President-elect Donald Trump’s main campaign promise was to make America great again. I assume he means to return the U.S. to the post-WWII years when Germany, Japan, China, and most of Europe were economically destitute. At that time the U.S. reigned supreme.
Trump says he will fulfill his promise by imposing tariffs on our foreign trading partners, lowering income taxes on corporations and the wealthy, and deregulating U.S. businesses. Unfortunately, these actions will only hasten the U.S.’s slide into becoming another has-been world power like Great Britain and France.
What is a tariff? It is a tax on the products imported from a foreign country. The foreign producer adds the tax to the price he normally charges, and ipso facto, you and I end up paying the higher price.
However, it doesn’t end there. The foreign country is likely to retaliate by placing its own tariff on goods flowing from the U.S. This action raises the price of U.S.-made products, and puts them at a competitive price disadvantage to similar products from other counties. The results are fewer American sales, lower production, and fewer U.S. jobs.
It might be argued that tariffs protect U.S. industries. What U.S. industries? The United States ceased being the “workshop of the world” eons ago. These days, the Japanese are buying the iconic United States Steel Corporation, and many U.S. industries have fled to lower wage countries.
The U.S. currently has a debt of approximately $36 trillion. This means the U.S. is spending $36T more than it is taking in as taxes. This debt is financed by selling Treasury bills, notes, and bonds to U.S. citizens and foreign countries.
This debt will be greatly increased if Trump reduces the taxes on corporations and wealthy Americans. Currently there are serious concerns about the possibility of the U.S. defaulting on its enormous debt (possibly as early as 2025). Should investors smell a default coming they would cease purchasing Treasuries, and the U.S. would suffer a financial collapse.
No business likes to be regulated, but U.S. history has shown the dire social consequences of unbridled capitalism.
One can only conclude that the President-elect’s promise is a chimera, like his promise to build a border wall and make Mexico pay for it. The train has already left the station, and Trump cannot bring it back.
Al Popowits
River Forest