The Father of the Constitution Was Also the Father of Tariffs by Daniel Greenfield

[Almost Heaven]

The Tariff Act of 1789, immediately following the Constitution, almost wholly financed the federal government created by that magnificent document, while also keeping it small enough so that it would not balloon in size the way that it did once income taxes were introduced during the Civil War, the Progressive Era, and catastrophically during the New Deal and Great Society.

Without tariffs, there would have been no Constitution and no United States of America.

The economic imbalance between America and Britain had been one of the foundational causes of the American Revolution, but simply pushing British governors and armies out of the Colonies had not actually changed the imbalance in trade or the ability of the British to set all the rules. As long as the British government had the ability to set a unified economic policy while the American Colonies were a mass of widely varying rules with states selling out each other, America might be legally independent, but would never be economically independent.

Madison’s greatest tariff challenge came after the War of 1812. The Father of the Constitution had been forced to flee the nation’s capital during the British assault. In a haunting recreation of the way the Founding Fathers had been forced to flee during the American Revolution, the president found a horse and huddled in a country house trapped by the storm. While the White House was burned, Madison and the country survived.

But the war still wasn’t over.

The British, having once again failed to conquer America by force, turned back to economic warfare, dumping large amounts of products at low prices in the United States in order to cripple its already shaky manufacturing whose poor state had been credited with the country’s near defeat. The growing industrialization of warfare had already made it obvious that wars would not be won by courageous charges or compelling rhetoric, but by factories like the ones that would determine the outcome of the future Civil War, not to mention the coming two world wars.

If America could not maintain an independent industry, then it would also have no future.

Madison, like other Founding Fathers, also understood that tariffs were not just a means of economic warfare or a scheme to finance the government, but also a means of building up American industries. And his Tariff of 1816 is regarded as the first true ‘protectionist’ tariff.

The British had wanted to bury American industry under a flood of cheap imports, instead it was they who were forced to rethink their economic policies. Less than a decade after, the British Parliament passed the Reciprocity of Duties Act. The United States had used tariffs to create mutual trade agreements with other nations making America less dependent on British trade. The road to improving America’s balance of economic power with Britain remained a very long one, but it was tariffs that slowly forced British concessions for American trade from the West Indies to Manchester.

American political leaders and presidents had attempted to convince Britain along with other nations of the moral and economic virtues of free trade only to get nowhere. British thinkers could articulate those virtues better than we could. Practicing them was another matter. What did work was the strategic use of trade barriers to build relationships from a position of strength.

And that is what President Trump is trying to do.

Read More...https://www.frontpagemag.com/the-father-of-the-constitution-was-also-the-father-of-tariffs/

 

[Margery]

What did work was the strategic use of trade barriers to build relationships from a position of strength.

And that is what President Trump is trying to do.

Good article.

I hope President Trump succeeds. It might be a very rough and bumpy ride for the next couple of years though.

It's a different time -we use more complex stuff now than back in Madison's day.

In his day most of what was used in America was produced in America. Electricity had yet to be invented, indoor plumbing wasn't a thing and Henry Ford and his automobile wasn't even a twinkle in his father's eye, let alone his grandfather.

Cellphones today are a good example of why this is different. Minerals (the "rare earth" stuff they talk about) that goes into those things aren't all found in America. Mining in one country, refining in another, chip making in Taiwan and the cellphone gets put together in China usually.



I think the malicious efforts by China for example do need to be dealt with. Some tariffs are justified. As Daniel's article points out.

I'm less sure about the math Trump's team used to calculate the tariffs based on balance of trade as countries who can't afford to buy American products or have much smaller populations are the ones producing the stuff that Americans buy at Target, Amazon and Walmart.

That is like going to the grocery store where I buy my groceries and demanding a balance of trade adjustment for them to pay me the difference. I buy from them, they don't buy from me. Our balance of trade is lopsided. But I still need groceries, and I'm not equipped to grow my own. I'm happy to farm that out (pun intended). My grocery store doesn't steal my work, or threaten me with military action, unlike China so we are in a good relationship. I won't be applying tariffs on them. And if they did act like China I would take my business elsewhere. That is how a free market works. That is where tariffs can work well.



There is an economics lesson called the broken window fallacy - I taught it to my kids in home school, using Henry Hazlitt's book Economics in One Lesson. It's also called the Lost Opportunity Cost. It's an invisible cost. It's used to argue against high taxes and for limited govt. (Reagan used it)

When a window is broken, the homeowner has to go out and get the glass people to replace the window. That benefits the window people. It looks like the rock thru the window actually improved the local economy as it increased the glass man's business. He pays taxes and everyone is happy.

When the homeowner pays for the window, he can't afford to spend his money at the hardware store or invest in his business or loan it to the bank at interest.

That broken window cost everyone down the line. The broken window doesn't lead to greater investment and greater returns. It is a net loss to the economy as a whole.

The point of that broken window fallacy is that when money is taken out of circulation for crime, govt fees, extra taxes (and a tariff is a tax, paid by the end consumer) or other stuff that isn't directly related to building wealth, it's unavailable.

Money that used to go into circulation whether investing, loans, building business (creating jobs) has to now go to paying a tariff on top of the necessary item.

It's a net drag on the economic engine.

Money that used to go to the grocery store, or the hardware store is now paid as a tax, taking that money out of use in that persons budget. Less money to spend on fewer things. Economic recession begins as the consumer stops spending on goods, and instead, pays more taxes.



This is why Reagan went to tax reduction and trying to reduce the size of govt rather than impose tariffs. He stimulated the economy by reducing govt and tax burdens. More money quickly fueled a booming economy.




The business suffers as they force their customer to pay the tariff, so they have less business as the customer has limits on what they can afford. Now they are also being asked by the govt to invest the business's own money to set up their factory all over again- at their expense, back on home soil, paying higher local wages to produce their item. That item must be priced higher, because it's now produced on home soil for more cost. That business still competes on the world stage but their costs just skyrocketed. Their profits are falling.

The money that belongs to that business is being pulled out of circulation, and it's not being done for business reasons, but for govt regulation. So he does a wait and see, because this is by executive order, therefore in 4 years he might not have to do this. Why pay good money for something that he won't need in 4 years? It may be cheaper just to go out of business and take his profits elsewhere or just wait till another President is in office.

Tariffs bite into the whole supply chain. As each country adds tariffs to each raw item coming in, the cost of anything they produce and send on to other countries is higher. As each part of the chain gets hit, the costs begin to snowball. That is the cost of tariffs on the world wide supply chain. But it bites into home grown production badly especially when local producers need parts or equipment from elsewhere.

The Boeing factory is a good example. Mentour Pilot here explains how the supply chain and snowballing costs impact production and sales for Boeing, but the knock on effect gets passed down as higher ticket prices for the consumer. - YouTube Until every single component in a Boeing plane is produced within the States, they will have tariffs to pay on multiple components.

The economy world wide contracts. That is an adjustment and it will be a hardship for a time. The only way this pays off is if it becomes permanent, and if the tariffs end up being a smaller fixed cost. Business can absorb a 5-10% tariff, if they can turn around and pass that cost onto the consumer, and if they get rebates and incentives from govt to help offset the costs of building a factory on home soil. (more tax dollars at work).




What this is doing is taking money out of circulation, out of the hands of businesses into the govt as a tax and now govt bureaucrats are choosing how much money to take from the business, and decide where it is spent as it enters the govt coffers.

That is how communists and socialists work. As Margaret Thatcher used to say, Socialism works till you run out of other people's money. When the govt runs your business it tends to run it into the ground.

Look why these businesses moved offshore in the first place. High taxes, Union demands that got too much, expensive environmental regulations and increasing local taxes and regs that stopped the business from making a profit.

Tariffs that punish them for doing business offshore may not be enough to persuade them home. If they do come home, they will need to be sure that investment pays off.




It's an interesting experiment. I hope it works.

I remember Reagan fired all the Air Traffic Controllers, and that worked. (hard on the ATCs of that time- but their stupid union went toe to toe with Reagan)

His reduction of income tax singlehandedly pulled the US out of the bad years of the 70's.

Reaganomics became a word. It benefited the USA down thru the Bush Jr years, only fizzling out under constant debt pressure from presidents after him.

He defeated the Soviet Union by forcing them to match his spending on Star Wars and other expensive arms races stuff. They went bankrupt trying. Reagan won the cold war. His tax reductions paid off so well he could afford Star Wars. The Soviets who taxed the daylights out of their over regulated economy went bust.




Reagan had a very different view of tariffs - he was against them- for good historical reasons such as the Smoot Hawley tariffs of the 30's that made the Great Depression worse.

--yet this isn't 1980 anymore nor is it 1929. It does seem like about every 50 years we have some kind of a crash and reset happen though. One is coming.

To say we could stay at the status we've enjoyed for the past 40 years since Reagan bought us all some time would be to ignore reality.

We can and will get thru by relying on God.



When times are good people just want to keep the party going. When the party stops, we have to face reality again. Bills need to be paid. Markets that went up must come down. Cars we could afford, a lifestyle we could afford in the Roaring 20s were lost in the Dirty 30s.

This is the time to spread the gospel because looking at prophecy the closer we get to the OWG of the end times, the more things have to change to allow that system to arrive. Those changes might be very unpleasant. But God is still in charge and we can trust Him.

It's not the end of the world. Not till after the Rapture. Till then we focus on the gospel getting out. While it is yet day, because night comes when no man can work.

 

[TCC]

The Tariff Act of 1789, immediately following the Constitution, almost wholly financed the federal government created by that magnificent document, while also keeping it small enough so that it would not balloon in size the way that it did once income taxes were introduced during the Civil War, the Progressive Era, and catastrophically during the New Deal and Great Society.

Without tariffs, there would have been no Constitution and no United States of America.

The economic imbalance between America and Britain had been one of the foundational causes of the American Revolution, but simply pushing British governors and armies out of the Colonies had not actually changed the imbalance in trade or the ability of the British to set all the rules. As long as the British government had the ability to set a unified economic policy while the American Colonies were a mass of widely varying rules with states selling out each other, America might be legally independent, but would never be economically independent.

Madison’s greatest tariff challenge came after the War of 1812. The Father of the Constitution had been forced to flee the nation’s capital during the British assault. In a haunting recreation of the way the Founding Fathers had been forced to flee during the American Revolution, the president found a horse and huddled in a country house trapped by the storm. While the White House was burned, Madison and the country survived.

But the war still wasn’t over.

The British, having once again failed to conquer America by force, turned back to economic warfare, dumping large amounts of products at low prices in the United States in order to cripple its already shaky manufacturing whose poor state had been credited with the country’s near defeat. The growing industrialization of warfare had already made it obvious that wars would not be won by courageous charges or compelling rhetoric, but by factories like the ones that would determine the outcome of the future Civil War, not to mention the coming two world wars.

If America could not maintain an independent industry, then it would also have no future.

Madison, like other Founding Fathers, also understood that tariffs were not just a means of economic warfare or a scheme to finance the government, but also a means of building up American industries. And his Tariff of 1816 is regarded as the first true ‘protectionist’ tariff.

The British had wanted to bury American industry under a flood of cheap imports, instead it was they who were forced to rethink their economic policies. Less than a decade after, the British Parliament passed the Reciprocity of Duties Act. The United States had used tariffs to create mutual trade agreements with other nations making America less dependent on British trade. The road to improving America’s balance of economic power with Britain remained a very long one, but it was tariffs that slowly forced British concessions for American trade from the West Indies to Manchester.

American political leaders and presidents had attempted to convince Britain along with other nations of the moral and economic virtues of free trade only to get nowhere. British thinkers could articulate those virtues better than we could. Practicing them was another matter. What did work was the strategic use of trade barriers to build relationships from a position of strength.

And that is what President Trump is trying to do.

Read More...https://www.frontpagemag.com/the-father-of-the-constitution-was-also-the-father-of-tariffs/

It is my personal belief that the US Constitution is a huge part of end times (on the age of grace side). In my view, the US Constitution will likely be the backbone infrastructure upheld in free trade representation throughout the world. If this sounds like the opposite of the tribulation, it is. It would be, i mean. So yeah i throw that out there in a day and time when the watcher ideas are on how the beast system clamps down on us dragging us kicking and screaming into the tribulation. Meanwhile, my view is sunglasses, a lemonade sipping on the beach shoreline, and world free trade like never seen before. Even though its a lot of gravy, I would still see this as an end time motif. Just borrow the Antichrist false peace and safety, move it to the age of grace, slap a "its real not false" label on it. Wind it up. Set it on the table. Let it walk out its course. With no AC attached to it. That does not seem to be on anyone's radar. But I will recklessly place it upon mine...lol. But as real as it will be (in my perspective), it is not something meant to be a super happy ending where we ride off into the sunset together. Rather, quite the opposite I imagine. So I'd just say while the luxury liner pulls into port, ride with a sober mind. For in this way (although i believe this passage is for the literal physical return of Christ), for like the days of Noah there will be marrying and given in marriage. There will be high functioning commerce. At its core, I believe the US Constitution for age of grace body odor. Ladies and gentlemen, free market trade extraordinaire. Brought to you in the age of grace by the US Constitution backbone. "If" it goes this way, yeah, i'd say the end will be very near. Thanks for the awesome article. Amen. Blessings.