Who pays for the trade war? We do. -- May 16, 2019 column

By MARSHA MERCER

How or when President Donald Trump’s trade war will end is anyone’s guess. There’s no long-term plan or end game in sight.

But two things are clear: You’ll pay more and Trump will claim he won.

Despite what you’ve heard, China is not paying for the tariffs any more than Mexico is paying for the border wall.  

“We find that the U.S. tariffs were almost completely passed through into U.S. domestic prices, so that the entire incidence of the tariffs fell on domestic consumers and importers,” three economists wrote in a report on the impact last year of Trump’s tariffs. They are Mary Amiti at the Federal Reserve Bank of New York, Stephen Redding at Princeton and David Weinstein at Columbia.

Trump imposed tariffs on nearly $283 billion in imports last year – about 12 percent of total imports – and foreign countries retaliated with tariffs of their own on American goods amounting to $121 billion. 

By the end of the year, tariffs reduced U.S. income by $1.4 billion per month, the economists calculated.

Trump says consumers can buy American to avoid tariffs, but that’s easier said than done in our global economy. 

Besides, “We also find that U.S. producers responded to reduced import competition by raising their prices,” the report said.

A tariff is basically a tax at the border that’s paid by the importer, usually an American firm. Businesses may try to absorb the costs for a while, but eventually they pass them on to the consumer.

Even Trump’s top economics adviser, Larry Kudlow, conceded on “Fox News Sunday” that American consumers and businesses are paying the tariffs.

Trump says the world has been ripping off America too long. He insists tariffs bring back industries, like steel, and create jobs -- but the cost is astounding.

The steel tariffs Trump imposed last year created about 8,700 jobs in the U.S steel industry, according to calculations by the Peterson Institute for International Economics. But the price tag for American consumers and businesses for each job created or saved was more than $900,000.

“Wow!” the report said.

Trump has told allies and advisers the trade war is very popular with his base and will help him win re-election, The Washington Post reported.

“You want to know something? We always win,” Trump said on the White House lawn this week.

Well, let’s hope so. The last time the United States fell hard for tariffs was the 1930s, when tariffs probably worsened the Depression.

But Trump loves tariffs. After trade talks with China fell apart, he hiked tariffs from 10 percent to 25 percent on $200 billion worth of Chinese goods last Friday. China announced retaliatory tariffs of $60 billion on U.S. goods.

Trump wants to impose tariffs on another $300 billion of Chinese products, and he’s eyeing tariffs on autos from Europe and Japan.

Everyone agrees China should stop its aggressively unfair business practices -- like making American companies share technology and trade secrets. The question is whether tariffs are the right tool.

While the economy remains strong, the trade war is hurting the nation’s farmers who rely on overseas markets for soybeans. That’s opened a rift between the president and some Republicans in Congress.

Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican and a lifelong farmer, complained he can’t through to Trump on the need to lift tariffs.

Trump gave farmers a $12 billion bailout last year and is planning another for $15 billion.

“Our great Patriot Farmers will be one of the biggest beneficiaries of what is happening now,” he tweeted.

But Sen. Patrick Toomey, Republican of Pennsylvania, isn’t buying.

“Think about what we’re doing. We’re inviting retaliation that denies our farmers, the most productive farmers on the planet, the opportunity to sell their products overseas and then we say, `Don’t worry, we’ll have taxpayers send you some checks and make it OK,’” Toomey said.  

Consumers can expect to see higher prices of Chinese goods by mid-June, experts say. Items affected include auto parts, bicycles, dog leashes, fish and seafood, furniture and luggage.  

So grab your wallet. You’re likely to suffer collateral damage in the trade war.

©2019 Marsha Mercer. All rights reserved.

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At it again: Congress plays politics and favorites with health law -- May 2, 2013 column

 By MARSHA MERCER

Two things people detest about Washington: when members of Congress play politics and when they play favorites, especially favoring themselves.

 

Well, pull up a chair and get your mad on. Both sides of the aisle are guilty in the flap over the Affordable Care Act’s health insurance exchanges.

Exchanges are the online marketplaces where people will compare and buy insurance starting in January. One of the selling points for the public is that members of Congress will participate. This is less because Congress wanted to do the right thing than because Sen. Chuck Grassley, R-Iowa, added a requirement that Congress and staff enter the exchanges.

Members of Congress are notorious for making rules for the rest of us while exempting themselves, and Grassley has the novel notion that Congress ought not do that. He was also gigging Democrats and didn’t expect his amendment to survive. But Democrats surprised him and agreed to it.

With the online exchanges scheduled to open for enrollment in October, House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev., reportedly were secretly negotiating a way to exempt lawmakers and Capitol Hill staffers. When the news broke, the twitterverse lit up with outrage.

The congressional leaders denied they wanted to exempt themselves. They wanted only to fix it so the federal government could continue contributing its employer share to workers’ insurance premiums, they said. Maybe so, but the damage was done.

Now comes Rep. Dave Camp, R-Mich., chairman of the House Ways and Means Committee. He upped the ante by proposing that all federal employees – from the president to groundskeepers – buy their health insurance on exchanges. He would exempt active-duty military and postal workers.

“If the Obamacare exchanges are good enough for the hard-working Americans and small businesses the law claims to help, then they should be good enough for the president, vice president, Congress and federal employees,” a Camp spokeswoman said.

President Barack Obama has said he will buy insurance through an exchange, although he has medical staff at his elbow in the White House.

Camp’s bill brought speedy condemnation from Democratic leader Nancy Pelosi and the unions that represent federal workers.

“There is no need to kick over 2 million federal employees off their insurance plans in order to satisfy the cynical political urges of House Republicans, who have voted to repeal this law over 30 times,” a spokesman for Pelosi said.

Camp’s proposal is an over-correction, and federal workers are already political footballs under sequestration’s automatic spending cuts and furloughs. But his proposal does raise an interesting point. Should the government continue to subsidize federal employees’ health care the way private employers do?

If so, a mechanism for employer subsidies needs to be built into the exchanges. As currently envisioned, the exchanges are for people whose employers don’t offer insurance and for people who can’t afford the coverage that is offered.

The kerfuffle over congressional participation in exchanges came as most Americans seem to be hazy, at best, about the law. Four in 10 American adults don’t even know that the Affordable Care Act is still the law of the land, the Kaiser Health Tracking Poll reported.

Obama says the law is working fine, even if people don’t know it. He still believes that people will come to understand the benefits in time, although he also concedes there will be “glitches and bumps” along the way. Only 35 percent of Americans have a positive view of the law, Kaiser says.  

People are unlikely to embrace the law as long as Congress appears to disdain it. Sen. Max Baucus, D-Mont., made news last month when he worried aloud that the rollout of the exchanges could be “a huge train wreck.” He’s retiring but other Democrats are worried that the exchanges will hurt them in the 2014 elections.

It’s evidently too much to ask Congress to show leadership on an issue that affects every American.   

For now, Democrats and Republicans have returned to their corners. But we’re likely to see more mischief making on the health law and more reasons to detest Washington.

© 2013 Marsha Mercer. All rights reserved.

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