In recent days, we have witnessed a series of Republican border tax proposals designed, it is claimed, to bring jobs back to the United States. This is going on against a legislative backdrop that is focused on building a wall between the U.S. and Mexico for the purpose of reducing the flow of undocumented people into the U.S.
Strangely enough, the bring-back-jobs effort is occurring at a time when the nation’s unemployment rate rests at 4.8 percent and there are 5.5 million unfilled jobs awaiting qualified applicants.
Instead of arguments about taxes and walls, what we may need are proposals about how to encourage some of the currently 10 million idle, working-age people already here to become equipped for unfilled jobs. These people are not counted as unemployed when the unemployment rate is tallied because they are not working or looking for a job.
In some cases, of course, there are discouraged workers who lost good-paying jobs when an employer who was unable to compete for American workers moved production to Mexico or other off-shore locations. But it was the presence of higher-paying employers in America that forced the move.
Unfilled jobs and a low unemployment rate tell us we are struggling with a transforming economy that requires better-equipped workers. Still, the lessons of special interest politics are easily understood. Political promises made in pursuit of national office may be honored whether they make sense for all citizens taken together or not.
Not to be bothered by facts about the current state of U.S. labor markets, the political debate now focuses on technical aspects of how to properly design and enforce border taxes and how the taxes will change competitive corporate behavior to help achieve the goals of “America First.”
Sadly, however, government mandates designed to punish firms that seek to serve consumers will do just the reverse. Instead of making America first, punishment by taxation will put us in second, third or fourth place as compared to where we might have been.
Political speech about competition from across borders has probably been around as long as borders have existed. To illustrate, consider the words from the 19th century French economist and journalist Frédéric Bastiat:
A French ironmaster says: “We must protect ourselves from the invasion of English iron!” An English landlord cries: “We must repel the invasion of French wheat!” And they urge the erection of barriers between the two nations. Barriers result in isolation; isolation gives rise to hatred; hatred to war; war to invasion. “What difference does it make? … Is it not better to risk the possibility of invasion than to accept the certainty of invasion?” And the people believe the story, and the barriers remain standing.
Yes, border taxes may reduce U.S. invasion by Mexican-produced automobiles bought voluntarily by American consumers. But in doing so, more costly U.S.-produced substitutes will replace the Mexican product.
When asked about this during the presidential campaign, then-candidate Trump suggested costs would not rise but then, perhaps after a bit more reflection, added ‘[M]aybe a person will buy fewer cars over the course of a lifetime. Who cares? We have to have — we have to bring back our jobs … We have to do it. We have no choice.'”
Who cares, if every consumer pays more? Really. And no other choice? Did he mean there was no other choice if he were to get elected?
Meanwhile, leaders of U.S. car producers may enjoy warmer White House greetings. But while the politically proper are celebrating America first, when the tariffs fall in place, all consumers taken together will be just a little bit poorer.
Even worse, perhaps, American children may have been taught by political rhetoric to think that somehow people south of the border are not quite as worthy as those on our side of the wall.
Freedom, after all, is fragile. We should handle it with care.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is an adjunct distinguished professor of economics with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
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