Maybe as part of a lecture in an economics class this diagram might mean something.
But the real bottom line is that a tariff is a tax on US consumers.
That is who will pay the tax, not Mexico and anyone who thinks different just does not understand. Yes, under certain conditions a part of the tax will fall on the Mexican producer as your diagram shows. But it will be an insignificant amount.
Trump is just proposing to tax US consumers to pay for the wall, not Mexico.
Towards the very end of the presentation, it does say exactly what you said. “a tariff is a tax on US consumers” I always like to read your articles. It is good to see you here.
Just like every other regressive tax, they will not call it a tax. Use fees, tolls, various types of mandated insurance fees… all fall heaviest on the little guy. Imposing this tax gives them room to reduce progressive taxes on the rich.
While I certainly agree with the article, it does miss one thing.
The wall will not stop anyone who wants to come into the US.
It is simply beyond insane, unless of course you have a new gestapo in the streets, buses, railroad stations, airports, etc. demanding to see your papers.
I am certainly not arguing for a tariff, but the video is very similar to one would make if one were arguing that it is a mistake in having Walmart pay for the healthcare of its employees (rather than dumping them on Medicaid) since were it to pay for that healthcare, the cost would fall on Walmart consumers. One can argue for or against a tariff, and for or against a wall, but this seems a weak argument to me.
Except, without healthcare insurance the burden falls back on us anyway. Without insurance, hospitals still only have to stabilize you before they kick you out the door. ESI is subsidized by the Gov. The PPACA also provides alternatives also.
Furthermore, healthcare is provided in a large number of competitor nations. Healthcare in Mexico is good also. https://internationalliving.com/countries/mexico/health-care/ You can argue all you want to; but, there is no comparison. It is a level equal playing ground even if the US healthcare is more expensive. Need you go further??
“The cost of Operations in the US has caused more jobs to go over seas than trade policy”
Since free trade started in 70s under Nixon, we have doubled those in poverty, almost eliminated the middle class, and the USA has gone from a creditor nation to a debtor nation. Plus running a trade deficit every year since the 80s; which is the reason for our growing national debt.
Poverty: 1959: 22.4%
Poverty: 2015: 13.5%
US Census: http://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-people.html Table 2
And neither did the number almost double.
********************************
Debt:
Why not ask Reagan? why not ask Boy-George Bush? When you give tax breaks of which 30% goes to 1% of the taxpaying population (< $1 million) and there is no increase in economic growth generating revenues, you generate deficits. When you go on an arms race like Reagan did, the funds have to come from somewhere. When you run two simultaneous wars off budget like Boy-George did, it costs money. Nations which spend more on War rather than domestic productivity usually end up as a Tier 2 or 3 nation. This has happened to every nation since the Qin dynasty. Congress and Repub presidents like war and do not like to pay for it.
The 2007 recession brought on by War Street, banks and investment firms hurt the economy and we had to pay for it. Participation Rate dropped from 67% in 2000 to 66% in 2004. In 2008, it started a long slide downward to 63%. China entering the WTO certainly played a part in the shuffle of jobs; but here again, these were labor intensive jobs. Capital intensive jobs remained.
Most manufacturing plants were set up by function; saws in one area, drill presses in one section, stamping in another, Turret lathes in another, automatics off by themselves, NC machines separate. There were schedulers for each section. The flow was from one function to another, lots were big in number, transit time was lengthy, and labor was needed. Some one got the idea to rearrange the shop flow based upon the flow of operation from start to finish. This broke up the functional department into production limes by operation. You might go Saw, turret lathe, NC, drill press, deburring, clean all in a straight line rather than departments of function. Lots were still big. The next change was to shrink lot size which gave greater flexibility to what could be run. Smaller lot sizes meant changes could be made and service the customer faster as no lot was finished until the last part completed and the setup broken.
Did this at Miami Industries when they told me there lot size was 30 days of manufacturing/ inventory and they wanted faster customer service. Hmmm, 30 day lot size means an average of 15 days to the customer. Cut your lot size and you cut your delivery in half (besides reduce inventory). The amount of production time of a part was 10% and the rest was sit around time waiting for the next operation and transit time. Costly stuff . . .
Then they went to cells and CNC having 3, 4 and 5 axises.
Now you can sit there and argue with me about what has caused much of the labor for males to disappear all day. I am not a desk bound Prof or executive. I am one of those who has brought about the changes in throughput minimizing Labor in Manufacturing who happens to know a little economics and not to the same scale as Barkley, Sandwichman, Spencer or some of the economists out here.
The trade deficit will take care itself as efficiencies change from country to country. Eire harness manufacturing moves around from country to country and I have managed some of those moves to meet market demand and cost efficiency. Old jobs are not coming back and we need to bring people into line with education in areas that will grow, create a better infrastructure, and get out of the war games.
EL – I don’t think you should worry about a tariff with Mexico. The White House already backed off on that plan.
Mexico has $180Bn of foreign reserves. It could cover the cost of a wall from that wad of money and not feel it. Mexico spent $2bn of those reserves a week ago to stop the Peso from plunging. The intervention did nothing.
Over the next few months Mexico will spend more than another $13B of their reserves fighting the FX market. In the end they might be better off just caving to Trump versus an open ended run on their currency.
Give this story a few months before any conclusions are drawn.
EL – I’m delighted to see you back in print. Can you give us an update on your economic projections? Last words from you were that we were 70% sure to be in recession by now, and a 100% sure thing for a recession by June. Are you sticking with that?
Also, what happened to the Dow Tractor Beam of 17,300? I hope you did not short the market based on your own forecast.
The details on the Mexican FX intervention from the Wall Street Journal:
While you are here. For the second time CAG backed off of acquiring Chrysler automotive (cars). I am hearing some of this was the result of Chrysler not wanting to part with Dodge vehicles. I suspect too, political environment may be paying a role in this
Run – Tks for the update. Chrysler is an interesting story. What is Chrysler?
– It’s a 100% private company. It is owned by Fiat who bought it dirt cheap.
– I’m sure that Fiat would like to sell the car divisions. At the “right” sale price for C-cars Fiat would end up with Jeep and Ram trucks for free. That would be a home-run outcome.
Chrysler cars is owned by foreign investors, the physical manufacturing assets are outside the border. If CAG were to buy C-cars it would have no consequence to the US. It is just moving paper around the game board.
I doubt that Trump understands who-owns-what, and what the consequences of tariffs are. Trump is creating confusion/uncertainty. Money stays in the wallet under these conditions. I don’t blame CAG for backing off.
Jeep, MiniVan, and from what I understand now Dodge would stay. UF and PF I believe is done now and ended last year (200 and Dodge Dart). Not trying to deceive you, just telling you what I know behind the scenes. The same occurred in 2015 also. This company has a joint venture and showed for the first time at the Detroit Auto Show.
Run – you are right. The tax cuts plus wars of Reagan and Bush Junior pushed out the deficit.
Obama, on the other hand, increased income tax rates and capital gains taxes and special taxes (ACA). The Obama wars were smaller than the Bush’s. So you would think that the trend line on debt would be more stable under Obama then Bush or Ronnie.
Not the case at all. In the eight Obama years Debt Owed To The Public went from $6.3T to 14.4T. A 230% increase.
The cost of Bush’s programs >$5 trillion, the cost of Obama’s program $1.8 trillion. Bush left Obama quite a few issues.
If Reagan and Bush had been more fiscally sound in their policies.
Bush’s program costs versus Obama’s programs. Thank the Bushs and Reagan. Republican Congress blocked Obama’s initiatives. Go away bk. Give your fingers a rest.
What good is census data when they have acknowledged that people that don’t speak English don’t partake even when going door to door. California is quite famous for income inequality, but census numbers don’t show it. Gov’t numbers often hide the truth. LA county alone has more than 60,000 homeless in a multitude of homeless tent cities. They used to restrict these to under bridges, but now they have moved to the sidewalks.
The graphs – easily produced by any partisan political hack on either side. If you want to be taken serious, create your own with respectable data.
Just overwhelm dissenters with graphs and articles written by anyone and call yourself the winner. Yay! You won. Congratulation!
Naturally concomitant question: What do the dead eat when they come back to life?
They eat yo-o-u-u-u-u.
Maybe as part of a lecture in an economics class this diagram might mean something.
But the real bottom line is that a tariff is a tax on US consumers.
That is who will pay the tax, not Mexico and anyone who thinks different just does not understand. Yes, under certain conditions a part of the tax will fall on the Mexican producer as your diagram shows. But it will be an insignificant amount.
Trump is just proposing to tax US consumers to pay for the wall, not Mexico.
spencer:
Towards the very end of the presentation, it does say exactly what you said. “a tariff is a tax on US consumers” I always like to read your articles. It is good to see you here.
Right, You and I will pay for the wall. Business just passes the costs onto us, always. nothing new here. keeping the Base happy.
Just like every other regressive tax, they will not call it a tax. Use fees, tolls, various types of mandated insurance fees… all fall heaviest on the little guy. Imposing this tax gives them room to reduce progressive taxes on the rich.
Reminds me of the graphs drawn by Handsome Al Mandelstam in Econ 101 at Michigan State back in 1968
While I certainly agree with the article, it does miss one thing.
The wall will not stop anyone who wants to come into the US.
It is simply beyond insane, unless of course you have a new gestapo in the streets, buses, railroad stations, airports, etc. demanding to see your papers.
Course, I doubt many people would like that idea.
Time to go into the ladder business in Mexico.
If you try to fly, you will find “Eure Papieren, bitte” (sounds better in the original German) is very much in place.
“Ihre Papiere bitte” or “Ihr Pass bitte”
I am certainly not arguing for a tariff, but the video is very similar to one would make if one were arguing that it is a mistake in having Walmart pay for the healthcare of its employees (rather than dumping them on Medicaid) since were it to pay for that healthcare, the cost would fall on Walmart consumers. One can argue for or against a tariff, and for or against a wall, but this seems a weak argument to me.
Mike:
Except, without healthcare insurance the burden falls back on us anyway. Without insurance, hospitals still only have to stabilize you before they kick you out the door. ESI is subsidized by the Gov. The PPACA also provides alternatives also.
Furthermore, healthcare is provided in a large number of competitor nations. Healthcare in Mexico is good also. https://internationalliving.com/countries/mexico/health-care/ You can argue all you want to; but, there is no comparison. It is a level equal playing ground even if the US healthcare is more expensive. Need you go further??
Just tax remittances sent to Mexico.
Regardless of what the figures imply. Our trade policies cost American jobs and has made our Nation a debtor Nation, over the past almost fifty years.
The cost of Operations in the US has caused more jobs to go over seas than trade policy
“The cost of Operations in the US has caused more jobs to go over seas than trade policy”
Since free trade started in 70s under Nixon, we have doubled those in poverty, almost eliminated the middle class, and the USA has gone from a creditor nation to a debtor nation. Plus running a trade deficit every year since the 80s; which is the reason for our growing national debt.
Poverty: 1959: 22.4%
Poverty: 2015: 13.5%
US Census: http://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-people.html Table 2
And neither did the number almost double.
********************************
Debt:
Why not ask Reagan? why not ask Boy-George Bush? When you give tax breaks of which 30% goes to 1% of the taxpaying population (< $1 million) and there is no increase in economic growth generating revenues, you generate deficits. When you go on an arms race like Reagan did, the funds have to come from somewhere. When you run two simultaneous wars off budget like Boy-George did, it costs money. Nations which spend more on War rather than domestic productivity usually end up as a Tier 2 or 3 nation. This has happened to every nation since the Qin dynasty. Congress and Repub presidents like war and do not like to pay for it. The 2007 recession brought on by War Street, banks and investment firms hurt the economy and we had to pay for it. Participation Rate dropped from 67% in 2000 to 66% in 2004. In 2008, it started a long slide downward to 63%. China entering the WTO certainly played a part in the shuffle of jobs; but here again, these were labor intensive jobs. Capital intensive jobs remained. Most manufacturing plants were set up by function; saws in one area, drill presses in one section, stamping in another, Turret lathes in another, automatics off by themselves, NC machines separate. There were schedulers for each section. The flow was from one function to another, lots were big in number, transit time was lengthy, and labor was needed. Some one got the idea to rearrange the shop flow based upon the flow of operation from start to finish. This broke up the functional department into production limes by operation. You might go Saw, turret lathe, NC, drill press, deburring, clean all in a straight line rather than departments of function. Lots were still big. The next change was to shrink lot size which gave greater flexibility to what could be run. Smaller lot sizes meant changes could be made and service the customer faster as no lot was finished until the last part completed and the setup broken. Did this at Miami Industries when they told me there lot size was 30 days of manufacturing/ inventory and they wanted faster customer service. Hmmm, 30 day lot size means an average of 15 days to the customer. Cut your lot size and you cut your delivery in half (besides reduce inventory). The amount of production time of a part was 10% and the rest was sit around time waiting for the next operation and transit time. Costly stuff . . . Then they went to cells and CNC having 3, 4 and 5 axises. Now you can sit there and argue with me about what has caused much of the labor for males to disappear all day. I am not a desk bound Prof or executive. I am one of those who has brought about the changes in throughput minimizing Labor in Manufacturing who happens to know a little economics and not to the same scale as Barkley, Sandwichman, Spencer or some of the economists out here. The trade deficit will take care itself as efficiencies change from country to country. Eire harness manufacturing moves around from country to country and I have managed some of those moves to meet market demand and cost efficiency. Old jobs are not coming back and we need to bring people into line with education in areas that will grow, create a better infrastructure, and get out of the war games.
EL – I don’t think you should worry about a tariff with Mexico. The White House already backed off on that plan.
Mexico has $180Bn of foreign reserves. It could cover the cost of a wall from that wad of money and not feel it. Mexico spent $2bn of those reserves a week ago to stop the Peso from plunging. The intervention did nothing.
Over the next few months Mexico will spend more than another $13B of their reserves fighting the FX market. In the end they might be better off just caving to Trump versus an open ended run on their currency.
Give this story a few months before any conclusions are drawn.
EL – I’m delighted to see you back in print. Can you give us an update on your economic projections? Last words from you were that we were 70% sure to be in recession by now, and a 100% sure thing for a recession by June. Are you sticking with that?
Also, what happened to the Dow Tractor Beam of 17,300? I hope you did not short the market based on your own forecast.
The details on the Mexican FX intervention from the Wall Street Journal:
http://www.wsj.com/articles/bank-of-mexico-intervened-to-the-tune-of-2-billion-last-week-1456247456
bk:
While you are here. For the second time CAG backed off of acquiring Chrysler automotive (cars). I am hearing some of this was the result of Chrysler not wanting to part with Dodge vehicles. I suspect too, political environment may be paying a role in this
Run – Tks for the update. Chrysler is an interesting story. What is Chrysler?
– It’s a 100% private company. It is owned by Fiat who bought it dirt cheap.
– I’m sure that Fiat would like to sell the car divisions. At the “right” sale price for C-cars Fiat would end up with Jeep and Ram trucks for free. That would be a home-run outcome.
-Odd thing about Chrysler cars? None of them are made in the USA.
http://www.businessinsider.com/fiat-chrysler-is-doing-something-remarkable-and-taking-a-lead-in-the-auto-industry-2016-7
Chrysler cars is owned by foreign investors, the physical manufacturing assets are outside the border. If CAG were to buy C-cars it would have no consequence to the US. It is just moving paper around the game board.
I doubt that Trump understands who-owns-what, and what the consequences of tariffs are. Trump is creating confusion/uncertainty. Money stays in the wallet under these conditions. I don’t blame CAG for backing off.
Jeep, MiniVan, and from what I understand now Dodge would stay. UF and PF I believe is done now and ended last year (200 and Dodge Dart). Not trying to deceive you, just telling you what I know behind the scenes. The same occurred in 2015 also. This company has a joint venture and showed for the first time at the Detroit Auto Show.
We do agree about tax cuts and spending for policing the world.
Beene:
Come back when you can be more polite.
Run – you are right. The tax cuts plus wars of Reagan and Bush Junior pushed out the deficit.
Obama, on the other hand, increased income tax rates and capital gains taxes and special taxes (ACA). The Obama wars were smaller than the Bush’s. So you would think that the trend line on debt would be more stable under Obama then Bush or Ronnie.
Not the case at all. In the eight Obama years Debt Owed To The Public went from $6.3T to 14.4T. A 230% increase.
bk:
The cost of Bush’s programs >$5 trillion, the cost of Obama’s program $1.8 trillion. Bush left Obama quite a few issues.
If Reagan and Bush had been more fiscally sound in their policies.
Bush’s program costs versus Obama’s programs. Thank the Bushs and Reagan. Republican Congress blocked Obama’s initiatives. Go away bk. Give your fingers a rest.
What good is census data when they have acknowledged that people that don’t speak English don’t partake even when going door to door. California is quite famous for income inequality, but census numbers don’t show it. Gov’t numbers often hide the truth. LA county alone has more than 60,000 homeless in a multitude of homeless tent cities. They used to restrict these to under bridges, but now they have moved to the sidewalks.
The graphs – easily produced by any partisan political hack on either side. If you want to be taken serious, create your own with respectable data.
Just overwhelm dissenters with graphs and articles written by anyone and call yourself the winner. Yay! You won. Congratulation!