According to the Fed's Other Inflation Measure, Inflation's at an 11-year High

According to the Fed's Other Inflation Measure, Inflation's at an 11-year High

02/08/2018Ryan McMaken

According to the Federal Reserve's Underlying Inflation Gauge, the 12-month inflation growth in December was at 2.98 percent. That's the highest rate recorded in 136 months, or about 11 years. The last time the UIG measure was as high was in September 2006, when it was at 3 percent. 

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The Fed began publicly reporting on new measure in December of last year, and takes into account a broader measure of inflation than the more-often used CPI measure.

Not shockingly, the UIG shows a higher rate of inflation than the CPI, and also shows a different trend. the UIG has been increasing in recent years while consumer price trends have been falling.

In December, while the UIG was 2.98 percent, the CPI came in at a mere 2.1 percent, which is a four-month low. 

As we reported earlier today, central banks continue to remain reticent as far as raising interest rate targets and scaling back QE. The excuse is often that the economy is not hitting the "two-percent target." Two-percent, of course, indicates inflation levels that are "just right" according to the arbitrary goal set by central banks. 

Politically speaking, it is also assumed that a two-percent inflation rate is palatable since it is though to offer a reasonable amount of price stability. 

But what if inflation as experienced by real people — and as indicated by the broader UIG measure — is closer to three percent, and is more like the inflation rate encountered during the days of the super-heated housing bubble in 2006? That would seem to suggest more urgency in raising rates in order to put a lid on price inflation while lessen malinvestment. 

According to the CPI, though, current price inflation is no where near where it was prior to the last financial crisis. 

So according to the CPI at least, everything looks well under control. The UIG tells a different story, but that's not used as the basis for monetary policy. 

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JRR Tolkien on the Danger of Centralized Political Power

08/01/2018Zachary Yost

At the recent Mises University, Jeff Deist and Ryan McMaken recorded a live edition of Mises Weekends focused on radical decentralization and addressing some of the points raised against it. While in this conversation and in many others related to it intellectual titans like Mises and Rothbard are invoked to support the decentralist view, many libertarians unfortunately fail to call upon one of the most articulate critics of centralized political power with unparalleled intellectual and cultural influence; JRR Tolkien. While Tolkien is no doubt a popular figure among many libertarians, an unfortunate unfamiliarity with his work on a deeper intellectual level often prevents his enormous cultural influence from being brought to bear against the forces of statism and centralization.

There is no need to wonder about Tolkien’s political leanings, as he made them quite explicitly clear in a 1943 letter to his son Christopher Tolkien (who would later edit a great many of Tolkien’s posthumous works) he wrote “My political opinions lean more and more to Anarchy (philosophically understood, meaning abolition of control not whiskered men with bombs) – or to 'unconstitutional' Monarchy.” In the same letter Tolkien continued that “Anyway the proper study of Man is anything but Man; and the most improper job of any man, even saints (who at any rate were at least unwilling to take it on), is bossing other men. Not one in a million is fit for it, and least of all those who seek the opportunity.”

With such political sentiments, it is hardly surprising then that Tolkien incorporates a disdain for centralized power and a warning about its seductive nature in his work. In The Lord of the Rings, perhaps Tolkien’s best known work, the story traces the journey to destroy the One Ring of Power and chronicles the various effects the potential to wield this power can have. Tolkien does not attempt to hide the nature of the Ring, its purpose is clearly labeled upon itself:“One ring to rule them all, one ring to bind them, one ring to bring them all and in the darkness bind them.” The One Ring is just that, one, singular, representative of a unitary will that imposes itself upon all.​

Sauron, the creator of the One Ring, is unambiguously evil, driven by a desire to impose his will and dominate all others. Yet, Tolkien’s message does not simply end with the idea that power should not rest in the hands of clearly evil tyrants, but rather penetrates much deeper into why centralized power by its very nature is too dangerous to exist.

One of the first characters to fall prey to the temptation of the Ring’s power is the wizard Saruman. Saruman’s reasoning for wanting power is quite simple and is certainly a sentiment that we hear everyday from the DC class. “The time of the Elves is over” he tells fellow wizard Gandalf, “but our time is at hand: the world of Men, which we must rule. But we must have power, power to order all things as we will, for that good which only the wise can see.” Such an attitude is all to common when it comes to the actual and aspiring members of the governing class who believe that they know best and are justified in imposing their kind hearted plans upon everyone else. Whether it is social democrats who believe they can plan the economy, or neo-conservatives who believe they can plan the entire world order and engage in “building” entire nations at the point of the gun in the Middle East, the world is full of wannabe Saruman’s fully convinced of their own wisdom and infallibility.

Tolkien examines in great psychological depth the process by which ordinary people end up abusing power, most poignantly in his creation of the Ring Wraiths; men who were once mighty kings who over time became subdued to Sauron’s will after accepting the nine rings of power gifted to men. Tolkien expert Dr. Thomas Shippey has said that “the Ringwraiths are Tolkien’s most original and distinctive image of evil” in part because they represent the danger that power poses in the hands of anyone, even oneself. Shippey calls this process by which ordinary people who begin with good intentions end up becoming corrupted and twisted as they acquire power the “wraithing process.” The use of the adjective “twisted” is quite intentional, as the word “wraith” stems from words such as wreath and writhe which are both twisted things. The etymology of “wraith” also draws upon the important element that wraiths are more defined by shape than by substance. According to Shippey, what fills this shape is ideology with power.

The suspicion is that people make themselves into wraiths. They accept the gifts of Sauron, quite likely with the intention of using them for some purpose which they identify as good. But then they start to cut corners, to eliminate opponents, to believe in some ‘cause’ which justifies everything they do. In the end the ‘cause’, or the habits they have acquired while working for the ‘cause’, destroys any moral sense and even any remaining humanity. The spectacle of the person ‘eaten up inside’ by devotion to some abstraction has been so familiar throughout the twentieth century as to make the idea of the wraith, and the wraithing-process, horribly recognizable, in a non-fantastic way.1

The dangers of the wraithing-process by which ordinary people end up becoming consumed by ideological power and committing atrocities are known all too well to anyone familiar with the bloody history of the 20th Century, a century in which, with bureaucratic efficiency, millions were exterminated in the ideological crusades of the USSR, Nazi Germany, and Communist China among others. According to Shippey, Tolkien’s portrayal of evil through the wraithing-process “is a curiously distinctive image of evil, and… a very unwelcome one because what it says is it could be you and under the right circumstances, or I should say the wrong circumstances, it will be you.”

While there is still much left to unpack from Tolkien’s prodigious body of work, one of his central theses is very clear: centralized power is too dangerous to be allowed to exist. If concentrated power exists people will be corrupted by it. This important point cannot be ignored in arguments for decentralization.

  • 1. Shippey, Tom J.R.R. Tolkien: Author of the Century pg. 125
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3D Gun Debates Shows the Limits of Politics

08/01/2018Tho Bishop

In a great interview with CBS, Cody Wilson of Defense Distributed declares that the  "debate is over" in terms of the availability of 3D printed guns. 

3D-printed gun advocate Cody Wilson says "debate is over"

Honest, well intentioned people can have genuine concerns about what this means for society, in much the same way that concerns exist about the existence of pornography or certain types of drugs. Those concerns, however, don't change the fact remains that designs for 3D printing guns are obtainable and there is nothing the government can do to change that reality. 

In a better world, this would serve a reminder to society of the limitations of politics and government. Government, after all, is simply force. The only thing the state can do is attempt scare the population into giving them further powers to hunt down individuals who choose to access these files - which is precisely what we are seeing now with the political theatre playing out in Washington. It can even go further and harass Mr. Wilson, perhaps even try to throw him behind bars next to Ross Ulbricht. Perhaps it can go even further and use the threat of "ghost guns" to give the state new powers to regulate the internet and try to control data. 

It can't however, change the fact that Cody Wilson's designs exist. For all the power horrific government has, it simply can't change that.

 

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Medicare For All – Getting the Math Straight

Okay, so I’ve been looking at the Mercatus numbers.

First, Think Progress IS wrong in their representation. (Think Progress makes the very simple error of acting like an ADDITION to cost is the WHOLE cost.)

HOWEVER,  my initial impression was also wrong. My error was a bit more complicated – I assumed constancy in some things that weren’t constant in the Mercatus estimates, and ended up misrepresenting the results, TOO.

So, let’s try to get it right, and we’ll just focus on one year.

Before we hop in, we need to figure out what we’re talking about. We’re going to look at National Health Expenditures (page 5 is my reference here). What this is: Personal Health Care Expenses + Government Administrative Cost + Net Cost of Insurance (Basically, private administrative costs, I would guess) + Government Public Health Activities

Mercatus starts by looking at personal health care expenses in 2022. They suggest these are projected, under our current system, as being $3.859 trillion. (Note: this includes both public and private systems.) With Medicare 4 All, there would be a big jump in healthcare utilization – amounting to $435 billion. This comes from the currently uninsured being covered and from Medicare covering things that some private insurance doesn’t, and from people using more medical care because they are no longer responsible for copays or coinsurance (so, on the margin, they go to the doctor more often – though I suspect this effect is small). BUT, providers would receive less because of M4A’s pay structure. That would cut $384 billion from provider payments, and $61 billion from prescription drug costs. Net effect: personal health care spending FALLS by $10 billion in 2021.

The other change is that total administrative cost is expected to fall by about $83 billion. Basically, we’re eliminating private health insurance costs,  but Medicare’s administration would have to eat that up – but with some economies of scale, there would be a net savings on the administrative side.

So, total effect: $93 billion in National Health Expenditure savings. The other years in the estimate project savings of up to $300 billion in NHE by 2031.

Now, Mercatus’s point is that, EVEN WITH this savings, the government would be spending an additional $2.535 trillion that year – since it is absorbing the private insurance industry’s costs. They want to know where the money is coming from, since doubling income taxes on both individuals and corporations wouldn’t be enough to bring in that money.

On the one hand, progressives can reasonably point out that we’re already spending this money, it’s just a matter of redirecting it. And there’s a point in that. This $2.535 trillion is not new to the ECONOMY, it’s just new to the GOVERNMENT BUDGET. Okay.

But, would progressives then suggest that we should just have the government absorb the health insurance premiums currently paid by employees, employers, and individuals? I suspect not. That would mean that each person’s premium would vary not based on income, but on their current employer. This would be an administrative nightmare, I suspect. So, while the money is there, there is still the practical question of how best to collect it in a way that isn’t politically disastrous.

Another big point: Blahous is very clear that he’s being generous in his estimates of savings because he wants to estimate the MINIMUM amount of additional tax revenue that would be required.

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Have You Gained or Lost Weight? Congrats, TSA Is Now Tracking You for Suspicious Activity

07/31/2018James Bovard

If you fall asleep or use the bathroom during your next flight, those incriminating facts could be added to your federal dossier. Likewise, if you use your laptop or look at noisy children seated nearby with a “cold, penetrating stare,” that may be included on your permanent record. If you fidget, sweat or have “strong body odor” — BOOM! the feds are onto you.

Welcome to the latest profiling idiocy from the Transportation Security Administration. TSA’s Quiet Skies surveillance program is spurring federal air marshals to target dozens of Americans each day on the flimsiest of pretexts. The secret program, first exposed by Jana Winter in The Boston Globe, is security theater at its best. 

What does it take to become a Quiet Skies target? “The criteria for surveillance appear fluid. Internal agency emails show some confusion about the program’s parameters and implementation,” The Globe noted. 

Anyone who has recently traveled to Turkey can apparently be put on the list — as well as people “possibly affiliated” with someone on a terrorist watchlist (which contain more than a million names). The program is so slipshod that it has targeted at least one airline flight attendant and a federal law enforcement agent.

After a person makes the Quiet Skies list, a TSA air marshal team is placed on his next flight. Marshals receive “a file containing a photo and basic information” and carefully note whether the suspect’s “appearance was different from information provided” — such as whether he has “gained weight,” is “balding” or “graying,” has a beard or “visible tattoos” (bad news for Juggalo fans of the Insane Clown Posse). Marshals record and report any “significant derogatory information” on suspects.

TSA air marshals follow travelers targeted by this program, even writing down their license plates. Marshals must ascertain whether a “subject was abnormally aware of surroundings.” Does that include noticing the undercover G-men who are stalking them in the parking lot? No wonder the president of the Air Marshal Association, John Casaretti, considers the program unjustified.

Read the full article at USA Today
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Peter Klein Receives the 2018 Strategic Entrepreneurship Journal Best Paper Prize

07/31/2018Mises Institute

Congratulations to Mises Senior Fellow Peter Klein for being recognized by the Strategic Entrepreneurship Society with its Strategic Entrepreneurship Journal Best Paper Prize for his paper "Opportunity Discovery, Entrepreneurial Action, and Economic Organization."

One of the aspects that makes this award particularly important is that it recognizes the impact of a paper. As such, papers are not eligible until they have been published for five or more years. 

The award committee consists of the Editorial Board of the Strategic Entrepreneurship Journal and is supplemented by surveys of leading figures in the field of strategic entrepreneurship conducted by the Co-Editors of the Strategic Entrepreneurship Journal.

This paper is included in Dr. Klein's 2010 book The Capitalist and the Entrepreneur.

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A Modest Proposal from Dr. Walter Block

07/27/2018Walter Block

If you're reading this, you should be supporting the Mises Institute every month!

I recently taught at the Mises University. This weekly experience is the highlight of my entire professional year, as it has been for lo these many decades. (When I started, I was an enfant terrible; now, I’m an old duffer. I don’t know what happened. Time goes by fast whey you’re having fun).  It is an honor to work with my colleagues on the academic staff. The students, as always, were superb. Presumably, in the next few years, more than just a few of them will become MU professors, as are about half of the present faculty ex students of MU.

Thanks go out to Lew Rockwell, Jeff  Deist, Joe Salerno, Pat Barnett and some dozen other members of the Mises Institute staff. Lew started off the entire institution, Jeff is the president of the MI, Joe put together the entire MU program, and Pat is the excellent administrator of the operation.

Who is the forgotten man? Who are they, such that without their support, the entire institution would fall to the ground? Have never been able to be started up in the first place? I’ll give you just one guess. Yes, it is the donors of course. I must take my hat off to them, for without these generous people, there, literally, would be no Mises Institute.

We had about 200 students at this year’s MU. Most of them are at the stages of their careers where all they have is brilliance and enthusiasm. Neither undergraduate students, nor those in graduate school have much money to donate to the MI.  I had occasion during that week, nevertheless, to ask each of them to contribute $5 on an annual basis (until they have more money) to the Mises Institute (by the way, I myself donate a bit more than that). Why did I make this plea? It is not really that the $1000 that would be raised in that manner if all attendees complied with my request would spell the difference between success and failure. Yes, every $1000 helps, and I would be grateful to anyone who can afford to donate that amount, or more. No, the reason I asked all students to contribute this relative small amount of money was quite different.

It was this. Wealthy people will be more likely to contribute funds to the MI, and more heavily so, if this institution has many donors. They do not like to be the only ones financially supporting an organization such as the MI. Moreover, the more people who contribute to the MI this $5 per year I am asking for, the smaller is the average donation. That, too, encourages potential large donors to contribute in the first place, and in greater amounts.

I am now extending my plea from the some 200 students who attended MU 2018, to all those who are reading these words. Please donate $5 to the MI (I’d lower this to $1 per year, but, thanks to the fed, that doesn’t amount to two cents, so to speak). If all readers of LewRockwell.com did so, it would not, to be fully honest, help all that much, directly. But it would be of immense aid indirectly, in encourage larger donations.

So, poverty stricken students and other impecunious folk, please reach deep down into your pockets, and cough up that $5. You can do so at this easy to reach link: mises.org/giving/now.

I will be the BFF of everyone who complies with this request of mine.

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Red Flag Laws: The Latest Anti-Gun Scheme

07/27/2018José Niño

Gun control may be coming to a legislature near you.

In the wake of the Parkland, Florida, and Santa Fe, Texas, shootings, elected officials on both sides of the political aisle are rallying around “red flag” legislation.

Extreme Risk Protection Orders (ERPOs), informally known as red flag laws, are gaining traction in legislatures nationwide. Red flag laws are presented as a common-sense proposal to disarm people who allegedly present a danger to themselves or others around them.

Political leaders assure gun owners red flag laws won’t trample over civil liberties and are a middle ground solution that appease pro-gunners and gun controllers alike. But the devil is in the details when dealing with any form of government intervention.

The Potential Threat of Red Flag Laws

In Gunpowder Magazine, Ted Patterson details the potential dangers of “red flag” laws. Four points stick out the most:

1. Due process rights are put on the chopping block.

Anti-gun family members, friends, or acquaintances can levy dubious accusations to justify the confiscation of law-abiding gun owners’ guns. They can take these accusations to a court of law, even if the individual in question was not charged or convicted of a crime. In turn, due process rights are turned upside down, as gun owners are presumed to be guilty and must then prove their innocence.

2. Indefinite time frames for gun confiscation.

The duration of ERPOs is unclear — which could end up being weeks, months, or even a year. Gun owners would then be forced to go to court multiple times just to win their Constitutional rights back.

3. Red Flag Laws have Bipartisan Support

What makes red flag laws even more dangerous is the bipartisan support they currently boast. It is no secret when both parties come together on legislative matters, nothing good can come out of it.

Political insiders constantly remind us that Republicans are staunch supporters of the Second Amendment. They contend Republicans play a pivotal role in defending our gun rights, and any criticism directed toward them is unjustified.

But nothing could be further from the truth. A Republican governor in Maryland recently signed a red flag bill into law, while Republicans in states like Colorado and Pennsylvania have actively pushed red flag bills of their own.

Lawmakers under the impression that compromising on red flag laws will curtail further gun control attempts, are in for a rude awakening. The nature of the government beast is to expand.

Economist Ludwig von Mises recognized full well how interventionism is “illogical and unsuitable, as it can never attain what its champions and authors hope to attain.” Once the regulations fail, the political class will clamor for even more regulations to “fix” the problems they ironically created in the first place.

This has been on display in sectors such as healthcare. Under the banner of “compassionate conservatism,” George W. Bush signed Medicare, Part D into law — the largest welfare expansion since Medicare was originally established in 1965.

Even with the passage of Medicare, Part D, healthcare interventionists were still not satisfied. Once Democrats returned to power with significant majorities in both chambers of Congress, then President Barack Obama passed a hefty piece of government intervention in Obamacare with ease.

We can expect the same dynamic to occur if politicians start kowtowing to red flag laws. The recent passage of Fix NICS is already a troubling development.

At this point in the game, it may behoove gun rights activists to start shifting their focus toward decentralization and fight for expanding gun rights in their own backyards instead of looking for Washington to change its ways.

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You'll Soon Be 3-D Printing Guns at Home

07/26/2018Ryan McMaken

Remember Cody Wilson? In 2013, he's the guy who successfully tested a fully-3-D-printed gun. Shortly thereafter, he posted information on how to make the guns online.

Shortly after that, as many predicted, the federal government took steps to shut the whole thing down.

Recent developments, however, mean that the guns and plans on how to make them, will soon be seeing the light of day again.

Last week, Wired reported:

Two months ago, the Department of Justice quietly offered Wilson a settlement to end a lawsuit he and a group of co-plaintiffs have pursued since 2015 against the United States government . Wilson and his team of lawyers focused their legal argument on a free speech claim: They pointed out that by forbidding Wilson from posting his 3-D-printable data, the State Department was not only violating his right to bear arms but his right to freely share information. By blurring the line between a gun and a digital file, Wilson had also successfully blurred the lines between the Second Amendment and the First.

The Department of Justice's surprising settlement, confirmed in court documents earlier this month, essentially surrenders to that argument. It promises to change the export control rules surrounding any firearm below .50 caliber—with a few exceptions like fully automatic weapons and rare gun designs that use caseless ammunition—and move their regulation to the Commerce Department, which won't try to police technical data about the guns posted on the public internet. In the meantime, it gives Wilson a unique license to publish data about those weapons anywhere he chooses.

This isn't exactly a total victory for laissez-faire, of course. The federal government is hardly abandoning any attempts to regulate firearms — including those created by Wilson. But, the recent court settlement does signal the political and legal realities that make it difficult for the federal government to arbitrarily decide what sort of information is legal to share.

The effect of the settlement will soon be felt, it seems:

Now Wilson is making up for lost time. Later this month, he and the nonprofit he founded, Defense Distributed, are relaunching their website Defcad.com as a repository of firearm blueprints they've been privately creating and collecting, from the original one-shot 3-D-printable pistol he fired in 2013 to AR-15 frames and more exotic DIY semi-automatic weapons. The relaunched site will be open to user contributions, too; Wilson hopes it will soon serve as a searchable, user-generated database of practically any firearm imaginable.

All of that will be available to anyone anywhere in the world with an uncensored internet connection, to download, alter, remix, and fabricate into lethal weapons with tools like 3-D printers and computer-controlled milling machines. “We’re doing the encyclopedic work of collecting this data and putting it into the commons,” Wilson says. “What’s about to happen is a Cambrian explosion of the digital content related to firearms.” He intends that database, and the inexorable evolution of homemade weapons it helps make possible, to serve as a kind of bulwark against all future gun control, demonstrating its futility by making access to weapons as ubiquitous as the internet.

The triumphalist response to all this, voiced by some libertarians is that gun control will "end" as soon as Wilson's operation goes online. They're not totally wrong, although history suggests we're really just about to head down a long road of quasi-legality and court battles over these sorts of weapons. 

After all, the US government has not said it has no role in regulating guns. It still says it can prohibit publication of information on how to make fully automatic weapons, for example.

Nevertheless, the court settlement does suggest the federal government, for now, has been forced to admit that it is at least somewhat constrained in just how much it can prohibit the spread of information — even if that information involves the manufacture of firearms.

Over the next decade as this issue further works its way through the courts and legislatures — as is sure to happen — we will nevertheless see here a true decentralization of both the information and the tools necessary to make guns.

Historically, this has always posed a threat to states, and decentralized distribution and ownership of weapons has long been a hallmark of guerrilla warfare.

RELATED: When Guerrilla Warfare Can Succeed — And When It Will Fail by Ryan McMaken

The US state, of course, is as well aware as any state that the ability to manufacture guns at home — at relatively low cost — does indeed change the landscape.

But what will the state do in response? States, to be successful, must be able to maintain a monopoly on the means of coercion. The US state is no different, and it will be interesting to see what steps the US government takes to restrict the ability to crank out guns with a 3-D printer. Will the US government simply tell itself that it can easily overpower any challenge to its monopoly that might arise from the proliferation of homemade guns? After all, it's still not possible to churn out tanks or rocket launchers or Apache helicopters with any equipment one might have in one's basement.

To some extent, this strategy of relying on better firepower will depend partially on just how much gun ownership might proliferate in an age of DIY guns. After all, it's easy enough the deal with a small number of angry gunmen with superior firepower. This advantage becomes smaller, however, the more gun owners there are. Even today, when many types of guns can still be easily bought, only 42 percent of Americans say they live in a home with guns. I happen to be of the opinion that these numbers tend to understate the probable real ownership rate. But by how much? Even if the 42-percent figure gets it wrong by 10 percent, we're still talking about only half the population with an apparent interest in having guns. And even fewer of these are likely skilled in the usage of firearms. Ownership rates, are important, though, because someone who owns guns is less likely to support efforts to confiscate them. 

The fact that guns are easy to come by,however, doesn't mean every one will want one. Of course, things could change substantially in a crisis situation that would significantly undermine public opinions of the state. This could arise from a serious economic crisis or from a surge in crime and civil unrest. Or all of the above. Then we might see a lot more interest in private gun ownership.

And Cody Wilson's gun operation might make it much harder for governments to assert control in such a situation.

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Block in NY Times: Trump's Tariffs a "Fake Fix"

07/26/2018Ryan McMaken

In today's New York Times, Walter Block employs some excellently Rothbardian logic in exposing just how absurd is the argument that protectionism increases wealth. In this case, Block notes that if protectionism helps to increase the living standards of people in American states who import from other states, then New York would surely benefit from slapping tariffs on imports from Iowa:

As an illustration, assume Mr. Trump is the governor of New York. He is devoted to making the Empire State “great again.” Right now, both New Yorkers and Iowans raise pigs — but Iowa produces far more than New York. So Governor Trump sets up a protective tariff against the importation of Iowa-raised pork. Will this make New York great again?

Hardly. There is a very good reason the Empire State does not produce a huge amount of this product: economic efficiency, the true path toward economic greatness. Of course, pork product jobs will increase in New York thanks to the Trump tariffs. But this is the way to ruin the state’s economy.

Surely, New Yorkers would be far better off continuing to produce goods and services in which they have a comparative advantage (Broadway shows, dairy products, financial services, jewelry, maybe even newspapers) and trading them for pork, rather than trying to grow more of it locally. Ditto for the Iowans. They, too, would be well advised to stick to what they do best and trade for what they want.

There are good reasons the United States is such a prosperous country, one of which is this: The country is a gigantic free-trade zone among the states. Yes, every once in a while a state legislature will get in the way. Wisconsin may try to reduce the importation of wine from California. But this only interferes with the specialization and the division of labor that maximizes output. Happily, the Supreme Court has typically given the back of its collective hand to all such attempted interferences with interstate economic freedom. ... Maybe we should be happy that the president hasn’t yet kicked Hawaii out of the union and imposed a tariff on pineapples to strengthen the weak pineapple industry in other states. Absurd, yes, but hardly less bizarre than thinking tariffs on foreign goods will make the American economy great again.

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Tariffs are Bad — Not Because Trump Is Good or Bad — But Because Tariffs Are Always Bad.

07/26/2018Matthew Noyes

[Originally published by the Albany Student Press.]

The Trump Administration levied tariffs on steel and aluminum last month through an executive order. Imported steel is subject to a 25 percent tariff and aluminum to a 10 percent tariff. A tariff is a tax on the American people. The money is paid for out of citizen’s pockets and does more harm to Americans than it does to their trading partners.

There are several arguments President Trump and his supporters use to defend the tariffs. Economist Walter Williams says that one of these arguments are that they help domestic steel and aluminum industries. Increasing the price of foreign steel and aluminum reduces the supply and makes it easier for domestic firms to compete. Williams then debunks this claim by arguing the increased profit of domestic firms comes at an aggregate cost to Americans. Artificially higher costs on steel and aluminum make the prices of other goods go up that use them. The argument that it helps steel and aluminum producers in the U.S. is true, but it ends up hurting the economy overall.

Another point that deserves rebutting is one made by Trump. NPR quoted Trump saying, “A strong steel and aluminum industry are vital to our national security.” Defense Secretary James Mattis said, “Military demand for steel and aluminum can be met with just 3 percent of domestic production.” The notion of autarky, that the U.S. needs to produce all of what it needs instead of trading, greatly limits the economy’s potential and as a result may limit future defense capabilities.

The New York Times reported that Trump also claims that shifts in trade policies are necessary to make countries like China engage in fair trading. However, there is no such thing as fair trade, only free trade. Free trade is the voluntary exchange of goods and services between people in different countries. It allows one region or firm’s comparative advantage to create more of something at a lower cost, benefiting everyone. Free trade produces mutual benefits to all parties involved. Trade isn’t a zero-sum game that has losers and winners. A great quote that summarizes this concept is one by sociologist Franz Oppenheimer , “The first method [of acquiring wealth] is by producing a good or a service and voluntarily exchanging that good for the product of somebody else,” aka: the free market. The other method being stealing taking someone else’s property.

The Trump Administration wants you to artificially pay more for certain goods. Cans of soda, construction, and countless other things we pay for everyday are going to be more expensive. Free trade is a part of capitalism. Trump’s campaign was full of protectionist rhetoric, so it isn’t surprising that he followed through with it. What is disheartening is the hypocrisy of the media and politicians. President Obama’s tariff on tires did not see the same scrutiny from the mainstream media as Trump’s tariffs have. On the flip side, some from the right-wing media have not been critical about the tariffs simply because they’re Trump’s. Many in the Republican Party who claim to be capitalists and conservatives have supported the tariffs as well. Trump’s tariffs are bad, not because Trump is good or bad, but because tariffs are always bad. Government interference in consensual interactions between people is wrong whether it’s by Republicans or Democrats.

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