That truth should be silent I had almost forgot.
Antony and Cleopatra,  Act 1, Scene 2

Unsilent Truth
February 2, 2017

Tracking the yeti


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A 20 percent tariff on goods coming in from Mexico, huh? And that's supposed to pay for the immigration wall?

Let's consider some elementary economic objections, which I must suppose have already shown up all over the Internet. (Even the warhawk Mark Levin has made some of them.)

Who will pay that fee? The Mexican government?

Of course not. U.S. consumers and (perhaps even more important) U.S. industries that import parts for products assembled in this country.

The idea (I guess) is that by increasing the cost of Mexican products, American companies with high production costs will become able to compete with them. But how certain is that to happen?

After all, for this plan to work, the tariff must so increase the costs of the Mexican products that it offsets the advantage of lower labor costs in that country. But it will also increase the cost of parts manufactured in Mexico for assembly in America. And that cost increase must not be so high that American companies are still at a competitive disadvantage. That is in no way certain. It might even be mathematically impossible.

Would American workers benefit, perhaps, from the opening of new factories? Maybe. If it becomes profitable to compete with Mexican end-products despite the price increase for Mexican parts, some union members, previously unemployed in those industries, may be said to benefit, at least in the short run. But American consumers, who will be paying the higher prices for the end-products, whether American-made or imported from Mexico, will outnumber those workers by millions.

In effect, the salaries of the (American) workers who are benefited will be subsidized by the (American) consumers who buy the products. It's another way of taxing the many to benefit the few.

But then, when they are facing social problems, the solution most Americans seem to find handiest is always one that attacks or injures the neighbors and fellow citizens who have done them no harm.

They take no notice of a simple principle: You don't make a group of people rich by raising costs on them.

Now let's think about this a little more. I am not a graduate-degree-holding economist with lots of accomplishments in my background, but this was easy for me to see. For that matter, even a Defense Department retiree of my acquaintance who thinks that you need inflation so that people don't run out of money was able to see it. Is it possible that the graduate-degree-holding economists advising Trump cannot see it? Do you think Trump himself can't see it? I have to think they can. I have to think the matter is well known to them.

And so we must ask ourselves, Why would they choose to make the entire body of working Americans subsidize a few union workers? That, we must ask ourselves. We may ask ourselves this also: Why do they believe that most Americans will not see through this charade? How is it that they can be confident that what opposition they encounter will not be raised on these grounds, but on other (probably international-relations) grounds? Can they really be so certain that public-school educations (including subsidized university-subsidized educations) have finally done their job and made most Americans simply stupid?

Consider this: If you really want Mexico to pay for the wall across the Southwest, get the money from Mexicans who send remittances to their relatives. Charge anyone who is sending money to Mexico by Western Union or Moneygram an extra 5 percent for each remittance. Right now, the remittances (nearly $27 billion in 2016) spare Mexico the cost of having a welfare state. Taxing the remittances (before they leave the U.S.) — not blocking them — would provide income for the wall and hurt Mexicans in Mexico. (Would it hurt the Mexican government? Who knows? I cannot bring myself to fret over it.)

The U.S. state finds it easy to track money and interrupt its flow — much easier (its functionaries say) than it does to track populations and interrupt their flow, anyway.

I'm not really in favor of this suggestion. I'm just mentioning it as a proposal that is fairly obvious and that does not affect the average American. I'm pretty sure that such a tax would be considered discrimination. Apparently the government can discriminate in favor of union workers and against the rest of the American population, but it can't discriminate against a particular foreign transaction.

So what is really going on here?

A deceased friend of mine (vichnaya pamyat') used to say that the ruling class is like the yeti. We are never really allowed to see the yeti, but every now and then we do see its footprints.

The footprints this yeti leaves are power and money. Follow them. But don't expect them to lead you to anything helping ordinary Americans. Ω

February 2, 2017

Published in 2017 by WTM Enterprises.

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