Trump's Border Tax Will Make American Consumers the Losers

Donald Lambro
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Posted: Feb 03, 2017 12:01 AM
Trump's Border Tax Will Make American Consumers the Losers

WASHINGTON -- The anemic Obama economy ended with a whimper in December, a victim of his anti-growth, anti-capital investment, tax-hike policies.

You probably didn't see any mention of it on the network news shows last month, because, for the most part, they didn't report it.

Obama's bedridden economy was defined by three things: a painfully long recovery from the 2008 recession, the lack of enough good-paying full-time jobs, and a sluggish growth rate that was largely stuck in the 2 percent range over his entire presidency.

Obama left office declaring that his policies had pulled the economy out of the recession, created lots of jobs and made the economy healthy again. In the last month, pro-Obama business journalists were projecting that the economy's fourth-quarter GDP growth rate could be as high as 3 percent.

Not even close. The Commerce Department reported last week that the U.S. economy had barely expanded at an embarrassingly minuscule 1.9 percent rate between October and December.

The GDP rate for the last year of Obama's presidency came in at an ignominious 1.6 percent -- the lowest rate on record since 2011. In other words, the U.S. economy was clinging to life, but barely breathing.

Economists correctly blamed the weak growth rate on lackluster business investment, which was a major factor, but the root of the U.S. economy's illness ran even deeper than that.

Oppressive tax rates on businesses, large and small; a jungle of increasingly costly regulations; and the scary threat of raising the minimum wage, which Hillary Clinton promised would be one of her official acts if she won the presidency -- all contributed to our economic malaise.

The nonpartisan Congressional Budget Office issued a report that warned a higher minimum wage would result in the loss of 500,000 to 1 million jobs because employers would cut their payrolls to remain in business.

But Clinton and the Democratic lawmakers on Capitol Hill didn't care about them, and proved it by never uttering any complaint about the subpar economy in the eight years of Obama's presidency. Indeed, some of them called the dismal growth rates "the new normal."

Now it's the Republicans' turn to run the economy, but it's still an open question about what kind of policies they will put into effect to turn it around and make it great again.

Cutting tax rates to encourage business investment and new job creation, and helping struggling middle- to low-income taxpayers to get ahead and achieve the American dream, is the hallmark of Republican economic policy.

It worked in the 1980s under President Reagan, who ended the Jimmy Carter recession in just two years. Democrats said it was "trickle down" economics and wouldn't work, but the nation held a referendum on it in Reagan's re-election campaign, which he won in a 49-state landslide.

Reagan also championed trade expansion as the other pillar of his successful economic revolution, which led to widespread growth at home and abroad. European countries were privatizing certain government programs, and many of his global critics admitted he had made capitalism and free trade popular again.

But President Trump has taken a sharp leftward turn away from Reagan's trade expansion policies and plans to either kill or renegotiate the North American Free Trade Agreement that President Clinton expanded to include Mexico.

Blaming trade deals for America's manufacturing job losses, Trump is calling for a 20 percent tariff on Mexican exports. That's never going to pass muster in the GOP because Trump's border tax would raise retail prices here by 20 percent, hurting consumers, according to the retail industry.

Trump has other plans for some of the tax revenue: to pay for his $20 billion wall along half of our border with Mexico. So, in effect, American consumers would be paying for it in the form of higher prices.

It is true that manufacturing jobs have been declining for decades, but not because of trade with other nations. The decline began in the 1950s and '60s, long before we ran yearly trade deficits, but have continued since then.

The reason: increasing manufacturing technologies and automation that result in fewer assembly line employees, according to a study by University of California economist J. Bradford DeLong in a report posted on the Vox website.

Mexico is one of our top three trading partners. The U.S. Chamber of Commerce says 6 million U.S. jobs depended on trade with it in 2015. The Commerce Department says sales of U.S. auto parts to Mexico rose from $17.5 billion in 2010 to $30 billion in 2015.

"There are close to a couple of dozen states for which Mexico is the top export destination," says Gordon Hanson, who teaches international economics at the University of California.

Trump's border tax is a loser for American consumers and for U.S. factory workers, too.