A Tale of Two Tariffs

Back in the 19th century the Republican Party rode to victory, election after election, on the Tariff.  It was common sense, really.  By charging a fee on imports we Americans could make imports from decadent Europe a little more expensive and help boost American jobs and wages.

It all worked like a charm until the economic Armageddon of 1929-33.  Then the Smoot-Hawley tariff helped bury the Republican Party for a generation.

That was then; this is now.  Now the Democratic Party is reaching the end of the line on their Tariff.  The Democratic tariff is not a tariff on imports.  The Democratic tariff it is a tax on jobs.

Think about it.  If you are a "job creator," as we Republicans like to say, you find that when you pay a new employee you must also pay the government for the privilege.  There's the 7 percent payroll tax, the 1 to 6 percent unemployment tax, the premiums on the state's workers' comp. program.  It could add up to a 20 percent tariff that you pay the government on each dollar of each worker's pay.  Then the worker pays their share of the payroll tax, plus income tax if they earn decent money.  That's another tariff, another tax on jobs.

But hey, it's just common sense, right?  We have to fund the government's social insurance programs for retirement, health care, and unemployment compensation somehow.  Right?

Back in 1937 when Social Security taxes first started the tariff on jobs was one percent on the employer and one percent on the employee.  And only the rich paid income tax.  The big 1937 recession was probably not caused by the new FICA tax, but by the 1935 Wagner Act that resulted in huge boosts to union wages.

But now that the tariff on jobs--on ordinary low wage jobs--is hitting 20, 30 percent...  Well, just think back to the days of the Smoot Hawley tariff, when tariffs on imported products reached almost 20 percent.

Economist Deirdre McCloskey writes:

“‘Jobs’ are deals between workers and employers, and so ‘creating’ them out of unwilling parties is impossible. The state, though, can outlaw deals, and has.”

Let us expand this notion.  If "Jobs" are deals between workers and employers, then "Products" are deals between producers and consumers.  Everything the government does to get between workers and employers or between producers and consumers is going to sour the "deal."  Whether it's a tariff on an import, or a tax on a job, it makes the deal less attractive to the parties to the deal.  At some point, they are going to say: "screw it, the deal is just not worth it."

So now tell me that the Obama administration, intent upon raising the tariff on labor, is as smart as they say it is.