One can agree the founders intended political leaders to craft a national economic and industrial policy. The Trump tariff regime is certainly not that. At best the administration claims the tariffs are meant to win unfettered access to foreign markets like China and in the meantime are raising revenue for the treasury. In reality, they are tyrannical taxes placed on American consumers and producers alike at the whim of a questionable professor posing as a trade advisor. These tariffs/taxes are placed without legislation and the debate and deliberations envisioned by the founders to inform and grant legitimacy to the taxes. There is no rhyme nor reason for the tariffs other than preferred industrial cronies, and exemptions are granted based on lobbying and currying favor with the powers that be.
This is not an economic policy nor a national industrial policy. Certainly not one implemented through the thoughtful crafting of elected officials as envisioned by the Constitution. The facts are clear: America can't produce many of the products we import because we no longer possess the productive capacity to do so.
A proper industrial and economic policy would tariff all products (no exclusions) from designated economic competitors at the same rate and in an amount to lower the low wage-based comparative advantage of that competitor. It would also reward producers for buying American-made capital equipment used here in America. Investment tax credits for capital equipment made in America will increase productive capacity and accelerate the multiplier effect and velocity of exchange. All this can happen while keeping a lid on inflation by pushing the supply curve down and to the right. Tariffs on the other hand create a diminution in the multiplier effect, slow velocity, and increase prices. In addition they motivate retaliation and hence damage our exporters. The results are clear in the data: manufacturing started shrinking in America in 2018, and that trend continued in 2019, before the pandemic hit.
We can look at one industry to prove out the benefits of investment tax credits. The electric car industry is booming here in the U.S. Tesla is growing at a rapid rate, and its cars are selling. Why? Buyers receive a tax credit. Why don't buyers of American-made capital equipment used here in the U.S. receive the same type and amount of credit? American-made CNC machines, stamping machines, 3D printers, laser printers, lathes, drills, conveyor belts, sewing machines, hammers, trucks, train cars, buses, coffee makers, radiology equipment, etc., should all have the same tax credit for those who purchase them and use them here in the U.S.
Think about it, why couldn't we produce the PPE we needed here in the U.S. when needed? Why don't we produce medicine here in the U.S.? Name the product lost to offshore low-wage competitors? We no longer have the productive capacity to produce it here in the U.S. Think about the multiplier effect if American manufacturers are making capital equipment for American manufacturers and businesses.
In addition to investment tax credits for American-made capital equipment used in America, we need investment tax credits for Science, Technology, Engineering, and Math (STEM) training and education programs for Americans. We not only need to produce here, we need to create and program here. American companies should be given tax credits for setting up STEM training programs for the current work force and also partnering with inner-city schools and colleges for setting up STEM education programs for students. We do not need to import software engineers, programmers, mathematicians, etc, if we train them here in America. There is nothing that says inner-city children cannot grow up to be the next generation of American software and engineering professionals.
Arbitrary and capricious tariffs are not policy, won't solve our productive capacity deficit, and slow the overall economy. Investment tax credits for American-made CAP EX and STEM training and education is an American economic and industrial policy engineered through legislative tax policy and will move the needle positively on all economic and political fronts immediately. —Ken G., Colorado
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