Ripping Off The Bandaid
By Mitch Berg
OK, so work with me here [1].
I’m not especially a fan of tariffs. Some of the arguments against them aren’t much better, though. If they go through, they are taxes, yes indeed. And if they don’t – if they are leverage, used to successfully change trade policy, or in some cases safeguard an industry we *don’t* need getting offshored [2], then not so much.
But this goes way beyond tariffs, so again, bear with me [1].
Our economy has extremely healthy fundamentals – and some incredibly nasty endemic problems:
- – National debt that will crush the economy if we don’t do something useful
- – inflation that was down from four years ago, but still way higher than it should be, especially for working-class Americans (because the inflation rate for food, fuel and housing was and remains *way* higher than the economy at large)
- – A stock market that was very overvalued at the beginning of the year (with profit to earnings ratios almost double the rate of a healthy market), with a major bubble caused by federal spending and the AI bubble.
- – A Federal Reserve whose only answer is cutting rates (which will increase inflation, given all the loose money that’s already out there) or hiking them (strangling economic growth).
- – Four years of uncontrolled immigration, which depressed working-class wages (and artificially kept some prices down while raising other costs, economic and social).
- – A Congress that *can* and *should* fix all these problems, and *could*, at least to start by means-testing Social Security and Medicare, except that they have to win popularity contests every two years, and the noise machines of both sides have made being *honest* about the impending entitlement time bomb political suicide)
- Oh, yeah – Europe is closer to general war than it’s been in 85 years, and experts are predicting China will, not may, either invade or strangle Taiwan before the end of the decade. ]
So – what to do?
Let me take you back.
It’s 1982. I was still a Democrat. Probably kind of an obnoxious one, come to think of it.
And the economy had been a basket case for much of my childhood, and all my teenage years and adulthood to that point. The Oil Embargo led to the mid-seventies recession, which led to Stagflation, which led to the Malaise, and of course the Federal Government was spending money like crazy on the “war on poverty”, so inflation crushed economic activity; inflation peaked at over 12% when I was in high school.
President Reagan’s Fed chief, Paul Volcker, cranked the federal funds rate to *20%*. Mobbed up loan sharks said “dial it back, bub”. It SLAMMED inflation to the mat – but unemployement *soared* to 10.8% [3]. It triggered a VERY sharp recession in 1982 – one that’s still “the big one” to a lot of us.
The Democrat majority in Congress grew by 26 seats to a majority of *over 100 seats*. IF there’s been a Presidential election in 1982, Reagan would have lost by a landslide.
But here’s the thing about recessions – if the fundamentals of the economy are healthy, then the sharper the downturn, the sharper the recovery, if you let it [4]. In a year, the economy was gaining almost 500,000 jobs *a month* (and the population was 34 the size it is today), and the longest peacetime boom in history, almost 25 years, kicked off.
And Reagan rode that economy to the biggest landslide in history. And I made my first Republican vote, for Reagan (and my last Democrat one – for my Mom).
So – what about last week’s orgy of tariffs?
Maybe it just means Trump is stupid. Could be [5].
Or maybe the whole thing is:
- A sharp kick in the market’s teeth, to get those valuations down to size, AND…
- … burn off some of that excess capital that Biden (and yes, Trump in 2020) pumped into the economy with no growth to eat it up, AND…
- Throw a stun granade into the international trade market to exert leverage on other countries to cut the tariffs that *are* there [6] AND… Start creating demand for American blue-collar labor, to replace all the cheap foreign labor that the cartels aren’t walking across the border, AND…
- To force China into a recession that they can just not afford (if their exports are strangled, they are screwed blue), which might have the salutary effect of helping prevent WORLD WAR F**KING THREE in the Taiwan Straits, AND…
- Unleash the Growth Fairy, which – let me put this as gently as I can – IS THE ONLY WAY THIS COUNTRY’S ECONOMY ISN’T GOING TO COLLAPSE in the next decade or so. Literally, those are the two choices – out of control growth, or collapse. There is no option C. Taxing billionaires don’t do it. Confiscating every dollar of wealth over a Billion, or a million, won’t do it. ONLY the greatest explosion of growth the world has ever seen will do it.
It’s not just me thinking this: my (Facebook) friend Glenn Reynolds wrote this [7]…
And HIS friend and my one-time rhetorical fencing partner Steven Green had this to say:
Decide for yourself. [1].
[1] Or don’t. I don’t care. But if you disagree, shoot for intelligent disagreement, OK? I’m kind of tired of the other kind.
[2] Germany is kind of starting to regret outsourcing the production of its army’s tanks to Greece, for one example.
[3] Yep, Millennials, almost a point worse than 2008. You didn’t survive the worst of all possible times.
[4] Which is why the 2008 recession, and the Great Depression for that matter, dragged on so long – government “recovery” efforts prolonged the economic trouble that caused the whole thing in the first place.
[5] We’ll see, one way or the other. I’ve been wrong about Trump before, and so have you. Anyway, hear me out [1].
[6] Both sides are wrong about trade, by the way; Trump’s largely wrong about the trade deficit (it’s mostly from us buying cheap stuff from poor countries, and the middle class has grown in the past 40 years) and his opponents are wrong about foreign countries’ policies (they DO hamper lots of American exports in the “free market”). We can discuss it [1].
[7] I eschew “appeal to authority” and other logical fallacies, and I hope you do too [1], but let’s be honest; he’s smarter than me, and probably smarter than you, too.
April 8th, 2025 at 8:19 am
Trump’s relationship with the world translated into family dynamics.
Dad: You graduated four years ago and have been living in my basement since then, if you don’t move out by Friday, I’ll toss your Xbox into the dumpster.
Son: Calm down. You always say stupid things like that. We can talk about it tomorrow. No wait, I have something going tomorrow, how about this weekend, maybe.
…
Son: Hey, where’s my Xbox?
Dad: In a dumpster – but the trick is, which dumpster? If you find another place to live before the trash trucks comes, I’ll tell you which one.
Son: I’m calling the police.
April 8th, 2025 at 8:26 am
I largely agree with the idea that Trump dislikes bad economic news, so while I do think this scheme of tariffs and retaliatory tariffs has the potential to spiral into disaster, I think it’s more likely should things start to really go wrong, Trump will claim some sort of win and the Administration will pivot. You’ll probably see an advisory get scape goated when the spin cranks up.
Pollyannaism out of the way, I would feel better if the messaging coming from Trump’s surrogates was more consistent. Treasury Secretary Scott Bessent consistently talks about negotiating with other countries to remove trade barriers, tariffs, subsidies, regulations, etc. This calms the markets. OTOH, Commerce Secretary Howard Lutnick and Economic Advisor Peter Navarro claim the tariffs are the end goal and won’t be going anywhere. This panics the markets. I wish I knew the actual goal. I hope that the pro-tariff voices are merely selling the negotiating tactic, but I’m not sure.
As I said on the Facebooks, Americans have proven time and time again that they will severely punish any politician that seeks to correct course before the United States runs off the looming fiscal cliff. The current trajectory is unsustainable, but the electorate has no taste for anything that hints at personal austerity. Cut the other guy sure, but don’t cut mine at all. I never bet on the 4D Chess analogy, but I can hope that Trump is using his unique circumstances1 to hoodwink the American populous into reforms before they realize it. It could happen, right?
1) First Term administrative energy, second term lame duck status, and a cult of personality in the Base that is keeping slim congressional majorities in line.
April 8th, 2025 at 9:40 am
Huh. I think you forgot to include that you’re a Trump skeptic, although calling him stupid, I suppose, makes up for it.
And yes, you have been wrong about Trump and no, I haven’t.
April 8th, 2025 at 9:48 am
Mitch, please expand on means testing Social Security. The scam aspect of SS, in my view, is that one could pay in for 40 years, pass away before eligibility and without eligible survivors, and receive essentially nothing. (In fact, younger people dieing early is one of the greatest contributions to the “trust fund”)
April 8th, 2025 at 9:54 am
Trump’s Painful but Necessary Scorched-Earth Approach Is Precisely What I Voted For
April 8th, 2025 at 10:23 am
One thing that I remember from macro in college is that there is a cycle of “balance of payments” involving government deficits and personal saving. More or less, if you have deficits and a lack of personal saving, you will have trade deficits to make up the difference.
So the key issue, IMO, is not tariffs at all, but rather whether the tax and regulatory systems are set up to reward savers or borrowers. We are pretty heavily (inflation targets, easy funds, etc..) on the side of borrowers these days, and that enables deficit spending and almost mandates huge trade deficits.
That noted, if we tax consumption with “Constitutional” taxes like tariffs, and balance that with a cut in the income tax, we can “keep the goose alive” by reducing the overall burden of tax compliance. The trouble, then, with Trump’s moves is that he’s not involving Congress, and as soon as he’s gone, the next guy can go bat-guano crazy with spending and make the situation worse.
April 8th, 2025 at 3:03 pm
This is a fairly long read, and it treads into economic territory over my head. But it makes a lot of sense of you’re not a militant knee-jerk anti-Trumper:
https://tierneyrealnewsnetwork.substack.com/p/3-3-3-policy
You might have to create an account on Substack, and you might have to answer no to a couple of donate/subscribe questions, but you should be able to get to the article without saying yes to anything. I was able to.
Spoilers: The tariffs are being used with a much more global/macro purpose than just resolving trade imbalance. Trump has been of this mindset for decades. And Bessent is the perfect choice for his role in this undertaking.
April 8th, 2025 at 3:05 pm
don,
You make a great point. There was a report, I believe in February, that pointed out that the number of WuFlu related deaths, relieved a huge draw on SS. One of my shooting buddies, is a retired doctor of internal medicine. He verified that he also received the letter to inflate WuFlu deaths, just like the one Scott Jensen was destroyed for. Further, he said that he and over 50 of his colleagues, were shocked when the CDC guidelines for younger adults and young children to receive it. He still has a number of former colleagues that are still practicing, that tell him they are seeing sporadic reports of vaxxed women in their 30s, entering menopause.
April 8th, 2025 at 3:09 pm
donlokk,
Means testing is applicable for a number of reasons, here are two:
1) SSI kicks out checks to “disabled people”. It doesn’t matter if they are missing their limbs or addicted to crack, they still get a check. But let’s take the case of a crack addict whose ex is raising their kids. SS will pay child support, which is okay, but what if the ex is a brain surgeon making north of $800k a year or simply can afford to raise their own kids?
Should the taxpayers still be paying child support?
Really?
2) Few people living today are getting a fair return on the SS taxes they paid in. They are getting more, a lot more than an annuity would offer due to cost of living increases. Now, if we are talking about Aunt Mildred living in a Florida RV park and SS is her only income – that’s fine with me.
But what about that brain surgeon or a quadruple-dipper civil servant?
They should get a SS annuity based on what they paid in, but not ta cost of living raises paid by Gen X’rs who will never get out what they paid in.
In case you don’t know what a quadruple-dipper civil servant is, I can name a few. It is when you retire from the city after 20 or 30 years with a city pension, then go over to the state to collect another pension – all the while paying SS taxes and putting money aside in differed comp.
In retirement, they earn way more than they ever earned working.
Hey, that is smart financial planning and I got nothing against that – but do taxpayers really need to be paying them cost of living increases beyond a normal annuity calculation?
April 8th, 2025 at 3:56 pm
Time to crank the chaos up to 11.
April 8th, 2025 at 4:01 pm
Did you see all those decrepit old boomers being herded down the street by their Soros handlers last Saturday? “ keep moving memaw…raise that sign higher, pappy!” Hilarious!
Wonder how many colostomy bag mishaps occurred… 😂
Hey, what happened to “we’re spending our kids inheritance”? LMMFAO