by Dr. Thomas Patterson | Mar 29, 2025 | Opinion
By Dr. Thomas Patterson |
President Trump, by his own declaration, loves tariffs. In fact, tariff is his “favorite word.” Tariffs purportedly produce funds, “billions and billions, more than anybody has ever seen before,” which can be used for essential spending or to reduce taxes and meanwhile will “bring back jobs.”
The president is all in on his enthusiasms. As matters now stand, he is imposing both universal baseline as well as country-specific tariffs, affecting more than $1 trillion of imports. This compares to the mere $380 billion in tariffs passed in 2018 and 2019 by the first Trump administration but will rise to $1.4 trillion when/if the temporary exemptions for Mexico and Canada expire in April.
There is a logic to tariffs which appeals to those with a protectionist bent. If foreign producers are selling in your country and taking profits which could otherwise be earned by domestic enterprises, why not make the cost of doing business higher for them and keep the profits at home?
Yet the history of tariffs is, to put it kindly, dismal. The 1930 Smoot-Harley tariff is America’s best known and most instructive experience with protectionism. In 1929, the League of Nations passed a resolution declaring that tariffs were destructive and should be ended by all. When Smoot-Hawley was introduced, Franklin Roosevelt campaigned against it. After the bill passed, 1,028 economists and even some business leaders like Henry Ford urged a veto.
President Hoover termed the measure “vicious, extortionate and obnoxious.” He signed it anyway at the urging of his advisors. Americans, especially the agricultural sector, were facing a perceived problem with overproduction, mainly due to electrification and other laborsaving innovations. Republicans generally agreed that prices were too low, and it would help pull us out of our economic slump if American producers were shielded from foreign competition.
Big mistake. Trading partners had warned of retaliation and indeed boycotts and reciprocal trading restrictions soon broke out. Canada, our most loyal trading partner, imposed tariffs on 30% of our products and formed closer economic ties to the British empire. France, Britain, and Germany all formed new trading alliances.
Yet initially, the medicine seemed to be working. Factory payrolls, construction contracts, and industrial production all profited from the reduced market competition.
But the loss of the inherent advantages of trading soon became clear. From 1929 to 1933, U.S. imports fell 66% and exports decreased 61%. World trade nearly ground to a halt, falling by two-thirds from 1929 to 1934.
Unemployment was about 8% when Smoot-Harley was enacted, but the promises to lower it further never panned out. The rate jumped to 16% in 1931 and 25% in 1932-33, falling back to pre-depression levels only during World War II.
Tariffs didn’t cause the Great Depression, but they clearly deepened and prolonged it. Without Smoot-Hawley, it might have just been another temporary recession, not much worse than many other economic downturns in our history.
The take-home message is that free trade is a voluntary interaction that reliably promotes prosperity, both in theory and in practice. It is a classic win-win for participants, in contrast to protectionism which is based on the principle that the stronger party wins by defeating the weaker one.
The 2018-19 tariffs imposed by Trump and expanded by the Biden administration proved the point once again, by reducing long-term GDP by 0.2% and resulting in the loss of 142,000 full-time equivalent jobs.
Still, Trump favors strength and domination, based on negotiations where he “holds the cards.” The lack of success last time has not dissuaded him from unleashing a barrage of tariffs with impositions, pauses, increases, suspensions, and escalations that have left producers around the world desperately scrambling to protect their businesses by anticipating his next move.
Trump is playing with fire here. If he does ignite a trade war that results in another downturn, he may find that the American economy is not as resilient as it once was. Decades of uncontrolled deficit spending have left us deeply in debt and without the reserves necessary to withstand much more fiscal abuse.
The lessons of history and the laws of economics are clear. Tariffs don’t work. Proceed with caution.
Dr. Thomas Patterson, former Chairman of the Goldwater Institute, is a retired emergency physician. He served as an Arizona State senator for 10 years in the 1990s, and as Majority Leader from 93-96. He is the author of Arizona’s original charter schools bill.
by Dr. Thomas Patterson | Aug 29, 2024 | Opinion
By Dr. Thomas Patterson |
Kamala Harris in her nomination acceptance at the Democratic National Convention assured the roaring crowd that she would “never stop fighting” for the American people and that she would “blaze a new way forward.” The speech disclosed no details, but she appeared to have in mind merely adding to the benefits that the welfare state bestows on grateful voters.
Subsidies for home mortgages, forgiveness of student loans, and free universal preschool have been dangled as possibilities. However, Harris and the other purveyors of free stuff have a big problem. They are running out of other peoples’ money to give away.
It’s not just America but the world’s advanced economies who are seeing the bill come due for decades of social spending exceeding revenue. American leftists like to chide fiscal conservatives for fretting about high tax rates, but economists now note that some high-tax European states are approaching the peak of the Laffer curve, the point at which raising tax rates fails to raise additional revenues. That means hitting the wall.
Western politicians over the last century developed a different style of campaigning for office. Rather than emphasizing the common good and overall strength of the nation, they competed on the basis of what government services they could provide to individuals and groups.
The responses to the Great Depression and the COVID crisis were especially harmful. The New Deal failed to end the depression. We have WWII to thank for that. But the traumatic experience convinced many Americans to think of government as their benevolent caretaker.
The economic deprivations caused by the COVID crisis were due to mostly self-inflicted wounds like the economic and educational shutdowns. Worse, long after the crisis had passed, the checks kept coming to Americans who were not impoverished. The “emergency” expenditures morphed into entitlements.
America has developed a culture of spending which caused the national debt in 2023 to exceed 120% of GDP while 100% has long been considered the outer limit of acceptable indebtedness. We also have hundreds of trillions more in future obligations to beneficiaries with no funding source available.
Time and demographics are not on our side. In just the next 12 years, aging baby boomers will reduce the ratio of workers (25 to 64) to retirees (65 and older) from 3:1 to 2:1. The fastest growing demographic group is those 85 and older, who require extra funding. Moreover, increased security risks like war and terrorism will create additional budgetary stresses.
There are fewer alternatives to reduced spending than ever available. Tax increases are politically unpopular and often don’t produce the hoped for outcomes because they reduce productivity. European countries have about 50% higher tax revenues than America, yet their real GDP per capita is lower, even factoring in the government services and subsidies they receive.
The era of low interest rates and the accompanying “sugar high” is over. The higher cost of debt financing will inevitably impair the ability of succeeding generations, already tapped out, to shoulder the burden of our selfish spending.
By now, we’ve breezed past all the easy fixes. We are facing severe warning signals, and all the red lights are blinking. Yet in spite of the urgent need to change our ways, both political parties studiously look the other way. Getting elected is still the imperative that trumps all others.
The general accounting office (GAO) recently made recommendations for minor adjustments to federal government procedures that would save $208 billion over the next decade. The major one was equalizing payment rates for offices determining Medicare benefits. The proposals are non-controversial and politicians supporting them could take cover by pointing out that they are endorsed by a non-partisan agency. The response has been…crickets.
Scores of scholarly papers have been written on how to reduce government waste, how to expedite permitting, and how to recover COVID over-payments, all to no avail. The politicians just aren’t that interested and, sadly, neither is the public.
We’re hearing a lot about democracy lately. Both parties claim the other one is an existential threat. Advice to would-be political leaders who are courageous enough to go beyond pontificating and do something that might actually preserve our democracy is simply this: cut the spending.
Dr. Thomas Patterson, former Chairman of the Goldwater Institute, is a retired emergency physician. He served as an Arizona State senator for 10 years in the 1990s, and as Majority Leader from 93-96. He is the author of Arizona’s original charter schools bill.
by Dr. Thomas Patterson | Feb 3, 2022 | Opinion
By Dr. Thomas Patterson |
On Fox News recently, the leader of an “anti-work subreddit” with over 100,000 followers, caused a stir by claiming that “laziness” was a virtuous lifestyle choice, which should be freely available. She depicted work as a form of oppression that the woke are justified in resisting in principle. The guest was a part-time dog walker who hoped to someday “teach philosophy.”
Shrug this off at your peril. Like many other threads now coursing their way through our culture (CRT, BLM, MMT, etc.), anti-work has deep roots in Marxist ideology.
In “The Abolition of Work,” Marxist author Bob Black decades ago argued that the only way for humans to be free is to reclaim their time from jobs, the “source of most of the misery in the world.” “No one should ever work.”
Instead, they should indulge in voluntary free play. Only thus could they avoid the subordination and degradation of the workplace. Nietzsche argued that work “uses up a tremendous amount of nervous energy and takes away from reflection, brooding, dreaming…”
It’s not just goofy dog walkers or cranky proto-communists in the anti-work bandwagon today. Relief measures implemented when our response to COVID dried up the jobs markets are no longer necessary, yet a great many Americans are simply disdaining a lifestyle that includes working. 4.5 million people quit their jobs in November alone. There are currently 12 million jobs available. Services are becoming harder to obtain, and empty shelves are popping up.
But work from the beginning has been a cornerstone of American culture. America and Canada were settled by Europeans who came to stay and create a better life. Land and other resources were plentiful here, but labor was scarce. So work was necessary to survive and prosper.
In Europe, idleness was admired. Gentlemen were hereditary landowners who believed work was a humiliating sign of failure, best left to the masses.
In America, by contrast, work was honored and rewarded. Common people could become landowners simply by “working” the land. Small farmers, shopkeepers and artisans, workers…all were the backbone of the economy.
DeTocqueville in the 1830s noted the astonishing industriousness of Americans. “An honest day’s work for a day’s pay” was the prevailing code of conduct.
With a productive private sector and a modest, non-intrusive government, America prospered unimaginably, transforming itself from just another British colony to a worldwide beacon of opportunity and prosperity.
But work provided more than material comforts. It endowed each worker with dignity, a sense of self-worth and personal agency. Each citizen could take justifiable pride in providing for and protecting their family.
During the Great Depression of the 1930s, many Americans dreaded material poverty less than the loss of dignity from not working. Written materials from that time confirm that severe economic hardship was considered temporary and survivable, but loss of dignity crippled the human spirit.
We now know that both economic prosperity and dignity eventually survived. But today the connection between work and dignity seems to be diminished. Dignity itself seems to have fallen out of style. Our leaders emphasize made-up rights, inequality, and income guarantees, but dignity is mostly ignored.
In the 1990s, the Contract with America implicitly established the notion that the Great Society welfare programs of 30 years previous had been a colossal failure. By disconnecting beneficiaries from work, they had consigned generations of Americans to lives of dependency and poverty of spirit.
The reforms enacted by the states consisted mostly of work requirements for able-bodied adults on welfare. Despite their success, over time the requirements have gradually been eroded by the hostile bureaucracy that administers welfare programs.
Now Democrats, once the party of work and workers, are seeking to eliminate work requirements altogether. Work is seen as an injustice that particularly minorities and poor people shouldn’t have to endure.
Unless workers work, there are no goods and services produced and the standard of living falls for all. A society where citizens vie to avoid work and live off the productivity of others, and where politicians scramble to accommodate them, is in danger. Ahead lies chronic economic weakness and vulnerability to tyranny.
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