site banner
PaperclipPerfector  25d ago (text post)   2848 thread views

Small-Scale Question Sunday for October 27, 2024

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

Culture war topics are accepted, and proposals for a better intro post are appreciated.

2
Top Bottom Old Controversial Comments
Jump in the discussion.

No email address required.

Can someone steelman US tariffs for me? Is there a way that tariffs (or more likely, the threat of tariffs) is a plausible economic policy?

Would you need a large market to be accessible for sales so that overall profit would outway the labor and regulatory costs in establishing production back in the US?

As someone who’s not particularly plugged into a tariff perspective either way, I will summarize what I took away from Trumps perspective on Rogan when talking about chips.

There are certain products we want more made of in America like chips and cars. Today we incentivize it with carrots and end up giving ridiculous subsidies to already rich companies, which further ruins organic domestic competition by picking winners and losers upfront. And it ends up not working to boot because it remains cheaper to produce overseas. So the companies do the minimum to get their subsidies or pull out halfway in leading to tremendous gov waste with little gain.

Since we’ve already agreed we want to market distort these products (I.e incentivize domestic production) tariffs apply a stick instead, making it more expensive to produce overseas to begin with. Thus the government doesn’t have to spend money, it in fact makes money during the transition, it doesn’t have to pick winners (all domestic producers can compete fairly), and it’s harder to cheat.

The other thing Trump mentioned was that this play can work because America is in a negotiating place of power, still very rich, but our advantage won’t last forever and a harsh tariff policy isn’t as effective if you can’t negotiate as well.

Without being able to judge the economic principles of all this, it sounds quite sensical to me, and to get a midwit like myself to disagree, I’ll need more from the other side than ‘experts disagree followed by theoretical jargon’.

I can’t make much in the way of an economic argument but it’s extremely obvious that Chinese have intentionally been using state support and dumping to strip and move entire industries from western countries to China. This has created a parasitic class of rich people in the west whose entire wealth comes from middle manning either the 1)importation of this production to the west or the 2)sale of western financial assets to China which are needed to sustain western trade deficits.

There is nothing organic and laissez faire about any of this. It’s very intentional and it has been very destructive for almost everyone involved. Western working classes are extremely wage suppressed and largely lost the discipline required for industrial production. Middle classes are corrupted into believing their laptop jobs (which usually simply supervise one of the two legs of this trade I mentioned above, or extract profits from it in some indirect way). Cheap credit due to massive Chinese demand for western financial products has destroyed any integrity and competency left in western political classes. Free money plugs every hole anyway so they just keep making disastrous decisions non-stop with no apparent consequences.

Large sections of the Chinese society seem to have benefited but overall it’s not good for humanity that economic “growth” comes from shifting labour and environment externalities around to world instead of technology. We only get richer if we have more robots. Substitution of one European worker and his advanced machinery earning 20x with 10 third worlders with no machinery earning 1x, is bad for humanity.

So I don’t know if tariffs are the right policy to stop this decay but it’s absurd to oppose them as an obvious wrong policy simply because they don’t fit in with some notion of free trade and markets invisible hand. None of this process is classic economics at all. It’s state policy and distortion all the way.

Western working classes aren’t really wage surprised outside of, to some extent, Germany and the Netherlands (which has much more to do with the euro than with China). Inequality is higher than the 1970s, but real incomes haven’t fallen significantly and productivity, while somewhat higher, has lagged asset price growth. Factory workers in Northern Europe are still paid very well, they’re often still in countries like Germany and Switzerland a kind of Marxian labor aristocracy. The working class suffering are those who work service jobs.

How do you figure that? I would suggest that due to immigration and the exportation of manufacturing to other countries, there’s an extremely hard ceiling on what the productive blue collar workers can hope to make — which is exactly the wages at which it becomes cheaper to either replace them with imported domestic workers (immigrants) or outsource the work to some other country. The ceiling seems to be around $16-18 for work that doesn’t require either apprenticeships or college. And this is despite any changes to COL. even in construction in the USA, you’re going to be seeing a lot of Mexicans putting on roofs and laying floors because they work dirt cheap.

Hahaha. Productive blue collar workers, even without apprenticeships or college, make more than that regularly.

The steelman is a combination of what @hydroacetylene has said coupled with the belief that the economic upsides of inceased wages and labor-force participation will offset the likely increase in import costs.

The steelman is that the US economy can sustain raising more revenue per the laffer curve and tariffs are unpopular among the PMC but not uniquely bad.

There is enormous economic efficiency in America because the super-wealthy have resources that they waste frivolously, when these resources would be better allocated to the lower-middle, middle, and upper-middle classes. These super wealthy people make money by selling people stuff made overseas. If you make them pay money to import their overseas stuff, they have two options: (1) reduce their profits and make their business more efficient; (2) attempt to raise the cost of their items. If they do (2), then things made in America can compete against them, which is great for all Americans but the super-wealthy, because your job’s wages are set according to the number of wage-competitive jobs available to you and your peers. Increasing the number of competitive middle class jobs increases all wages of the middle class, as well as the workers’ quality of life. Additionally, there’s a ceiling for the pricing of a lot of overseas items, because if a company like Nike prices them too high, fewer people will buy them and more will buy competitors. This means Nike, Nespresso, Shein, Temu, Alibaba, IKEA, and other sorts of businesses are not actually able to raise their prices in proportion to the tariff. Once their price is too high, people opt for a lower-cost competitor. Fast food is similar. We could tax the heck out of McDonald’s and they could never raise prices proportionately because once it reaches a certain high people will make their own food.

Be wary of talk about “economic efficiency”. If profits go to people who don’t need them then those profits don’t matter.

Actually, even increasing competition of lower class jobs will increase middle class wages

Except that in practice the middle class cares about purchasing power, not paper wages.

I am alleging that this will increase purchasing power.

For overall purchasing power, it might go either way. But what I can say for certain is that it will significantly reduce purchasing power of cheap consumer goods, the kind of crap you buy from Shein, Temu and AliExpress. Stuff that will never ever be made again in the US.

And if you look around the house of a lower middle class person, it's often really all they have.

(2) attempt to raise the cost of their items. If they do (2), then things made in America can compete against them, which is great for all Americans but the super-wealthy, because your job’s wages are set according to the number of wage-competitive jobs available to you and your peers.

But there is a floor on the price of American-made competitor goods due to the much higher cost of labor. Therefore, at least up to that floor, aren't American consumers (largely the middle class) just paying more for goods?

I think so, yes, you need the tariff to be so high that it promotes American industry. Otherwise it depends what you do with the tariff revenue. If everyone pays the tariff but the revenue goes to the middle class, then it’s just a tax on wealthy people really.

Then doesn't this turn into what is essentially an effective consumption tax, which is generally considered one of the most regressive forms of taxation, since percentage of income that goes to consumption is negatively correlated with income? Even worse, imported goods are more likely to be the kinds of goods that the average family spends most of their money on: appliances, groceries, cars, electronics, etc. The excess consumption of the wealthy is largely in the form of luxury services (personal cleaners, drivers, chefs, accountants, lawyers, etc.) or housing, which would be far less affected by tariffs, if at all.

My other concern is that the floor due to higher American wages may in fact be higher that the ceiling you talk about, where most people are just unwilling/unable to buy that good any more.

Which option are you talking about? I do not support a tariff where the revenue doesn’t go to those who have more use for the money. I don’t know the fine print of Trump’s “replace income tax with tariff plan”, but we can imagine a policy where the revenue of a tariff disproportionately benefits the lower through middle classes. Well, if everyone pays the tariff, and if wealthy people pay slightly more of the tariff because they import somewhat more goods, but if all the revenue goes to the lower and middle class, then the lower and middle class wind up having more money at the end of the day, implying that price increases pass on to all consumers equally and no American industry develops.

Unless I’m misreading you, then this doesn’t have to do with % income spent on tariff at all, so it’s simply a case of imported red herring to talk about % of income going to the tariff. Everyone pays tariff, and that total money goes to lower/middle class. I would support that. If that is what you were asking.

But the policy I support is a tariff so high that American industry develops. This has all the benefits of the aforementioned with one key difference: we now see wages rise because there is more middle class employment opportunity and employers must pay more to recruit workers.

The excess consumption of the wealthy is largely in the form of luxury services (personal cleaners, drivers, chefs, accountants, lawyers, etc.) or housing

Sadly it’s also in wasteful vacations, multiple cars, rolexes, foreign alcohol, cocaine, ayuahuasca retreats, multiple homes, homes that are too big, private jets and yachts, superfluous degrees. If we apply pressure on their finances they are likely to keep the stuff from your list but get rid of the truly crazy amount of inefficient resource waste from my list.

where most people are just unwilling/unable to buy that good any more

Before that happens the profit margin would evaporate, with the businesses owned by billionaires forced to cut into their profit margin.

How do you picture this money "going back to the middle class?"

Tax deduction or credit to those earning less than 160k a year. Why not? I understand this is functionally just redistribution from wealthy to less, but if you call it a tariff more people will be supportive than “we are literally going to redistribute money now”. It has a nice conservative tinge. But also, this isn’t my steel-man of tariffs per the OP.

I just have strong priors against "government gets all the money then moves it around" so I wanted to clarify.

More comments

What do you mean by “plausible?”

Tariffs are a way to incentivize something other than pure efficiency. Pay more, but get it made at home. The question is how much more, and what you’re getting instead. In a great-power conflict, that’s supposed to be security.

Trump’s narrative, where bringing manufacturing back home will make it better overall, probably isn’t going to pan out.

Sure! I think I actually believe this argument to some extent as well.

Redistributive taxes and tariffs both reduce societal wealth and also reduce inequality.

But redistribution poisons the well of social discourse and creates a class of “useless” people who rely on the government for payouts. The share of Americans receiving some sort of welfare payment has never been higher.

Furthermore free trade results in the hollowing out of many industries, resulting in permanent societal skill loss, depopulation and brain drain from affected regions, and dependence on China.

And the downsides of tariffs from a US perspective are overrated. Other countries may eat much of the cost because the US has by far the most lucrative export market. We have huge trade deficits so a trade war will hurt other countries more than us.

To achieve our goal of maximum growth with the least inequality and other negative effects, it would make sense to reduce redistributive taxes and increase tariffs.

This is a good response and I'll add one more thing. Tariffs reduce the amount of stuff being produced because it costs more to produce it. If the price of raw materials doubles people are more thoughtful about what they produce. A lot of what gets produced just ends up in a landfill after x years. Maybe it is good for the planet if the world produces less trinkets that ultimately end up in the trash.

Aren't a huge percentage of greenhouse gases due to shipping? If you make more things closer to where they're meant to end up, there's likely an environmentalist appeal somewhere there as well.

The entire transport sector is 20% of CO2 emissions. But ocean shipping is only around 3%. Ships are incredibly efficient.

No, I don't think so. International shipping is very efficient. IIRC, it uses less carbon to ship something from Shanghai to NYC then it does from Chicago to NYC.

Perhaps you were thinking of the "pollution from one container ship = 1 million cars" meme that went around a few years ago. That was referring to sulphur emissions which are not a greenhouse gas and actually reduce global temperature.

What is this place?

This website is a place for people who want to move past shady thinking and test their ideas in a court of people who don't all share the same biases. Our goal is to optimize for light, not heat; this is a group effort, and all commentators are asked to do their part.

The weekly Culture War threads host the most controversial topics and are the most visible aspect of The Motte. However, many other topics are appropriate here. We encourage people to post anything related to science, politics, or philosophy; if in doubt, post!

Check out The Vault for an archive of old quality posts. You are encouraged to crosspost these elsewhere.


Why are you called The Motte?

A motte is a stone keep on a raised earthwork common in early medieval fortifications. More pertinently, it's an element in a rhetorical move called a "Motte-and-Bailey", originally identified by philosopher Nicholas Shackel. It describes the tendency in discourse for people to move from a controversial but high value claim to a defensible but less exciting one upon any resistance to the former. He likens this to the medieval fortification, where a desirable land (the bailey) is abandoned when in danger for the more easily defended motte. In Shackel's words, "The Motte represents the defensible but undesired propositions to which one retreats when hard pressed."

On The Motte, always attempt to remain inside your defensible territory, even if you are not being pressed.


New post guidelines

If you're posting something that isn't related to the culture war, we encourage you to post a thread for it. A submission statement is highly appreciated, but isn't necessary for text posts or links to largely-text posts such as blogs or news articles; if we're unsure of the value of your post, we might remove it until you add a submission statement. A submission statement is required for non-text sources (videos, podcasts, images).

Culture war posts go in the culture war thread; all links must either include a submission statement or significant commentary. Bare links without those will be removed.

If in doubt, please post it!


Rules


Recommended Posts And Communities

Recommended Realtime Chats