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Clifford Rieders

A Shot in the Foot

I was talking with an old friend, a self-described “lefty,” and he was not talking about using his left hand either. He was decrying President Trump and the horrors that he believes Trump will bring upon the United States and the world. I said to him: “Don’t worry about it, Fred. Trump will shoot himself in the foot before he gets his gun out of the holster.” I did not think I would be correct so quickly.

President Trump has a historic opportunity to remake America in some very positive ways, but he seems hellbent on going about it in a way which is not only obnoxious but, more importantly, is counterproductive. Take tariffs for example. President Trump is using tariffs, in his words, as a national strategy to cut down on the importation of fentanyl and illegal immigrants. That is not what tariffs are for.

At the time of the founding of this Republic and up until the days of the federal income tax, tariffs were widely used to finance the federal government. Never mind that tariffs represent trade policy, revenue raising, and international diplomatic relations more than balancing the budget.

Tariffs have always been a sledgehammer, an unguided missile, and typically ineffective to do anything more than stir up international discord. Tariffs and similar punitive trade policy have always been part of the reason why nations go to war. Tariffs have the ability to isolate some trading partners, but not others. They anger friends and create more angry enemies.

A better idea than punitive tariffs is the concept of imposing levies on countries that utilize cheap labor to exploit the poor and underprivileged. Nations which utilize their own underpaid labor to wreck American markets should face a wage parity tax, requiring those nations to increase their workers’ wages to a level which would make American goods competitive. Ideas such as a wage parity tax have also gone by the wayside as unworkable and inevitably raising the cost to American consumers.

The fact is that Americans buy Chinese goods because they are less expensive. Once upon a time, I represented a business in Williamsport that refused to move offshore. The owner of the company believed that Americans would be willing to pay more for a quality textile product. However, my friend was wrong. Americans went for the cheaper goods and eventually he faced either going offshore or closing down his business. He took the latter course.

Here in Israel, Chinese cars are all the rage. They are less expensive, readily available, and technologically advanced. Never mind that workers in Chinese factories are paid less, work harder, and live with less desirable conditions than we in America are used to. The cars are cool looking, drive great, and are definitely 21st century.

If Donald Trump thinks he is going to keep fentanyl and criminals out of the country by punishing our friends and allies on the North American continent, he is barking up the wrong tree. What he will do is raise prices for Americans, disrupt our friendly relationships with allies, and accomplish nothing more than being in the news 25 times a day. Then again, maybe that is what the president is looking for.

What we need is an overall financial policy which encourages commerce and, most importantly, opens up foreign markets to American made goods.

The United States, under the current administration and under the prior one, has does its best to keep Chinese electric cars out of the US market. That, of course, raises the prices of American made and other foreign made electric cars and negatively impacts innovation. The non-Chinese electric car manufacturers essentially have no reason to work hard to compete. So, should we import Chinese cars, whose prices are artificially suppressed by Chinese government financial assistance? The Chinese, and others, say that Boeing commercial jetliners are more affordable and better airplanes because of the gigantic defense contracts given to Boeing by the United States government. Is that a form of governmental subsidy to a commercial enterprise?

The point is that international trade is much more complex than a knee jerk reaction to one particular problem perceived by the political establishment.

The prior administration, and many more before that, did a very poor job in negotiating trade deals on behalf of America. The idea of creating a one-world market is terrific on paper, but there are differences between societies and national pay scales that make the idea of a unitary commercial community an illusion.

Speaking of tariffs, the current administration believes that income taxes can be done away with altogether. The President has pointed out that at the beginning of this Republic, there were no income taxes. In fact, the United States Supreme Court declared the income tax levy, first tried during the Civil War, unconstitutional. That led to the passage of a constitutional amendment permitting imposition of an income tax. My father was born the year that amendment passed, and he liked to say that the occasion of his birth was marked by one of the biggest mistakes the government ever made. The president, consistent with his promises to the American people, could do much better by suggesting a simplified income tax system with three progressive levels of taxation and no deductions or exemptions. Take, for example, the tax deduction for municipal bonds. Municipal bonds are the way that local economies and states pay for schools, ambulances, fire trucks, and other public necessities. When the bonds come due, state and local governments simply issue new ones. The debt will go on forever. In the meantime, investors buy the bonds because they are exempt from federal taxation, and sometimes from state taxation as well. Therefore, by a manipulation of the tax system, we encourage state and local government to borrow. Some would say it is not encouragement but rather simply makes necessary borrowing more attainable.

Rather than wasting time with punitive tariffs, the president needs to rethink all the ways the United States raises money and whether those approaches can be simplified, made less bureaucratic, and impact our population more fairly.

While prior administrations did an inadequate job when it came to tax fairness and an understandable tax policy, the new Administration has started out with a shotgun approach. What is needed in this hemisphere is cooperation by and between allies which is unlikely to be achieved by a blunderbuss approach.

Mr. President, keep your pistol in your holster and save it for when it is really necessary to use.

About the Author
Cliff Rieders is a Board Certified Trial Advocate in Williamsport, is Past President of the Pennsylvania Trial Lawyers Association and a past member of the Pennsylvania Patient Safety Authority.
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