Comment by svara
7 days ago
It's true that free trade is hugely beneficial to the US economy as a whole, particularly with the USD being the reserve currency.
The flow of goods is balanced by a flow of US dollars to other countries, which are ultimately cycled back into the US financial system - enabling budget deficits and an abundance of capital to invest in high growth industries.
The flip side of this is that it also drives inequality - the upside of this system is felt by the entrepreneurs, investors and high-skill employees in tech and finance, while the downside is concentrated with low-skill workers whose jobs are offshored to lower wage countries.
The obvious solution is not to hurt the economy as a whole, but rather for the government to lower the cost of high-quality education, build out social systems, and invest into onshoring select strategic industries by raising taxes at the high end.
As such, this administration's policies are foolish, but many on this very site would need to give up a little bit of their privilege to reduce the pain felt by many of their fellow citizens.
That is something that in the current American political climate seems a nearly impossible sell.
> but many on this very site would need to give up a little bit of their privilege to reduce the pain felt by many of their fellow citizens.
Agreed. However, by imposing tariffs it is not the privileged who are going to be affected the most. The pain is felt most by the low-skill workers you mentioned earlier.
If the solution was instead along the lines of changing tax-brackets to tax the 'privileged' more, that might have better addressed the problem you mention in the beginning.
Not only are the poor going to bear the brunt of these tariffs, but this has been tried multiple times before, and failed. As in, catastrophic failure.
"Those who don't learn from history are doomed to repeat it"
People should check out all the tariff insanity before and during the period of The Great Depression. That includes the justifications given.
This is HN. Nobody here understands how "plastic crap from China" is what keeps poor people alive.
There are folks who earn $1000 per month who also occasionally want to buy a birthday gift for their nephew. I advise everyone to just occasionally go to a budget store and walk around looking at the customers.
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The older I get the more I appreciate that those proverbs aren't just rhetorical.
I always assumed people would learn from history, because everyone knows that proverb. And yet now as I'm pushing 40 it seems more a warning, people will refuse to learn from history, and they will repeat it. So be as prepared as you can.
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Yeah, isn't this just regressive taxation?
How much all the imports are realistically going to be made in the US?
If the tariffs remained in effect for three decades, or more, there may have been incentive to move manufacturing back to the US; however, with the changing of the guard on the regular, most companies are just going to ignore it for 3.5 more years and hope that someone stops this from continuing.
Because, if you think about it, it took decades to get us to where we are today and it'll take decades to reverse, even logistically. This is a bunch of stupidity and meaningless saber rattling that will do nothing but hurt everyone except the extremely wealthy who can afford the additional taxation on the consumer side because the Republicans will further reduce the taxation on the income side.
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Somewhat yes. But more precisely it is a reallocation from things we have the best comparative advantage to things where we have less comparative advantage. The main effect is to make almost everyone poorer.
> How much all the imports are realistically going to be made in the US?
For some of the hardest hit locations, very little. The US would have to invade and claim other countries to start producing, for instance, vanilla or coffee (the US essentially doesn't produce vanilla, and for coffee we grow less than a percent of what we consume). But Madagascar got hit with 47% tariffs.
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Even at this tariff rate, it's unlikely US manufacturing will compete on price with china, etc. So likely won't help US business, and will crush lower/middle class people. This is true, imo, even after whatever long ramp up period companies need to start manufacturing here.
Yes it is regressive taxation. It can't be judged in isolation without considering how that revenue will be spent. If that revenue went into massive public works and social programs the stimulus could increase consumer spending which in combinations with tariffs might possibly benefit US business and jobs (gut feeling, not an economist) though perhaps the overall economy might still suffer. Clearly that isn't the plan though.
If it funds tax cuts for the extremely wealthy then potentially its going to be a colossal shit show.
Meanwhile countries are raising barriers against US exports and those losses will need to be made up with increased domestic demand. It is a very brave experiment.
Look, this is basic economic theory. The kinds of taxes you levy alter primary behavior. You tax the things you don’t want and don’t tax the things you want. So looking at incidence of taxation (who pays the tax) isn’t enough. You need to look at how taxes alter economic incentives.
It is to be seen. Capitalists are the closest thing we have to rational economic agents. If there is a buck to be made in American manufacturing then that buck will be made.
My layman concern though is that these tariffs are not going to be stable enough to convince daddy warbucks to build a $10m factory.
By low-skilled workers do you mean the working class in general? If so it is my understanding that the overall goal is to help them at the same time as the privileged by shifting taxes at the same time as tariffs start to come down to create a re-balance of sorts in theory. Here [1] is a quick interview of Treasury Secretary Bessent by CNN Kaitlan Collins that I think covers this idea at least a little bit. I am curious to see how this plays out in practice. It's explained a little more in depth here [2] including how this was done in the past. I know videos are an unpopular medium on HN but I believe they are both worth the time to watch.
[1] - https://www.youtube.com/watch?v=i8WWvBEiFvE [video][10 mins][cnn interview]
[2] - https://www.youtube.com/watch?v=1ts5wJ6OfzA [video][24 mins]
How can a lack of tariffs AND the presence of tariffs both hurt low skill workers. Secondly why do all of these countries have tariffs if they are so bad for the economy.
Because tariffs can be applied on specific goods rather than the current blanket tariffs.
i.e. You could place a tariff on steel to ensure local manufactures use American steel while placing a tariff that includes cocoa does not necessarily mean American chocolate producers can buy more from American cocoa producers so it only injures the local chocolate producers (and downstream consumers) without protecting or improving another local industry.
You could still argue that the steel tariff is not a net positive but at least the positives and negatives of tariffs are arguable.
To your second question three (inexhaustive) possible reasons are that the industry has large political sway, or it's part of a plan to stop the quick collapse of an industry while the economy develops other industries, or it's a defense against the artificial short term lowering of external prices (i.e. foreign government subsidies either to grow an industry in their country or to destroy the industry in other countries).
Taxing the rich is wishful thinking. They don't just give up wealth. They will simply look at it as an additional cost and hike the prices of their products up causing more inflation and that means even more trade deficit.
If companies could hike up their prices and still get consumers to pay them they'd already have done it. In fact, companies are constantly increasing prices as high as they possibly can up to the point where sales suffer.
They've taken advantage of recent events to prevent customers from feeling too ripped off though. When covid happened there were legit supply chain issues but even once they let up, and there were warehouse shortages because companies had so much unsold inventory, the companies continued to artificially restrict supply and blame the pandemic for higher prices.
Egg producers were busted colluding to inflate prices far higher than normal using the excuse of "bird flu" even as the largest supplier of eggs in the nation wasn't impacted at all by it (that's less of an excuse this time around though) and "inflation" is the new boogeyman companies are using to set expectations with consumers so that they can deflect blame for overcharging them, but even that only works for so long.
Nobody is going to pay $30 for a happymeal while their wages stagnate and their real earnings decline year after year.
Taxing the rich works just fine. We know it does because we used to actually do it. They'll spend billions trying to convince you that taking taxes from them is impossible and not worth trying tho. Why wouldn't they? That tactic has worked for them for a long time. Don't fall for it.
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> Agreed. However, by imposing tariffs it is not the privileged who are going to be affected the most.
I thought the idea was that the billionaires would buy up all the crashed stocks then suddenly the tariffs would be lifted so that they can sell them off as soon as they recover. If so, the privileged will be affected the most but only in terms of how much money they'll make while everyone else suffers in the meantime.
I never really understood this argument. The billionaires wealth is mostly in stock. In a crash like this their wealth goes down 10% like of all us. They can buy assets on the dip, but it will only regain that 10% they lost.
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Nobody has faith in the governments ability to put that money to good use. The US gov uses significant amounts of its budget to fund weapon development, promote weapon sales, change unfriendly foreign governments, support friendly foreign governments, and genocide troublesome foreign populations. Who will support raising more taxes to maintain and expand such efforts?
Offhand, I'm unaware of where to even look to get an easy to digest version of 'where tax dollars go'. Would the GAO make such a report? Something for Congress otherwise? Would there be a classified and an public version?
Even better would be a tool that, E.G. with your IRS filing number, shows how much 'you' paid in, breaks down where that went, and shows how 'you' compare to other areas.
Such tools and reports would cost money, but making them is practically an audit anyway which is a good use of resources in a bureaucracy (part of the self-calibration system).
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Letting billionaires hoard all the money has gotten us to where we are today. It seems worse than government mismanaging the budget. Was that concern also there in the 50s and 60s when the wealthy was taxed at a substantial higher rate? I don't believe so. It all seems to point at the failure of trickled down economics of Reagan.
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> However, by imposing tariffs it is not the privileged who are going to be affected the most. The pain is felt most by the low-skill workers you mentioned earlier.
I don't think this is necessarily true. 1 day into tariffs and things are probably the same for the low-skill workers. So far, the stockholders are the ones taking a beating. Sure, that includes some low income retirees, but for the working poor, I would bet that proportionally they consume fewer foreign made goods. They're not drinking imported booze.
Everything at Walmart is about to be 34% more expensive but you think the rich are hurt more than the poor?
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Yes! "Trade Wars are Class Wars" by Klein & Pettis is the book to read if you want to hear actual economists with actual data talk about this.
For what it's worth Pettis thinks tariffs would be beneficial for the American economy: https://www.foreignaffairs.com/united-states/how-tariffs-can...
Archive: https://archive.ph/2025.04.07-072352/https://www.foreignaffa...
I read this and I was quite disappointed that he didn’t talk about labor costs and other comparative advantages for labor-heavy manufacturing to be in a different situation trade market-wise than it was in the 1930s.
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Stellar book. Can't recommend it enough. Wanted to chime in on how good this book is.
I just downloaded this and listened to it for the past 2 hours, this is a fantastic book. Thanks for the rec guys!
I purchased this book after seeing all of these glowing reviews for it.
> the upside of this system is felt by the entrepreneurs, investors and high-skill employees in tech and finance, while the downside is concentrated with low-skill workers whose jobs are offshored to lower wage countries.
This is true only if we impose barriers to geographic mobility, which we do via artificial scarcity of housing in our major cities.
If we produced housing like we did cars, all the "low-skill" people would be able to move to the city and find a job in the many other services that require human labor.
> the government to lower the cost of high-quality education, build out social systems, and invest into onshoring select strategic industries by raising taxes at the high end.
We don't need more high-quality education nor do we need to onshore. We need to deregulate the housing market, we make it easier to migrate to the US (funny enough, yes that would help with inequality). And I do agree we need better social systems.
There is no way to frame this admin's policies that makes it look reasonable. It's a Crony Clown Club show.
all the "low-skill" people would be able to move to the city and find a job
That this doesn't work is self-evident. Cities are currently filled with low skilled people. The vast majority of whom find no employment or employment in illegal activities.
Also:
We don't need more high-quality education
The idea that the world, and the US in particular, has no need for more and better education is laughable. Considering the fact that a lack of education is, arguably, what got the US into the current situation in the first place.
Evidence that the "vast majority" of low skilled people in cities find "no employment or employment in illegal activities"?
> If we produced housing like we did cars, all the "low-skill" people would be able to move to the city and find a job in the many other services that require human labor.
Why would they want to do that? Their priorities are myriad, but raising a family, having a degree of autonomy and space to themselves, and remaining a part of their community are all generally on the list.
What’s generally not on the list is living in a tiny rabbit hutch, owning nothing, working a dead-end service job, trying to raise a family in a city (or just not trying at all), and paying a higher price for the privilege.
Because that’s where the money is. The world over people have exhibited their revealed preferences for living in a city, as everywhere continues to urbanize
> The obvious solution is not to hurt the economy as a whole, but rather for the government to lower the cost of high-quality education, build out social systems, and invest into onshoring select strategic industries by raising taxes at the high end.
Like... Scandinavia?
Yes.
Scandinavia is the gold standard for liberals.
Unless you are talking about immigration, and then no one ever heard of them.
Scandinavia has its problems too, but they're doing a lot better than we are in many measures that aren't "number of billionaires getting richer while the rest of the population gets poorer every year."
People there are happier, healthier, and better educated than they are here.
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As an example, yes.
Scandinavia is using oil and gas reserves as a captive tax base. It doesn't really generalize to markets where capital is mobile.
That is only Norway. Maybe a little bit of Denmark, but Denmark is not considered an oil economy.
And I don't know what you mean with "captive tax base" but Norway just piles up the wealth they are too afraid to use it since it will increase the inflation.
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That's just Norway.
> It's true that free trade is hugely beneficial to the US economy as a whole, particularly with the USD being the reserve currency.
It's true that free trade is hugely beneficial to large cap U.S. companies and their shareholders.
If you are U.S. worker without a lot of equity in the market all you notice is that your job gets outsourced.
This “free money” also inflates housing prices. It’s one application of “trickle down economics” that works; except it’s housing prices.
Even for highly paid Silicon Valley engineers what does it matter if much of that money goes right back to landlords?
what you're saying in short is that the US economy has changed from Manufacture-based to Service-based, just like China.
People don't realize this but China is moving toward Service-based, naturally, as they raised their standard of living, thus education.
What's missing is not raising tax on Income but taxing Wealth: the super rich has their wealth sitting and growing unproductively (house appreciating is not productive, buying farm lands and rent it to other farmer isn't productive). Holding Limited version of a Ferrari isn't productive. Feel free to find other Assets.
Once the super rich completed their journey in this world, they will inherit billions to their kids, whose productivity output does not match the wealth they inherited, again, not productive.
Tax their Wealth.
Even if this were implemented, any country taxing wealth would see a flight of capital to other countries not taxing it.
Good, I'll help you pack your factory into your suitcase.
The US wouldn't as it taxes global income.
More generally, you'd probably get the OECD together and make a deal if you wanted to do this.
Not many billionaires will move to the Congo, regardless of how much they are taxed.
So? Less capital chasing after housing means housing prices fall. If the capital was not destined to be used in the first place, then it only serves to inflate the economy
The other countries will bear inequality and servitude.
Let them swallow that pill.
The rich can’t bring their assets without divesting and get taxed first.
Can you imagine if someone like Elon Musk got wealth taxed at 75% of his $400Bn?
He’s still a billionaires and USA coffers will increase by $300Bn.
He can’t replicate his success outside USA because USA has the market and the appetite to spend.
You wanna cut income tax? Get Wealth Tax in place. Not Tariffs and cutting Govt. That’s billionaires playbook.
> The obvious solution is not to hurt the economy as a whole, but rather for the government to lower the cost of high-quality education, build out social systems, and invest into onshoring select strategic industries by raising taxes at the high end.
You are assuming that this administration has the same goals as you, just different ("foolish") methods of arriving there. I'd posit that they have very different goals that these methods are solving for.
This is a regressive tax that hurts low skill and low wage workers proportionately more since basic necessities of life are going to increase in price - it will be a much larger share of wallet than rich. This will not materially change purchasing behavior of very rich (save maybe waiting to buy a car due to increased pricecs)
It would be beneficial to increase taxes on the massive service economy and use the proceeds to subsidize lower wage industries.
In trumps first term after tariffs affected farmers, they had to subisidize them to keep them afloat. It didn't quite work the way it was intended. The trade war relief program in the first term spent $30bn keeping farmers afloat.
As a highly skilled and comparatively highly paid worker, I feel it is outrageous to suggest that I am within the class that needs to give up any reputed "wealth" when I am nowhere near the 1% who hold more than 50% of it. Such a claim just contributes to the wealth making of the 1% misers even more. Class warfare! I have already had to give up significant amounts of college and retirement savings from these tariffs.
You're arguing from a steady state. In point of fact the pain of the at-this-point-seemingly-inevitable recession is absolutely going to be concentrated on the working class. Those of us with savings and work flexibility will do just fine.
Even someone making a first principles argument for a revision of US trade policy should agree that this is insane.
The real pain will hit the working class harder, but the nominal pain will hit the capital class harder. Historically, this is how inequality unwinds. See: recessions, World War II. Let's hope to god that this is "just" a recession and doesn't cook into World War III.
The current spending bill has a 4.5T giveaway to corps and the ultra rich. The goal is to drive prices to the floor and then buy everything up.
What's a 50% drop in value to a billionaire? Most of them would still be a billionaire and the ones that fall from that group still have more money than they could ever spend. No wealthy person will truly feel what's going on. They'll still vacation and eat their caviar. Caricatures aside, it's absurd to compare someone stock sheet numbers going down with people not able to find medical care or feed themselves.
Definitely looks like an intentional precursor to WW3.
- Threats of annexations - Existing conflicts in North America, Middle East, Europe and Asia. (whats up with South America?) - Mass unemployment and poverty in US freeing up able bodied people for some soldiering - Right wing blowhards everywhere
Just crazy that this is essentially because rich people dont want to pay some debts, and some crazy russian guy's ego
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I think my comment is entirely compatible with what you said, no?
its also assuming there is any plan here do get somewhere, they just asked chatgpt for number, it spewed them out and those became the final numbers.
there's no plan for anything here.
> The obvious solution is... for the government to lower the cost of high-quality education
Not everyone is smart enough to land in the professional class. The US does its young population an enormous disservice by pushing low academic performers to go to college. There needs to be, somehow, a way for people to make a living with their hands, because for some people, that is genuinely all they are capable of.
> ... build out social systems...
The way you build out the social system is by enabling people in the working class to find genuine work that produces value, not some ditch-digging make-work government program. You don't take those jobs away by offshoring them.
I'm not saying I'm against offshoring in general or that I support Trump's tariffs - I don't. But it's not exactly controversial to point out that, since the end of the Cold War, the US prioritized the recommendations of economists over social cohesion and socially harmonious policy. A lot of people were thrown out of work and were left to fend for themselves. Many of them ended up as victims of the opioid epidemic. I'm not convinced that the prior system was completely peaches as cream.
> by enabling people in the working class to find genuine work that produces value, not some ditch-digging make-work government program
Like building out clean energy infrastructure?
Modern "ditch digging government programs" aren't necessarily low-skill. Even at the time, the new deal government programs were massively beneficial for society while also providing jobs for folks who needed it, at reasonable wages. Let's not shit on good government programs just because the right has been feeding us propaganda demonizing it for decades.
Building out clean energy infrastructure provides value. That's perfectly fine. There is plenty of need for hands to maintain American road infrastructure that is falling apart and build new infrastructure like high-speed intercity rail and more subway lines to help support additional population growth.
The reference is to how a government can pay people to literally dig ditches then refill them. This nominally increases GDP (due to additional government expenditure) but it does not produce value and, more importantly, does not give people the dignity they would ordinarily achieve through their labor because they know such work is bullshit.
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What happened to the information economy? And getting everyone trained on that type of skills? Nowadays education seems to be frowned upon by those in charge.
Edit: looks like this is discussed in a sibling thread: https://news.ycombinator.com/item?id=43573036
The "move" from an agricultural economy to an industrial economy didn't end agriculture being a significant part of the national economy; agriculture just lost relative share of GDP. Similarly, the "move" to an information or services economy isn't necessarily going to eliminate either agricultural or industrial work. China, for example, has its tech giants (Tencent, Alibaba, etc.) but it also has vast industrial capacity (e.g. Shenzhen) and agricultural capacity (e.g. the largest pork production in the world). American education deciding to push children towards information-economy jobs that were a poor fit for their talents, neglecting classes like shop skills that were once common, was a mistake and certainly not inevitable.
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> As such, this administration's policies are foolish, but many on this very site would need to give up a little bit of their privilege to reduce the pain felt by many of their fellow citizens.
Very few people who work as full-time devs are so wealthy that they are totally insulated from general social decline.
Thanks for your comment, it explains why there seems to be a high degree of support for these measures in some quarters (was looking at the youtube comments to the liberation day speech) vs the consensus here at HN.
Let's suppose these policies are to the benefit of some Americans over other the benefit of other Americans. The open question now is: does it matter? does it really have an influence on the gross profit numbers? Will an isolationist foreign policy destroy the international order and how could this effect the US in return?
Tariffs will probably be bad, but on the other hand the old system didn't really work either in the long run. Perhaps he can bring some manufacturing back and I don't really believe consumer goods getting more expensive will be immediately felt. Could be wrong though.
Well, at least it might get interesting if you like crazy. I don't really believe those crying the loudest that they are particularly interested in combating inequality or are too interested in protecting low income people. Yes, maybe they need industries protected by tarrifs instead of cheap t-shirts. Maybe this perspective is rather stupid though. We will find out if that works or not. Economics projecting the next depression aren't really sources to trust either.
> The obvious solution is not to hurt the economy as a whole, but rather for the government to lower the cost of high-quality education
I'm always skeptical of the idea that we can just educate ourselves out of problems.
As I see it, that would only raise people's wage expectations which would make us even less competitive on a global market?
The need for blue collar workers doesn't just evaporate, and there's frankly only a finite demand for white collar workers. You give everyone expectations of a white collar job, and they end up working blue collar because there's no job for them, you're just setting society up for mass disappointment and resentment.
You give your average blue collar worker today a degree, are they actually more valuable to their current position? Probably not.
Your problem statement is missing "national security" angle. As I understand the current administration sees US de-industrialization as a threat to it and tariffs as a soution.
Yes! I've been consistently frustrated at both sides of the issue. It became salient for me when I read about how China had sanctioned three American drone manufacturers that were supplying Ukraine last year, and how it disrupted their supply chains and ultimately the war effort.
It is unacceptable for any other country to be able to do this to any part of the western-aligned military supply chain.
We needed a targeted policy -- I don't care about American cars except to the extent that those factories can be converted to aircraft and tank factories.
But the conversation has been frustratingly reduced to 'reshore low skill work' vs 'save my infinite trough of cheap plastic slop'.
I don't want to hear about tariffs bad, I want to hear about how subsidies are better or about how it doesn't matter anyway because of the structure of the Chinese economy (I saw it claimed without evidence that they depend on imports from places aligned with the west which is reassuring if substantiated).
There's an underlying issue everyone is dancing around.
I don't know why you are being down-voted, I think you raised some interesting points that add to the discussion.
National security / foreign interference hadn't occurred to me, and now I'm wondering what would happen to US economy and manufacturing if it was at war with China and or the EU over Taiwan and or Greenland.
How would US deal with Russian style sanctions? Can China simply ban all exports to the US?
In times of war, it probably is super important that a country and manufacture all essentials.
> I don't know why you are being down-voted
Just give it a few minutes to settle out. Sometimes people tap the downarrow by mistake, since it's 2mm away from the uparrow. It's not always a conspiracy :-)
If I were a third party downvoting my comment I would probably take issue with the characterization of the anti-tariff position as "save my infinite trough of plastic slop". Other countries do have highly skilled artisans. Tariffs are also considered bad on the merits (looking at it from a liberal [economically] world view). It's like vaccine skepticism to economists: an extremely low-status opinion for kooks and cranks. But I am open to being convinced on illiberal economics (this is not the same thing as saying I support it) because I consider military supply chain erosion a national emergency and I don't think "balloon the military budget even more with subsidies" is a politically viable position and "just build it in an allied country we now have to keep permapoor to make the economics work out" is cruel.
>We needed a targeted policy -
>But the conversation has been frustratingly reduced to 'reshore low skill work' vs 'save my infinite trough of cheap plastic slop'
The conversation has been reduced to that because this administration's tariffs are and have always been indiscriminate.
You bring up an interesting issue, but people aren't discussing it because it's orthogonal to what is currently happening.
You can’t make everyone above average.
> The obvious solution is not to hurt the economy as a whole, but rather for the government to lower the cost of high-quality education, build out social systems, and invest into onshoring select strategic industries by raising taxes at the high end.
You're proposing to tax an international supply chain. To tax something it has to be in your jurisdiction to begin with, and then you have several problems.
The most obvious of these is, what happens when the stuff just isn't there anymore? Suppose the US isn't competitive with China for manufacturing certain goods, e.g. because the US has a higher cost of living as a result of a purposeful housing shortage and then has higher labor costs, or for any other reason. So manufacturing moves to China, not just to sell to the US but also to sell to the domestic market in China and to Europe and India and the rest of the world. No part of those other transactions is in the US, so the US can't tax them and use the money to help the people in the US who used to be doing that manufacturing and selling those products to the rest of the world. Whereas if you sustain domestic manufacturing through some means then it exists and can make products to sell to the rest of the world because the fixed costs of establishing a manufacturing base can be covered by the domestic market and then it only has to compete in the international market on the basis of variable costs.
Next consider the industries where the US still makes stuff. You could tax those things because they're still in the US. But that makes the US less competitive in the global market for investment capital, which is highly mobile. If higher US taxes cause returns to be lower in the US than they are in other countries then investors go invest in the other countries instead, and then the thing stops being in the US. So that doesn't really work. You can see this in the case of e.g. Europe, which has even worse problems with the loss of manufacturing than the US.
Which leaves the activity where it's the other half of the transaction happening in the US, i.e. China is manufacturing something but the customer is in the US. That you could tax without a huge risk of capital flight, because companies can rarely change the location of their customers, but that still leaves you with two problems.
First, either of the countries participating in the transaction could levy the tax. In the case of China, then they can levy a tax (or some tax-equivalent) to only such an extent that it consumes the surplus in the transaction attributable to the competitive advantage of their country. China can do this because they have a lower cost of living etc., which doesn't work for the US. But because they do that, the US can't tax that portion of the surplus, which was the gain from moving manufacturing to China.
And second, a tax on imports is called a tariff. Which the US can impose to tax that portion of the transaction surplus that isn't attributable to the foreign country's cost advantage, i.e. the preexisting transaction surplus where it costs $8 to make something someone is willing to pay $10 for regardless of where it was made. But tariffs are the thing you don't like.
OR use borrowing (e.g. current account deficit). If government spending drives productivity growth then it’s a net positive?
OR tax wealth. If most return on international capital investment is being stored in the US, taxing this effectively taxes profits on international sales???
> OR use borrowing (e.g. current account deficit). If government spending drives productivity growth then it’s a net positive?
That's basically what already happens. The US has been running a huge deficit for a while now.
It also requires government spending to be the spending that drives productivity growth, which most of it isn't.
> OR tax wealth. If most return on international capital investment is being stored in the US, taxing this effectively taxes profits on international sales???
Why would they store the wealth in the US if the US had a wealth tax? One of the biggest problems with a wealth tax is that it has such a strong propensity to induce capital flight.
It's also not just a question of how you structure the tax. Wealth taxes are hard to avoid for things like real estate (can't move it), easy to avoid for things like factories or intellectual property (can easily move it), but the same is true for other taxes that apply to those things. It's easy to impose an income tax on rental income, so you don't need a wealth tax for that. The hard thing is how to impose any tax on all the money the Saudis have without causing them to just invest it in something else, possibly in some other jurisdiction.
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I mean , if money is going to go to the rich.
There is a simple mechanism to distribute the money from the rich back to middle class / poor.
Its called taxes.
Basically, Trump shouldn't have done tariff and instead just taxed the rich after a certain point.
Oh wait, I think that sounds familiar.
Of course I am not saying tax them 90% and of course, you might say that there are loopholes. How are we going to distribute money from stocks? And you are right. But the thing trump is doing isn't working or maybe its working as intended by trump being a chatgpt wrapper.
If even trump literally just sat and did nothing, it would have been more beneficial.
I mean, Europe also has a high tax rate, its not that bad to have a high tax rate if you genuinely want equality, though I presume nobody really wants that. And Lobbying is legal in america which really shocks me.
I had said it time and time again. Trust is like a glass ball,once broken it can't be recovered. I feel like people are however still in shock of that glass ball being fallen and are in disbelief, But you guys gotta know whom y'all elected is doing harm.
Polymarket and even goldman sachs etc. are predicting 60% chance of US recession
> for the government to lower the cost of high-quality education
Devils advocate point, and one nobody wants to talk about: what if everyone can't be a high-skill employee?
Imagine if the highest earning jobs required immense physical endurance and strength. Nobody would argue that everyone can do that. It would be obvious that only a subset of people are capable of doing those jobs. For some reason, with intellectual labor, we are able to pretend that there is no threshold and everyone can do it. It's an idea that makes people feel good but what if it's just not true? Can everyone be made above average in something with enough education?
If we're creating an economy where decent jobs only exist for people in the top ~20% of the ability curve, how do we handle that? How do we maintain a democracy? Sometimes people float the idea of UBI, but that could turn out extremely dystopian with a huge underclass of UBI-collecting people in a state of hopelessness and boredom. That doesn't work much better for democracy than a huge underclass of under-employed and unemployed people.
To make matters worse: the fact that our past strategy works so well for increasing GDP means it it tends to inflate assets, including things like housing prices. The end result is a country that looks, to more than half its inhabitants, like a vacation town where outside capital inflates the cost of everything way above what local wages can support. It might not be a coincidence that San Francisco, New York, and other capitals of high margin high skill industries have real estate prices that lock ordinary people out of even "starter homes."
I absolutely do not support Trump's execution here -- it's ham-fisted, reckless, and badly thought out. If we are exiting this neoliberal model, Trump's exit from it is a little bit like Biden's exit from Afghanistan. Still it is obvious to me that the current system is not working for more than half of Americans. It's fantastic for the top ~20% or so and leaves everyone else behind.
We can't keep doing that if we want a democracy. If we exclude 50-80% of the population from anything meaningful or any economic stability, we will get one of two things. Either we'll get the kind of totalitarian state that is required to maintain that kind of inequality in perpetuity, or we will get a string of revolutions or a failed state. People will not just sit around in hopelessness forever. Eventually they will be recruited by demagogues. Ironically Trump has been one of the most effective at this. I'm sure more will eventually show up though. There's a big market for them.
> If we're creating an economy where decent jobs only exist for people in the top ~20% of the ability curve, how do we handle that?
The most important thing here is to do something about the cost of living, i.e. the price of necessities.
Housing isn't inherently as expensive as it is in the US, it's made that way on purpose. Healthcare likewise. If you only make $25,000/year and housing is $20,000/year and healthcare is $12,500/year, you're screwed. If you only make $25,000/year and housing is $10,000/year and healthcare is $5000/year, you're not.
I’ve reflected that resource extraction jobs often end up in the high wage / low educational investment category, and I’ve wondered if that motivates the whole “annex Greenland” bit as much as “securing critical resources” does…
Lowering the cost of high-quality education makes it more accessible, which isn't the same thing as "accessible for all".
But lowering the cost of tuition also have positive effect on economy, because people who are starting their career will have more money roughly at the same age where they will want to spend more money. They are figuring their living situation, they are trying to figure out what independence means, a lot of people will want to start families at the first 10 years of their career.
If you paid your tuition fees for 15 years, then you most likely already figured where you live/had kids and the additional money will go into savings for retirement. It's will not be "buyer" money, that will go to pay for products and services, and so it wouldn't go towards someone's paycheck.
> Devils advocate point, and one nobody wants to talk about: what if everyone can't be a high-skill employee?
You still need education to become a nurse, caregiver, welder or kindergarten teacher. And the right subsidies (free education) allows people to make the switch.
Will the US be able to survive as a superpower while severely cutting down the top 20%'s standard of living? They could simply defect somewhere that offers them a similar position in society as the US, similar to what the US has done to the rest of the world.
> Devils advocate point, and one nobody wants to talk about: what if everyone can't be a high-skill employee?
Agree with this.
Also, what if there's just not a need for it?
Even if "everyone" in some abstract sense is capable of "high-skill" jobs, how many are really needed? Look at software jobs alone and the onslaught that is the current labor market.
I think there's nowhere near enough "work" ("real" or otherwise) to go around to maintain the level of employment necessary to support the population that we have at the costs that we have.
I don't think any sort of "UBI" (assuming you mean direct cash payments) is a realistic solution, either. People need to "work" in some organized fashion to avoid the common negative outcomes associated with "welfare" scenarios.
I legitimately, unironically, support the kinds of "fake" jobs that were prevalent in years' past (day in the life TikToks come to mind, Gov jobs where people send three emails a week, etc).
I guess in another sense I do support "UBI", as long as it's paired with the illusion of "work."
I understand this seems nonsensical, but just from practical experience it makes total sense to me.
Here's an example.
Years back I worked a software gig at a large non-"tech" F500 company. Much of the programming work there was extremely dull--occasional maintenance of large barely functional enterprise Java messes, writing a few SQL queries a week for wretched multi-table joins requiring all sorts of nasty casting and hacks as "normalization" was an alien concept to the original author and the like. Realistically, folks worked on this stuff perhaps 10 hours a week?
Anyway, I know a few people hit with a layoff that worked there a long time (decade+) and now they're back in the Thunderdome looking for work as "developers". The people in question are nearing retirement but presumably not there, for one reason or another.
Hows this going to work for them? I'm not denigrating them, but having worked with these folks, they're not going to be tearing into broken pipelines, adding React components, configuring Docker builds or whatever--there's a skill mismatch and the workload I've seen at roles lately is just so far beyond the pace, scope, and "scale" that there's no way they'd make it, if they can even get an interview at all.
In this example, would it be best to give them "UBI" payments, or some other slow near-sinecure where they have dignity?
Maybe I'm just soft.
> I don't think any sort of "UBI" (assuming you mean direct cash payments) is a realistic solution, either. People need to "work" in some organized fashion to avoid the common negative outcomes associated with "welfare" scenarios.
That's actually the point of a UBI.
The problem with existing welfare programs is that they're a poverty trap. If you have no job or a very low paying job, you get benefits. If you make any more money at all, you lose the benefits, and simultaneously you lose the time and expenses of taking the job. If that means you e.g. have to buy a car to go to work, taking a job causes you to lose money. Sometimes you lose money even before your working expenses because overlapping benefits phase outs can consume more than 100% of marginal income.
With a UBI, the amount you get is only the amount you need to avoid starvation and homelessness, but you get that amount unconditionally. If you can find any work at all, you get the UBI and your wages, instead of getting your wages instead of welfare programs. Which allows you to work, even if you're only qualified to do low paying jobs, without being put in a worse position than you'd have been if you just stayed on welfare.
I'm of a similar mindset, just look how many software adjacent roles are basically UBI already.
With DOGE the US seems to moving backwards, cutting down on gov busywork for what self-defeating purpose? They just end up flooding the market, or worse, sabotaging productive teams with their meetings and ceremonies.
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This is the kind of side debates you get by framing it as “low-skill” versus “high-skill”. Whether the “~20% of the ability” curve should help the poors from their apparent attraction to demagogues.
> Imagine if the highest earning jobs required immense physical endurance and strength. Nobody would argue that everyone can do that. It would be obvious that only a subset of people are capable of doing those jobs.
"pfff it's easy-peasy, just go attend a (literal) bootcamp, you'll be fine, anyone can do it"
----
> Still it is obvious to me that the current system is not working for more than half of Americans. It's fantastic for the top ~20% or so and leaves everyone else behind.
god yes
The elephant in the room here: there is no money for anyone not in the top20%, it all goes into their pockets and they just sit on it, leaving only scraps for everyone else, tax the rich, anyone with more than x% of the median amount of wealth should have everything above that taken away and redistributed to everyone, possibly by means such as UBI/welfare/etc!
But we ain't gonna get any of that without revolution. And honestly it feels like Trump's getting us closer and closer to the brink of that.
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Nope. It's true that free trade WAS hugely beneficial to the US economy as a whole. Now free trade is hurting USA economy and that's why USA play against the rules they were promoting for so long.
> Now free trade is hurting USA economy
Then why is the economy crashing under these new tariffs when it was recovering nicely just a few months ago?
Free trade is not hurting the economy. American domestic policy impacting the distribution of the produce of the economy is, even in times of strong aggregate economic performance, hurting the felt effects of the economy on large swathes of the population, but throwing up protectionist policies that collapse both the global and local production possibilities curves doesn't help that; it just shrinks the pie without doing anything to deal with the bad distribution which makes people feel like the pie is shrinking even when it is growing. The results you can expect from that should be obvious without experiencing them, but it looks like we are all going to learn about them through painful experience real soon now.
> Now free trade is hurting USA economy and that's why USA play against the rules they were promoting for so long.
Explain how is it hurting US economy?
> lower the cost of high-quality education
And how do you propose we do that? By giving schools even more money at taxpayer's expense?
> raising taxes at the high end
40.1% of US taxpayers on the low end of income distribution pay no income tax, 16.5% pay neither income nor payroll taxes. Top 1% pays 40.4% of all income tax (while holding about 30.8% of net worth, 13.8% of the total is held by top 0.1%). Top 1% (with the possible exception of a few billionaires) already pays through their nose.
Funding public universities and giving them the mission to keep tuition costs low. Public universities are capable of providing enormous value to students, but over the past two decades their funding has been substantially cut. The result is that those schools became more reliant on expensive out-of-state tuition, which in turn means competing with private institutions for students, which in turn means building more luxuries (awesome gyms) and not focusing on value for money.
So, giving even more taxpayer money to the education cartel, then. Got it. Good luck with that. Over the past several decades staffing in administrative positions has exponentially ballooned all across the education system, starting with grade schools, while academic metrics moved in the opposite direction. Now the question is, do we continue setting even more taxpayer money on fire, or is there a better way?
What people don't discuss about the taxation is that rich people will universally pundit, preach, undermine, subvert, and squirm out of any law to tax themselves more. If you are preaching more taxes thinking it will affect the politically well-connected, it will be unwound and castrated by the politically well-connected. Or just deflected into somebody else's responsibility.
In that case, someone else is going to be holding the bill that you might not have intended.
I hate discussion of percentages, because every percentage seems reasonable by itself. It's the summation of the percentages that politicians have no interest in discussing.
In fact, it should be a requirement of government to sum the percentages of federal,state,medicare,social security, sales, resort, fuel, local levies, internet sales into one effective percentage that a given citizen in a given city has to pay.
Has anyone calculated that number for themselves? I've been collecting all my transactions and taxes to figure out what percentage of my income actually goes to taxes.
==40.1% of US taxpayers on the low end of income distribution pay no income tax==
According to 2022 IRS data, average deductions for those who itemized totaled $43,686 in tax year 2022 [0]. The 2022 bottom two quintiles of income were under $44k [1]. That means in 2022 rich people AND poor people didn't pay income taxes on their first $45k of income. Is that unfair to rich people?
Worth noting, the 25 richest Americans paid an average effective tax rate of 13%, as of 2018 when IRS data was leaked [2].
==Top 1% (with the possible exception of a few billionaires) already pays through their nose.==
"While average effective tax rates barely changed in the US from 1945 to 2015, the average tax rates of high-income households fell sharply—from about 50 percent to 25 percent for the highest income 0.01 percent and from about 40 percent to about 25 percent for the top 1 percent." [3]
If the average effective rate hasn't changed, but the effective rate paid by the top 1% has fallen by ~40%, how is the difference made up? The 99% pay more.
[0] https://www.pgpf.org/article/7-key-charts-on-tax-breaks/
[1] https://data.census.gov/table/ACSDT1Y2022.B19081?q=income+qu...
[2] https://www.propublica.org/article/you-may-be-paying-a-highe...
[3] https://taxpolicycenter.org/taxvox/effective-income-tax-rate...
this glib analysis neglects the part where decades of plans and budgets have been addressing " build out social systems" while simultaneously building crony networks of political appointees, guarding the hen house. Short term pain is loudly announced for the purpose of defeating the political opponent, not addressing the long standing inefficiencies in a swollen and obese wealth exchange centered in the USA.
tons of cynical one-liners from partisans drown out efforts to really examine the impacts over medium and long term. A horrible problem with this move is that it is not entirely wrong from a fundamentals point of view? It certainly creates winners and losers, no question about it.
The political class and plutocrats always wins regardless of the election outcome. The two party system guarantees they come out unscathed regardless of their jousting.
So basically: the solution is "do more of the same".
I suppose that's the point, people were tired of hearing the same old crap by leftists who fancy themselves as smarter, as their quality of life continued to drop, so they figured "screw it let's try the opposite".
Guess we'll see where it lands.
The deficit is 2 trillion.
Income taxes on individuals are 2.4 trillion.
How much do you expect to raise taxes to cover that gap? You double my taxes and I’m in the welfare line.
Further, and this is not referenced enough - the US must rollover ~9 trillion in treasuries this year. The lower the interest rate to do that, the better. Otherwise it increase the deficit even more.
The only way this ends is one of two paths - a path similar to what we are on; default.
We may not like this one, but default is world destroying because of the broad use of the Dollar around the globe.
The deficit is not in fact 2 trillion. Source: https://www.bea.gov/system/files/trad0225.png (and many other official documents)
Also, this is a false dichotomy.
In CBO’s projections, the federal budget deficit in fiscal year 2025 is $1.9 trillion. Adjusted to exclude the effects of shifts in the timing of certain payments, the deficit grows to $2.7 trillion by 2035. It amounts to 6.2 percent of gross domestic product (GDP) in 2025 and drops to 5.2 percent by 2027 as revenues increase faster than outlays
https://www.cbo.gov/publication/60870
IMO, 5%+ percent of gross domestic product (GDP) in a country with massive trade deficits is not sustainable.
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I think they meant budget deficit, whereas you refer to trade deficit.
That graph shows a 130B monthly deficit. So maybe not 2B but still 1.5B on a yearly basis.
I believe the OP was talking about the fiscal deficit, your chart shows the trade deficit.
The current administration has no interest in reducing the fiscal deficit. Their expressed policies will make it larger.
Taxes should be raised on the rich. Elon Musk alone is worth $330 billion. There is plenty of money to pay for what we need. The question is whether we can muster the political will to do it.