Uncertainty tax
Congress should reclaim its tariff power, say Freedom Conservatives
On April 2, President Donald Trump announced one of the largest tax hikes in modern times. Pointing to a long list of “reciprocal tariffs” — in reality, new taxes based entirely on differences between imports and exports, irrespective of cause — he proclaimed it “Liberation Day” for the American economy.
A week later, having managed to “liberate” trillions of dollars in wealth from panicked investors, Trump made another announcement: most of the new taxes would be paused for 90 days. The president retained 145% tariffs on Chinese imports, preexisting tax increases on Mexican and Canadian goods, and a 10% tariff on all other imports.
Economic crisis averted? Hardly.
Even during this three-month grace period, the United States will tax imports at the highest level in generations. The administration is also promising selective escalations and carve-outs. Not surprisingly, businesses, investors, and consumers are wary.
Jamie Dimon, CEO of JPMorgan Chase, told The Wall Street Journal that today’s market dynamics have no recent parallel. “It’s a significant change we’ve never seen in our lives.”
The resulting uncertainty “has been damaging on its own,” a California custom-bike manufacturer told The Washington Post. “My orders have certainly slowed. Why would someone in Japan or Australia or Canada order an American bike if things could change dramatically again next week? It’s like everything is frozen.”
The idea that policy uncertainty itself, as distinguished from the implementation of bad policy, can act as a damper on economic growth is nothing new. More than a decade ago, a trio of scholars — Northwestern University’s Scott Baker and Stanford’s Nick Bloom and Steven Davis — released the first in a series of papers that used patterns in news reporting about politics and business to measure policy uncertainty and then to link it to economic performance.
Over the decades, they found, increases in policy uncertainty in the U.S. were followed by “declines in investment, output, and employment.” Nor is the phenomenon an example of American exceptionalism. “Our results suggest that elevated policy uncertainty in many countries around the world contributes to sluggish growth in recent years,” they wrote.
Freedom Conservatives have warned for years that giving any president wide-ranging authority to set tariff rates was unwise. Now American households and businesses are suffering the consequences.
Today, we feature the work of FreeCon signatories calling on Congress to reassert its constitutional authority to determine tariff rates and other tax policies.
Clear violation
In December, a group of conservative leaders that included FreeCon signatories Daniel J. Mitchell of the Center for Freedom and Prosperity, Tom Giovanetti of the Institute for Policy Innovation, and Iain Murray of the Competitive Enterprise Institute expressed opposition to any attempt to hike import taxes without explicit authorization by lawmakers.
“The president’s immense powers to set tariff rates fly in the face of the Constitution’s clear vesting of such powers in Congress,” they wrote. “This is a clear violation of numerous foundational principles upon which our system is based, including the notion that the legislature — the people’s branch — ought to control taxing and spending.”
“Of course, negotiating trade deals with other countries involves the powers of the presidency, but the framers would not have intended such negotiations to occur without congressional input and assent.”
The conservative leaders concluded their statement by urging Congress and the Trump administration to pursue policy alternatives with a real potential to boost economic growth, incomes, and job creation, including “tax reform, energy production, deregulation, and government efficiency.”
Time to act
Jonah Goldberg holds the Asness Chair in Applied Liberty at the American Enterprise Institute and is editor-in-chief of The Dispatch. A CNN commentator, author of three books, and host of “The Remnant” podcast, Goldberg is also a FreeCon signatory.
In a recent column for The Los Angeles Times, Goldberg argued that while declines in stock and bond prices prompted President Trump to suspend his new round of tariffs, only federal lawmakers have the power to calm markets and boost public confidence over the long term.
“The Constitution gives responsibility for taxation, including tariffs, to Congress, not the president,” he wrote. “Congress ceded that authority over decades to the president, for good reasons and bad.”
“What might have once been defensible is now indefensible because Trump is abusing that authority on a massive scale, claiming emergency powers when the only emergency is the crisis he himself is creating.“
Sirens of revolution
Charles C.W. Cooke is a senior editor at National Review and host of the “Charles C.W. Cooke Podcast.” He’s also a FreeCon signatory and a longtime advocate of Congress reclaiming its constitutional authority over taxing imports.
In a recent NRO piece, Cooke placed the current trade war in the context of past overreaching by presidents of both parties.
“It is by this point rather a cliché to observe that, if either the Democrats or the Republicans could just be normal for a while, they might have a shot at a period of dominance,” he wrote.
Joe Biden, for example, might have been deemed a successful president had he focused on a “restoration of normalcy” rather than his reckless economic and social policies.
When they went to polls last fall, “Americans wanted to see a reduction in the cost of consumer goods, stricter enforcement at the southern border, and a reversal of the progressive cultural hegemony that had reached such an irritating fever pitch in recent years,” Cooke pointed out.
“Instead, Trump plunged the country into an unconstitutional, ill-considered, chaotically justified trade war. Again, the siren’s call of revolution proved more seductive than the charms of a slow-and-steady advance.”
In the mix
• FreeCon signatory David Mastio is a columnist and editor for the Kansas City Star. In a recent column, he described two different paths forward for President Trump on trade policy.
“If Trump chooses the path of negotiator,” wrote Mastio, a former editor at USA Today and The Washington Times, “a bevy of countries are offering concessions that would easily allow Trump to rack up victories and start pulling back from the precipice while pressure builds on Canada, Mexico and Europe to back away from planned retaliation to make their own deals.”
Alternatively, the president might “give into his worst instincts fueled by shady advisors more into trade bashing than opportunity building.”
“The only hope is that the showman Trump comes to the rescue, reminding trade-warrior Trump that every Apprentice episode needed conflict, climax and resolution in a neat package. Draw things out too much and you lose the audience.”
• In The Wall Street Journal, FreeCon signatory Will Swaim described recent efforts by the oil industry to defend itself against California regulators and politicians.
A new defamation lawsuit filed by Exxon Mobil “reads like a Hollywood thriller,” wrote Swaim, president of the California Policy Center. It alleges a wide-ranging conspiracy involving law firms, nonprofits, and public officials.
“Californians are financing this war on oil,” he wrote. “They pay the highest fuel prices in the nation and watch as state officials who can’t clear tinder-dry brush from a single hillside claim they’re working to control the planet’s weather.
“Meanwhile, California burns and American taxpayers are asked to provide relief.”
• In Civitas Outlook, FreeCon signatory Juliana Geron Pilon reviewed a new book on communism and its continuing influence on radical movements and governments.
“Too many of us have lost the ability and willingness to defend the individual freedom most covet,” wrote Pilon, a senior fellow at the Alexander Hamilton Institute for the Study of Western Civilization and author of An Idea Betrayed: Jews, Liberalism, and the American Left.
“Liberal democracy is fragile. We are responsible for recognizing Big Lies for what they are, exposing them, and defending against them with all the courage we can muster.”