formal heads-up from the White House before Trump said he would impose import tariffs—25 percent on steel and 10 percent on aluminum..."

The stock market dropped 1.5% on the news.

House of Representatives Speaker Paul Ryan said: "He hoped the President will consider the unintended consequences of this idea and look at other approaches before moving forward".

The decision has been taken against the advice of and over the objections of National Economic Advisor Gary Cohn, National Security Advisor H.R. McMaster, Treasury Secretary Steve Mnuchin, and Defense Secretary James Mattis. For it, apparently, are Commerce Secretary Wilbur Ross—but it is not at all clear why, for the view from the Commerce Department sees many more who benefit and who benefit more from low steel and aluminum prices as they seek to invest than it sees those who benefit from higher steel prices. For it, apparently, is trade advisor Peter Navarro—but Navarro has not yet set out a framework by which externalities from the creation of a larger domestic steel industry are a net benefit to the economy. For it, apparently, is Special Trade Representative Robert Lighthizer—but it is really not clear why, for his reputation depends on the administration's having a successful rather than a stupid trade policy.

Perhaps America's plutocrats—and their senators and representatives—will come to the realization that wealth flourishes most under a competent rather than an erratic and incompetent government? And perhaps they may start to wonder whether plutocrats are the allies of would-be kleptocrats—or their prey?