Protectionism is Wealth Redistribution On Steroids Part 1

June 30, 2016

 

 

 

The new progressive Republican buzz word is "can protectionism actually work"? The talking heads on our favorite news channel are tripping over themselves by touting the positive attributes of a thoroughly debunked economic policy. Fellow Republicans, this is why we lose. Never has policy been more debunked then the economic theory of protectionism.

 

You want to see a redistribution of wealth the likes of which would make Bernie Sanders blush enact this policy on a large scale. Conservatives, Libertarians, lovers of free markets have recoiled at the idea of any sort of government control of the economy. The picking of winners and losers has always been looked at as abhorrent and unfair. There are those who would trade there liberty for economic security. The trading of liberties in exchange for government largess or  some other piece of mind is short sighted and illogical. 

 

Government can't protect your job. Government can only shovel money into the back pockets of well connected business and lobbyist in order to give the perception of protecting your employment. This however will only temporarily protect the few at the expense of the many. Government currently has hundreds of tariffs on the books.

 

Every year goods coming into and out of the United States pay over $45 billion dollars in tariffs. The American consumer pays the bulk of these fees through the price of goods and the misallocation of capitol and resources. In a write up of a reform measure currently going through congress called the American Manufacturing Competitiveness Act in the write up they go over a few points bout the current system.

 

Cato study: On April 13, 2016, House Ways and Means Committee leadership and 15 other members of Congress introduced the American Manufacturing Competitiveness Act of 2016 (AMCA), a bill to reform and reinvigorate the stalled Miscellaneous Tariff Bill (MTB) process. MTBs are legislative vehicles through which Congress provides temporary suspensions of import duties on certain qualified products typically used as inputs in U.S. manufacturing operations. The last MTB afforded importers about $750 million in annual tax relief.

 

The current tariff systems only relief is centered around the MTB process. An archaic outdated system that makes businesses play mother may I to whatever legislature represents them. In order to dodge costly tariffs businesses have to ask there congressmen to get them a temporary wavier. You can almost see the back room deals taking place in smoke filled rooms in order to receive the approval of these lawmakers. The framers never intended the free market to function this way. 

 

Cato Institute Beyond the American Manufacturing Competitiveness Act: Congress Should Get More Serious about Tariff Reform: In 2014, U.S. Customs collected nearly $45 billion in duties, taxes, and fees levied on imports, with approximately $27 billion collected on imported intermediate goods, which amounts to nothing more than a tax on U.S. value creators.11 Duties on products such as magnesium, saccharine, polyvinyl chloride, and hot rolled steel may please their domestic producers, who are freed to raise prices and reap larger profits.

 

But those same duties are costly to U.S. producers of auto parts, food products, paint, and appliances—producers that consume those products as inputs in their own manufacturing processes. Current U.S. tariffs elevate the interests of certain producers over the interests of others. Oddly, it tends to be the producers of lower value-added basic materials that are protected at great expense to the higher value-added, intellectual property, capital, and export-intensive industries, which tend to contribute more to GDP and employ more and higher-skilled workers.

 

At this very moment protectionist policies are costing American jobs by restricting the market and investment in the private sector. 

 

Cato: At great expense to producers, consumers, and taxpayers, the U.S. government maintains “protective” tariffs on thousands of imported products, including many items not even produced domestically.4 To mitigate those costs, Congress has passed eight MTBs since 1982. These bills temporarily suspend duties on certain, “noncontroversial” products—usually intermediate goods, such as chemicals, electronic components, and mechanical parts—that are not manufactured domestically but are needed by U.S. producers to generate their own output.

 

Although limited in impact by its temporary nature, by the “no domestic production” requirement, and by the caveat that the suspended duty must not reduce tariff revenues by more than $500,000, the MTB does provide some cost savings to U.S. producers. The last MTB provided an estimated $748 million of import tax relief. 

 

The case against the progressive tariff system is a multifaceted one. In the next few months I hope to make a case against the myths of this bygone policy that still haunts our economic system. Stay tuned as we debunk these progressive redistributionist policies. 

 

 

 

 

 

 

 

 

 

 

 

 

 

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