PICK A FIGHT WITH OUR FOUNDERS ON TARIFFS, TRADE, AND IMMIGRATION? NO THANK YOU.
Tariffs which tax imports, cutting off trade with other nations, and anti-immigrant policies were declared on July 4, 1776 to be 3 of the 27 specific causes of the Revolutionary War which our nation’s Founders, America's original Patriots, waged against the feudal unitary executive, the English King, and His policies in the American Colonies.
The American Colonies had already been around for 156 years, since the November 21, 1620 arrival of the Mayflower with 102 Pilgrim souls, 49 of whom died, while 53 survived the privations, disease, and starvation of that first winter with the help of native peoples. Our Founders understood the life-and-death stakes, knew what made the American economy work, and what was in the way of their prosperity. It was the King, then our unitary executive and our chief decider of policies and law, who was strangling and sabotaging the Founder's "unalienable rights" to “life, liberty, and the pursuit of happiness.”
During the Revolutionary War, American Patriot soldiers, raiders, and marines fought and died for six and a half years in running battles and raids against the King's troops. 14 of the 56 signers of the Declaration of Independence (25%) were killed or died after torture. Another 12 of the 56 signers (21%) had their homes ransacked and burned, while 2 signers lost sons in the Revolutionary Army; and another signer had 2 of his sons captured. Their rebellious countrymen lived under the constant threat of British reprisals - burning, looting, harassment, arbitrary arrest, and torture.
The individual liberty, property rights, religious freedom, and economic prosperity which the Founder's own immigrant forebears had come to America to secure for themselves, their families, and their communities, meant everything to them. They sacrificed their lives so we might not live under the unitary tyranny of any single decider, a King, and His group of privileged and connected friends, running our lives and determining the fate of all the People.
From 1775 at the battles of Lexington and Concord, through the 1776 Congressional Declaration of war, until 1781, our Founders directly challenged the 156 year colonial rule of America by the unitary executive, the English King. In 1781, they won as the King withdrew his troops from the American Colonies. The American experiment in democracy was born - to a rough start operating under the Founder's 1781 Articles of Confederation. The thirteen colonies, now states, began fighting among themselves – over commerce, taxation, borders, and myriad other issues.
The Founder's regrouped in 1787, held the Constitutional Convention, and our Constitution was ratified in 1788 "to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity…" These words, together with the first ten constitutional amendments, our Bill of Rights, defined the Founder's core purposes for our American government. Federalism was born as three co-equal branches with separation of powers among all three - Congress, Executive (Presidency), and Supreme Court.
But freedom is not free, it requires vigilance to avoid being trampled by the selfish interests of a privileged few over the broad common interests of the People.....
WE HAVE FORGOTTEN HOW WE BECAME PROSPEROUS….
The economic issues here are not directly related to the illegal bioweapon, racketeering and rights program and litigation - but are directly on point regarding economic privation, subjugation, and inequality, which the King, the unitary executive, had imposed on His American Colonies. Those failed policies, which angered our Founders to war, have crept back into the national conversation – disguised as opportunities.
But those failed policies – tariffs on imported products protested in 1773 at the Boston Tea Party, protectionist cutting off of trade with other nations to favor the King's mercantile friends over Americans, and anti-immigrant policies which retarded American economic growth - were 3 of the 27 major policy disputes which caused the Founder's to engage in the Revolutionary War against the King. They fought to banish those bad policies, which they knew as practical people including tradesmen, farmers, merchants, bankers, and news publishers, were holding back Americans seeking prosperity, and constraining their freedom from the King's arbitrary police powers and His favoritism of a few privileged people over the many others.
Since then, regular Americans - including our family - my great-great grandfather, a religious Quaker, Civil War US Army Private 2nd NY Cavalry bugler, and Medal of Honor winner at the Battle of Appomattox which ended the Civil War in 1865, as well as my own father and uncle - and millions of others from activists to veterans - have repeatedly fought to defeat those same bad policies - which favor a few, perpetuate their economic privilege, and impose added taxes called tariffs, as well as privation, subjugation, and inequality on regular, everyday people – here in America, and around the world.
.....BY BUILDING SHARED PROSPERITY.....
To better understand the key components which make up the American economy, American prosperity, and the impacts of tariffs, check out these links:
Spending and investment make up our $29 trillion total Gross Domestic Product. Note that federal government spending at Item 3 in this linked article is actually about $7 trillion. The $1.8 trillion figure is what the government spent above what it took in as taxes. That spending above tax revenue is the federal deficit, the amount of debt ($1,800,000,000,000) we are passing on to our children from Washington, DC for that one year period:
https://www.thebalancemoney.com/components-of-gdp-explanation-formula-and-chart-3306015
Consumer spending powers the US economy and our private sector investments in productive capacity:
https://www.visualcapitalist.com/americas-19-trillion-consumer-economy-in-one-chart/
Tariffs reduce economic activity - tariffs have historically reduced trade, overall investment, asset values, and personal incomes in the American economy, just as they have in other major economies throughout history:
https://www.britannica.com/topic/Smoot-Hawley-Tariff-Act
Job creation - some industries and services create more jobs than others. Job multipliers by industry type and how they build American employment:
https://www.epi.org/publication/updated-employment-multipliers-for-the-u-s-economy/
Wealth inequality continues to grow - over the past thirty years under the tax and economic policies set in Washington, DC: beginning in the early 1980s:
https://news.research.stlouisfed.org/2019/07/fred-adds-wealth-distribution-data/
.....BUT OVER THE PAST FORTY YEARS OF SKEW TOWARD THE FEW, WE HAVE LOST OUR PATH TO SHARED PROSPERITY FOR ALL
US tax and economic policies of the past 40 years have shared increasing economic productivity in the private sector very unevenly, strongly favoring the moneyed (investors) over those providing the talent to get the job done (labor) – that’s what this chart shows:
Compensation has skewed to favor fewer people:
The hourly wage floor provided by the minimum wage has been falling dramatically since 1968. It's purchasing power is now back to its 1955 level while the real costs of basic food, energy, shelter, and health care have risen significantly. This 57 year failure to increase the real minimum wage as economic productivity has risen has eroded pay increases across all low to medium hourly wage levels. The net economic effect of this Congressional policy failure is that the purchasing power, living standards, and private sector economic growth driven by mass consumption have eroded across the board for virtually everyone, including investors in private sector companies who would benefit from the earnings growth driven by mass consumption:
Healthcare costs have grown dramatically faster than our economy, to consume twice what peer nations spend:
While life expectancy has fallen substantially below peer nations with lower health care costs:
And, housing costs have also grown dramatically faster than incomes since the Savings and Loan industry was destroyed by Congress in the 1980s with its effective repeals of Regulation Q and Glass-Stegall:
https://www.visualcapitalist.com/median-house-prices-vs-income-us/
As the charts above show, labor's total share of private sector productivity growth has been reduced, the share of compensation across all labor has skewed toward fewer people, health care costs and housing costs have risen much faster than incomes. With less money to spend on discretionary purchases beyond the basic necessities of shelter and health care, real mass purchasing power of the many for all other goods and services has declined much faster than our overall economy has grown. So, private sector economic growth has deteriorated badly.
This 40 year policy mistake has resulted in a precipitous decline from 6% - 7% overall private sector growth shared broadly in the 1960-70 period to less than zero. Effectively, our private sector economy has gone from robust growth to net shrinkage over the past four decades. Unsustainable US federal government borrowing props up our entire economy.
Economic growth per year: https://fred.stlouisfed.org/series/A191RL1Q225SBEA
Federal borrowing per year: https://fred.stlouisfed.org/series/FYFSGDA188S
Since around 2000, our ever growing federal government debt at 6% of GDP has propped up 3% total GDP growth across our entire economy. You can see this in two Federal Reserve charts above - federal borrowing per year exceeds total growth for our entire economy per year in recent years. That’s how the Soviet Union went into long-term decline – a shriveled private sector and government override led to its demise.
The mass purchasing power decline among the many in the US will get still worse as tariff driven price increases take effect. Tariffs fall hardest on lower incomes since everyday people spend much more of their total income on tariffed basic goods like apparel, toys, and appliances than high income people. All will have less to spend elsewhere in the private sector economy, so it will shrink still further, taking still more private sector jobs with it.
Income inequality and wealth ditribution will continue to skewi upward in the US – still more uneven – with the planned 15% further tax cuts for pass-through entities, such as LLCs and LLPs. These are typically used by private equity investors and higher income professionals such as doctors, lawyers, and small to mid-size private business owners. They are the current approach to providing lower than salaried worker tax rates, and still more tax cuts for those higher incomes. Their tax rates are typically reduced by around 30%, some as much as 50%, by using this form of legal entity. This would be fine if the federal government weren't running gigantic unsustainable deficits, around 6% of GDP every year. But.....
The current economic and tax policy approach is the perfect recipe for a debt crisis. Higher interest rates are necessary to attract investor funds to continue financing unsustainable growth in federal government debt. This government borrowing crowds out both private sector borrowing and the private sector investment which would use that borrowed money to create more private sector jobs in America. More money spent on interest by government to support its ever increasing debt also reduces government spending on other goods and services such as roads, bridges, parks, education, health care, basic research for human progress in technology and medicine, and other public services.
AMERICA WAS FOUNDED, GREW, AND PROSPERED ON MARKET-BASED DEMAND DRIVEN ECONOMICS
There is another way. We've used it in the past. It works and gave us 6% to 7% private sector growth which also supports government spending with sustainable tax revenues instead of more and more debt. A virtous cycle which creates sustainable economic growth instead of the current down-the-drain spiral toward a debt crisis.
Mass consumption driven by broadly shared productivity gains and higher tax rates in higher incomes gave us robust private sector growth in the 1960s and 1970s. It gave us sound government finances then, since federal government debt grew more slowly than the growth rate of our economy. It’s the only way back toward real prosperity for Americans, along with fixes to housing finance and health care productivity and costs. It’s the only way forward to improving federal government finances before a debt crisis does profound long-term damage to all Americans and forces profound cuts in government services at all levels, including state and local governments faced with failing economies, high unemployment, falling tax revenues, and the need to balance their budgets as they must each year. Those who are wealthy, with higher incomes, will not escape these consequences. Investments in the means of production, whether through the stock market, through corporate debt including bonds, or through owning private businesses, are worth less, or perhaps nothing at all, if Americans cannot afford the products and services offered by those private sector businesses.
Mass consumer demand and innovation have for centuries driven economic growth in basic consumer goods and services, in mass adoption of new technology products like cell phones, and innovations in services like two hour home delivery. Consumer demand also drives investment in business productivity innovations, such as more efficient manufacturing plants, larger airplanes, and expansions to deliver services on a national or global scale. The need for large scale investments comes only when a large number of consumers in a large number of places have funds to spend on those goods and services.
You can clearly see the actual negative effect of lower tax rates for high wealth and income investors on American economic growth in recent American history in the pdf chart below. Tax cuts for the wealthiest put more money in their hands. But with no mass consumer demand worth investing in to produce more goods and services, more funds in the hands of the wealthiest flow toward price action speculation, not toward investment. Fewer jobs are created as private sector investment dwindles. Overall demand thus continues to shrink, and the new job opportunities more consumer demand would bring disappear and are replaced by layoffs, all pushing overall consumer buying power down as our economy continues to dwindle. This sort of down-the-drain spiral is created by current economic and tax policies, which give us protectionism, higher costs, and short-term favoritism toward a few over the many.
WE KNOW PROTECTIONIST, TARIFFED, COMMANDED ECONOMIC MODELS DON'T WORK
The last time someone tried to command their economy with protectionism, favoritism, and tariffs, they got the Soviet Union - a command economy with state control of key industries, media, arts, and sciences, imports effectively banned, production quotas on home country produced low quality goods leaving consumers no better or less expensive choices – all forced on consumers and driven by government policy, not by consumer demand. The impoverished, unproductive Soviet Union thus economically and then politically collapsed under its own weight.
The Soviet bloc was crushed by its own sclerosis, driven by a few key government officials into the ground. Western capitalism with its free markets, multiple competitive choices among products and services, and innovation to drive better, faster, cheaper products and services, prevailed over centralized command and control by a few. In 1987, US President Reagan asked Soviet leader Gorbachev to tear down Soviet bloc barriers and allow the free flow of people and ideas, to introduce free markets so consumers could flourish, and free the peoples of the Soviet bloc to join the rest of the world. Well timed to meet the moment, the approach worked. https://banbrainhacks.org/early-bioweapon-sedition
The time before that it was 1930s American protectionism and tariffs that gave us the Great Depression as stock prices crashed in anticipation of the imposed tariffs which collapsed trade by 67%. Agricultural exports and prices collapsed in an era when many more people lived on farms. Banks failed and depositor funds fled, so bank loans could not be made. It took World War II and massive government spending on war goods to get the American economy back on its feet.
At the end of that war, we had about the same amount of debt to total GDP as we have today. But we had something to show for it then - global fascism was rolled back. Consumers came back from war and the post-war boom was off and running. Inflation rose briefly but industry converted back from war to consumer products and 6-7% private sector economic growth led a private sector investment boom. So, we know how to meet this moment and beat back bad economic and tax policy.
MARKET ECONOMIES DO WORK - WE HAD ONE THAT DID FOR DECADES
Putting a floor under real wages by increasing the federal minimum wage beyond its current 1955 purchasing power (shown at the link above) would be a critical step toward curing this problem. It would increase total demand on private businesses for goods and services, helping to restore private sector economic growth, which is the key to our long term prosperity. By itself, it's not enough - but it would help begin to turn things around. https://livingwage.mit.edu/
Combining increased consumer purchasing power for spending on essential goods and services, with higher tax rates on the highest incomes, would help put both the private sector back on a real growth path and the federal government back on a firmer financial footing while moving it away from piling on still more debt. Reforming health care to drive public and private expenditures on health care costs toward becoming a smaller portion of our total economy, and improving life expectancy to peer nation levels, are also key. Easing the housing financing crisis to drive more affordability of housing in employment centers will reduce the portion of income which must be spent on shelter, further improving consumer purchasing power.
These key reforms would in turn encourage more long-term private sector investment to meet increasing consumer demand. That feedback mechanism of market demand and pricing driving private sector business investment is the virtuous cycle which drives capitalism, a healthy market economy, and broadly shared prosperity with good jobs. America worked that way in the 1960s, 1970s, and throughout much of American history – except when we lost our way, such as in the tariff and trade collapse driven crash of 1929 into the 1930s.
BAD POLICIES DRIVE BAD OUTCOMES, EFFECTIVE LEADERS RECOGNIZE THIS AND CHANGE COURSE
Bottom lines - we have continuing reckless, irrational economic and tax policies - protectionist tariffs which undermine our own consumers and our international competitiveness, the continued skewing of incomes with tax favoritism and de facto subsidies, and an impending debt crisis - all of which undermine ordinary Americans and our private sector economy. We have durable failures in national policy, such as health care cost and access, giving shortened lives at twice the cost. We have a government which wants to choose winners and losers, controlling some, protecting some, trampling others. These policies have eroded private enterprise and innovation, and have added to our national debt at unsustainable rates since the 1980s. This continuing and future burden squanders our children's heritage, something no generation of Americans before us has done.
Meanwhile, Senate leadership organizes tie votes and capitulation in displays of cowardice over economic policy, and claims its own helplessness, effectively abdicating the policy leadership role it was constitutionally formed and is mandated to provide as a simple majority one person-one vote legislative body. Congress as a whole - Senate and House - continue to refuse to fix durable policy failures in thoughtful, rational ways. Instead, they have ceded their policy responsibility and authority to phony emergencies ginned up to implement irrational and dogmatic policies.
Our national government run this way is not our constitutionally guaranteed system of equal protection of life, liberty, and the pursuit of happiness for all of us. Nor is it capitalism and free markets as we Americans have understood that for generations. It's certainly not the liberty, free expression, freedom of religion, with personal choices made by individuals about their own lives, that our Founders fought to give themselves and all of us.
Rather, God and manifest destiny now come to all Americans who are chosen by government - as a government operated illegal bioweapon aimed at Americans by their own government to subsume and destroy individual rights, family, marriage, religion, property, and enterprise at will. Meanwhile Congress also abdicates its constitutional policy and fiscal responsibilities to phony emergencies and irrational economic and tax policies which benefit few and hurt many. We're okay with this?
We do know how to fix this. It begins with our choices for Congress.
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A scholarly Federal Reserve Bank paper below affirms that more progressive tax rates are a key driver of long-term economic growth and of sustainable government finances which don't crowd out private sector investments. Also see our Founders' views on tariffs and taxes which sparked the 1773 Boston Tea Party, the King's 1774 retaliation, and the 1775 opening conflicts of the Revolutionary War in and around the Cradle of Liberty at https://banbrainhacks.org/tariffs-and-taxes
Our Founders also held strong views about immigration's role in national prosperity. In our Declaration of Independence, they declared the King's barriers to immigration and naturalization as a cause of their war for independence, see the Right Sized Workforce webpage at https://banbrainhacks.org/right-sized-workforce
You can clearly see the actual negative effects of lower tax rates for high wealth and income investors on American economic growth in recent American history below. The table shows a simplified view of American economic growth since the early 1960s.
Private sector economic growth has collapsed since the dramatic tax cuts on the highest incomes and highest valued estates beginning in the early 1980s.
Unsustainable debt-fueled growth in federal government spending has added about $35 trillion of national debt since the 1980s while private sector real growth has declined from around 6% per year to below 0%.
Lowering tax rates for higher incomes has increasingly driven investors to chase short-term gains from speculative investments and by manipulating company finances, and to disfavor investing in the challenge and risks involved in building and growing companies long term. This has led to a shrinking private sector economy which will be unable to support continuing long term growth of our national debt.
A similar scholarly treatment affirming progressively higher tax rates for higher incomes and wealth as a key tax policy driver of long-term economic growth is shown below, published by the Federal Reserve Bank of Dallas.
FRB Dallas is part of the nation's 12 district Federal Reserve system, a self-sustaining system created in 1913 under President Teddy Roosevelt to reduce the number of bank failures and currency collapses which had led to nationwide financial panics and stifled economic growth in prior decades.
This system was bolstered by the Federal Deposit Insurance Corporation in 1933, early in the Great Depression to restore confidence in the banking system after many early 1930s bank failures left depositors with no money as they failed. The FDIC deposit insurance fund is funded by an insurance premium on deposits paid by member banks. Both the Federal Reserve and FDIC set policy and conduct routine audits of member banks to safeguard the nation's financial system.
Together, the FRB and FDIC keep short-term monetary policy out of the hands of politicians who are more concerned about their next election than the long-term health of the American economy, and operate professionally to sustain the relative stability of the banking and payments system which our economy, companies, and jobs rely on.