Want to get rid of our burgeoning national debt? Then get rid of free trade and the resulting trade deficits that created it.
The main reason our nation is nearly $20 trillion in debt is not due to entitlements like Social Security. It’s not military spending. It’s not Medicaid or Medicare. It’s not dedication to education. It’s our free trade policies that displace American workers and ship jobs overseas to workers in foreign countries who pay no taxes to America.
And since we import so many products made by foreign workers who pay no taxes to America, our inability to adequately fund popular programs like Social Security and Medicare makes it look like the programs themselves are the problems.
But the real problem is that our trade deficits have made our country amass a mountain of debt, on which we must pay interest. We paid $229.2 billion in interest on our national debt in 2015. This is what makes these programs seem perpetually unaffordable.
According to Gus R. Stelzer, former senior executive of General Motors (retired in 1976), and author of “The Nightmare of Camelot” (published in 1994), “state and local agencies are proposing new taxes to make up for the shortfall of revenue created by trade deficits.” This rings true especially today. In absence of raising tariffs (an indirect tax) on imports, we are faced with direct taxes on domestic goods. Certain states are already proposing an increase in gas taxes, which is a tax everyone must pay, unless you live close to your job in a large city and are able to depend upon public transportation.
Tariffs on imports are a discretionary tax. Buy the import? You pay the tax. Buy the American-made product? You don’t pay the tax.
According to The Coalition for a Prosperous America, “Trade deficits have been a substantial drag on economic growth. Our 41 years of trade deficits have played a major role in the hollowing out of our manufacturing industry. Since the year 2000, the U.S. has lost 28 percent of its manufacturing employment, around 5 million jobs. According to CPA estimates, eliminating the trade deficit would lead to the creation of over 2.5 million new jobs.”
According to the Made in USA Foundation, “Canada charges 300 percent duties on American dairy products and chicken. Our very ‘nice’ neighbors to the north have been screwing us on trade in dairy, chicken, beer and autos for years.”
You might think that it helps your Uncle Bob if he buys cheap T-shirts made with imported cotton by workers in foreign countries, but it hurts Uncle Sam. Since 97 percent of all clothing purchased in the U.S. is imported, that means very few Americans are working in the U.S. apparel industry, and very few are paying taxes to America to pay for the things that the American people have demanded from the use of their tax dollars (national defense, infrastructure, education, Social Security, etc.)
Not only were our Founding Fathers against free trade, so were several authors who lived in the same era and coined books on what was best for our economy. Daniel Raymond, author of “Thoughts on Political Economy” said the following in 1820:
“It is the duty of the legislator to find employment for all the people, and if he cannot find them employment in agriculture and commerce, he must set them to manufacturing. It is his duty to take special care that no other nation interferes with their industry. He is not to permit one half of the nation to remain idol and hungry, in order that the other half may buy goods where they may be had the cheapest.”
Republican President William McKinley also had a few things to say about the word “cheap,” saying, “I do not prize the word ‘cheap.’ It is not a badge of honor. It is a symbol of despair. Cheap prices make for cheap goods; cheap goods make for cheap men; and cheap men make for a cheap country.” Free trade is nothing more than a feeble attempt to generate national prosperity on the cheap. And, as is evident from our persistent trade deficits and budget deficits, it isn’t working.
Rejecting free trade is not only just about rejecting the offshoring of jobs to foreign countries; it is also about national independence. When you celebrate Independence Day on July 4th, are you really celebrating American independence or merely just enjoying an entertaining fireworks show? America can no longer be an independent nation if the producers who supply our manufactured goods are based in other countries. We should be celebrating our Declaration of Independence, and not some misguided declaration of interdependence.
There are many advocates, and rightly so, of American independence from foreign oil. But what about American independence from foreign apparel and the like? Thomas Jefferson, who once advocated free trade in his early days, later said this: “…experience has taught me that manufacturers are now as necessary to our independence as to our comfort: and if those who quote me as of a different opinion will keep pace with me in purchasing nothing foreign where an equivalent of domestic fabric can be obtained, without regard to difference of price…”
Andrew Jackson said, “A careful Tariff is much wanted to pay our national debt, and afford us the means of that defense within ourselves on which the safety and liberty of the country depend.”
Our politicians should not allow American workers who abide by American laws to be victimized by workers in foreign countries who do not abide by American laws, pay no taxes to America and, as President William McKinley said, “contribute nothing to the progress and glory of the nation.”
A tariff similar to what President Theodore Roosevelt talked about would be in order for today’s economy. Teddy Roosevelt once said that tariffs “must never be reduced below the point that will cover the difference between the labor cost here and abroad.” We might refer to this today as an “equalizing tariff,” or a tariff that “equalizes” production cost burdens between competing producers.
Any trade policy will create both winners and losers. With free trade, the losers are created because they are forced to compete directly with foreign, lower-cost producers on an un-level playing field. At least with a protectionist trade policy, losers are created because they end up not winning against competitors that are on the same, level playing field, for whatever reason. This could be the result of bad management, or failure to innovate and adapt, etc. But it sure isn’t because one producer had an economic advantage over its competitor.
And, can’t even free traders get behind a system like that and root for the producer that wins a fair competition because that producer was actually better, more efficient, with a stronger desire to win than his or her counterpart? American producers might become more focused on and hungry for winning if they knew that the odds weren’t stacked against them in a predatory, contrived, rules-are-for-fools, global economy.