The Trump Electorate Found A Hole In Free-Market Theory

VERY interesting…a free trader admits one not-so-small hole in free-market theory. Here is Brian Domitrovic:

The Donald J. Trump electorate, successful as it was in vaulting its candidate into power in the 2016 election, confounded not merely the grandees of the Republican Party but advocates of the free-market movement in general. Here was the most charismatic force in Republican politics since Ronald Reagan attacking one of the verities of the Reagan Revolution: free trade. In office, President Trump had to pull rank on even his own officials and insist on putting tariffs in place, after he passed a tax cut. All this was consistent with the wishes of his electorate: that this administration cut tax rates and impose tariffs.

The advocates of free markets have not made peace with this turn of events, insisting that while tax-rate cuts are sound policy, tariffs are wrongheaded in so many ways, no matter their resurgent popularity among the deplorables. They have been true to their principles. Free-marketeers—myself included—have long said that the proper formula is tax cuts and free trade. Here was David Mcintosh, president of the inestimable free-market force the Club for Growth, earlier this month: the Club endorses “key free-market tenets such as free trade…and growth-oriented tax cuts.”

Free trade and tax cuts. There is a major contradiction in this combination. Taxation of foreign things is to be wholly opposed, and taxation of domestic things partially opposed. No foreign taxation, some domestic taxation. This is an inconsistency. Why can domestic taxation at some level (the level of a tax cut) be conceded and foreign taxation not be conceded at all?

It is no answer to say that the government must fund itself through taxation. If the government must fund itself through taxation, and free trade is also a must, then domestic taxation is held to be superior to foreign taxation on economic grounds. Yet nobody, in particular advocates of free trade, believes this. All the superlative arguments against tariffs apply as much to the standard forms of domestic taxation, such as the income tax. Tariffs raise prices, ruin supply chains, keep us from experiencing the best competition, bring on the cronyism, etc.—all of these nail the income tax too.

Read more: Forbes

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