Somewhere along the way Republicans forgot that when governments take in dollars, they’re not staring lovingly at them. Each dollar represents access to resources for politicians who will direct those resources not to their highest use, but to the most politicized ones.
Which brings us to a recent Wall Street Journal opinion piece that former House Speaker Paul Ryan co-authored with American Enterprise Institute senior fellow Kyle Pomerlau. The authors discouragingly saw fit to introduce President Trump to a globally popular industrial policy concept (as if Trump needs new ways to copy those looking up to us…), one that they claim would boost tax collections. Who needs Democrats when we have Republicans?
Instead of encouraging Trump to ditch his economy-sapping tariffs, Ryan and Pomerlau are proposing a tax that they believe will onshore production. Translated, they’re trying to bring back the work of the past, and that some of the most innovative and valuable corporations in the world have long sent overseas not to avoid taxes, but to avoid wasting precious human capital on low-margin activity.
Paraphrasing economist Enrico Moretti, the first American hand to touch an Apple iPhone designed in Cupertino is that of the delivery driver. Amen to that. The outsourcing of factory work (oddly romanticized by members of a political class who’ve almost unanimously never toiled in a factory) by U.S. companies has occurred in concert with a mostly uninterrupted 45-year bull stock market, one that has happily revealed itself alongside much better, much higher paying employment for Americans thankfully relieved of backbreaking work by lower-skilled workers overseas.
Rather than embrace progress, Ryan and Pomerlau are calling for a “border adjustment” tax that “would subject all imports to a single rate tax while providing all exports with a subsidy at the same rate.” There you have it: industrial policy married to more taxation. A tax on imports is a tariff, and vice versa.
Ryan and Pomerlau contend with glee that their reform “would be the ultimate made-in-America policy,” except that a major driver of made-in-America prosperity over the decades has been the disappearance of work that Americans have long run from with great gusto (see Aliquippa, Detroit, Flint, etc.) in pursuit of the work of the future, and that realistically has nothing to do with factories.
Some of this is local to Ryan himself, who came up in Wisconsin. Looking back 100 years, the four most prominent U.S. manufacturing locales were New York City, Flint, Milwaukee and Los Angeles. Which is a less than subtle hint that if Ryan and Pomerlau’s plan were to succeed, it would be to the substantial detriment of the U.S. economy. Blasts to the past invariably are.
The authors estimate their tax “would raise around $243 billion a year by 2035,” and that rising revenues are important since Treasury “faces mounting debt and deficits.” Yes, the popular, dramatically naive Republican view that if Americans just pay more tax, that Congress will reduce the debt with the proceeds.
Except that since 1980, total federal debt has risen from $900 billion to $37 trillion amid booming economic growth that has predictably showered Treasury with ever-increasing revenues. Which was entirely predictable to those familiar with the powerful correlation between rising incomings and copious borrowings. If readers are still confused, The Deficit Delusion can be had on Amazon.
Ryan and Pomerlau should know that industrial policy and taxation are bad looks for the GOP. The only thing worse is naivete, and nothing could be more naïve than the wholly discredited notion that more tax revenue is the path to reduced government debt.