Paying For The Wall

Of all the many remarkable events of the past week, ranging from the curious to the alarming, today I wish to comment on the President’s actions and statements concerning funding the construction of a fence on the US border with Mexico.

In the space of a few days, President Trump and Republican leaders in Congress floated a wide variety of proposals to both encourage domestic manufacturing (by discouraging foreign imports), and also raise revenue for a border fence. What struck me was the comment made by many analysts “But wait! That tax/tariff/border adjustment/etc would raise prices for the American consumer!!”

Of course it would. Regardless of the mechanism, the whole point of protectionist economics is to “re-shore” manufacture of consumer goods — everything from socks and bobble heads to autos and HDTVs — away from low-wage countries and back to high-wage United States. As I understand it, this is what Mr Trump is referring to when he promises us all “really really good jobs”: we are going to assemble LCD displays for $30/hour at the new Magnavox plant in Kalamazoo, Michigan.

But to sell an LCD display assembled by happy Americans earning $30/hour, Magnavox will have to sell that display for $299. How can that compete with a Samsung display offered for $99? Well, that’s easy: the tariff  on imports from China will level the playing field: the Samsung will also cost $299.

That’s what a level playing field looks like: everything will be available to us in the US market at prices as if made in the USA. This could in fact help create some “really really good jobs” I suppose, but it is possible that we will not be able to afford the consumer goods that we manufacture. The result: higher wages, even higher prices. That’s inflation, which erodes the standard of living.

That’s okay, if our values follow suit. If we can break our fascination with the latest i-device, maybe we will be okay when only the top quintile of Americans can afford them. There are some things that are not subject to foreign competition, and these things might form the core of the new, protected, isolated economy: food, shelter, and education.

If we are all right working “really really good jobs” for the benefit of the very wealthy, and are content to spend our evenings sharing excellent meals with our neighbors on the porches of our cozy homes — because we can’t afford TV — then this could all work out. Perhaps this is the Return to the Good Old Days of America that I hear conservatives refer to from time to time. The path from here to there is likely to be tumultuous. It remains to be seen if Mr Trump will stay in office long enough to see us through the transition.

I’m all right with this vision, because I am already a low-income person with a very modest standard of living. I’m just not sure the American middle class is really ready to join me here.

That’s what I think any way. How do you see it?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s