MANDATORY MARCUS
Just a few day ago President Obama imposed a tariff on tires imported from China. For those who may not know, a tariff is a duty (a.k.a. tax) imposed on imported goods. The justification for it is that it helps to make domestic producers of tires "more competitive" so that they don't lose business to less expensive foreign competition. It's a lot like saying that because Tiger Woods is better than everyone else at golf, the PGA should force him to play every other hole left handed so things are "more competitive".
Let's be clear, the President just jacked up the price of tires from China specifically to make them more expensive for you to buy them. Because competitors in China are able to produce tires of equal quality for less money, and thereby sell more tires, the President simply increased their cost to make sure their tires aren't less expensive relative to tires produced in the U.S.
Don't you love it when you could pay less for something but are forced to pay more instead? Isn't it awesome to discover that the sole reason you have to pay more for the item is because your own government simply added costs to deter you from buying it...even though you need it?
233 years ago, back in the year 1776, a fellow by the name of Adam Smith wrote a fairly influential book called An Inquiry Into The Nature And Causes Of The Wealth of Nations (A.K.A. The Wealth of Nations); today Adam Smith is widely considered to be the father of modern economics.
A key concept that Adam Smith articulated can be found in the following passage:
"Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce." (emphasis added)
Let's dig into this just a bit more shall we?
Do you think that the President actually believes it is better for you to pay more for an item when you could, in fact, pay less? Do you think that the President actually thinks it is good for the economy to arbitrarily increase the price of goods and services; particularly in the midst of what we are continuously told is the worst economic downturn since the Great Depression? Do you think that the President feels that he has just improved things for the American consumer by ensuring we all pay more than necessary for tires?
I think we can all agree that the President is smart enough to know better.
Question: Why impose the tariff if it actually makes everyone worse off than they would be without it?
Answer: It doesn't matter that it makes every single consumer in the U.S. worse off because it makes specific producers better off; in particular it makes a small special interest group (the United Steelworkers Union) better off. And naturally, as a result of all this, the President is better off because he was elected in large part due to the support of labor unions.
Today the percentage of workers belonging to any labor union is about 12% and declining. So in order to protect the interests of a subset of 12% of the working population, our government just stuck it to the remaining 88%. And that's just as it relates to "workers". If we took the labor union population as a percentage of all U.S. consumers, the percentage would be substantially lower...to the point of statistical insignificance.
By sticking it to you and me in the form of higher prices, the President buys continued support from labor unions come re-election time. Such action is diametrically opposed to the common sense observation laid forth by Adam Smith who pointed out, over 200 years ago, that the purpose of production is consumption. A tariff hurts consumers and provides benefit exclusively to the producers of the product in question.
By the way...President Bush did the same thing with tariffs on steel imports (though he ultimately repealed them before they went into effect)...so this isn't just an "Obama" problem it's a "government" problem; which should make you very concerned because what is most evident through all this is the fact that an elected official, even at the highest possible level, will clearly say and/or do whatever is necessary to get and remain elected.
All of this raises the question: how much more do you want to put into the hands of people whose incentives are so clearly tied to their own outcomes, and not yours...unless of course yours are politically convenient at the time?
Just a few day ago President Obama imposed a tariff on tires imported from China. For those who may not know, a tariff is a duty (a.k.a. tax) imposed on imported goods. The justification for it is that it helps to make domestic producers of tires "more competitive" so that they don't lose business to less expensive foreign competition. It's a lot like saying that because Tiger Woods is better than everyone else at golf, the PGA should force him to play every other hole left handed so things are "more competitive".
Let's be clear, the President just jacked up the price of tires from China specifically to make them more expensive for you to buy them. Because competitors in China are able to produce tires of equal quality for less money, and thereby sell more tires, the President simply increased their cost to make sure their tires aren't less expensive relative to tires produced in the U.S.
Don't you love it when you could pay less for something but are forced to pay more instead? Isn't it awesome to discover that the sole reason you have to pay more for the item is because your own government simply added costs to deter you from buying it...even though you need it?
233 years ago, back in the year 1776, a fellow by the name of Adam Smith wrote a fairly influential book called An Inquiry Into The Nature And Causes Of The Wealth of Nations (A.K.A. The Wealth of Nations); today Adam Smith is widely considered to be the father of modern economics.
A key concept that Adam Smith articulated can be found in the following passage:
"Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce." (emphasis added)
Let's dig into this just a bit more shall we?
Do you think that the President actually believes it is better for you to pay more for an item when you could, in fact, pay less? Do you think that the President actually thinks it is good for the economy to arbitrarily increase the price of goods and services; particularly in the midst of what we are continuously told is the worst economic downturn since the Great Depression? Do you think that the President feels that he has just improved things for the American consumer by ensuring we all pay more than necessary for tires?
I think we can all agree that the President is smart enough to know better.
Question: Why impose the tariff if it actually makes everyone worse off than they would be without it?
Answer: It doesn't matter that it makes every single consumer in the U.S. worse off because it makes specific producers better off; in particular it makes a small special interest group (the United Steelworkers Union) better off. And naturally, as a result of all this, the President is better off because he was elected in large part due to the support of labor unions.
Today the percentage of workers belonging to any labor union is about 12% and declining. So in order to protect the interests of a subset of 12% of the working population, our government just stuck it to the remaining 88%. And that's just as it relates to "workers". If we took the labor union population as a percentage of all U.S. consumers, the percentage would be substantially lower...to the point of statistical insignificance.
By sticking it to you and me in the form of higher prices, the President buys continued support from labor unions come re-election time. Such action is diametrically opposed to the common sense observation laid forth by Adam Smith who pointed out, over 200 years ago, that the purpose of production is consumption. A tariff hurts consumers and provides benefit exclusively to the producers of the product in question.
By the way...President Bush did the same thing with tariffs on steel imports (though he ultimately repealed them before they went into effect)...so this isn't just an "Obama" problem it's a "government" problem; which should make you very concerned because what is most evident through all this is the fact that an elected official, even at the highest possible level, will clearly say and/or do whatever is necessary to get and remain elected.
All of this raises the question: how much more do you want to put into the hands of people whose incentives are so clearly tied to their own outcomes, and not yours...unless of course yours are politically convenient at the time?
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