Don't Threaten Business with a "Border Tax" — Instead, Make the US A Good Place to Do Business
“They’re going to have to pay a border tax — a substantial border tax,” President Trump pledged Monday morning during a White House meeting with twelve CEOs including the heads of Dow Chemical, Proctor and Gamble, and Ford. He went on to make thinly veiled threats against the businessmen, saying, “All you have to do is stay. Don’t leave. Don’t fire your people in the United States.”
The President also discussed a 75 percent regulation cut and tax cuts for both the middle class and for corporations and a “big border tax.”
This is troubling for several salient reasons, primarily because the public image of President Trump holding White House meetings with businessmen just doesn’t wash. This meeting, at least, was open to the media. However, previous meetings with high-level executives have not been. What was discussed during these back-room meetings? We don’t know. Did the president offer incentives or threats? We don’t know.
What we do know is that the president working directly with CEOs produces at least the perception of secret deal-making.
Additionally, the narrative that all outsourcing is bad is patently incorrect. Outsourcing factors of production can allow businesses to free up money and hire more workers in the US at higher wages. Another benefit is that those foreign firms who are paid by US companies have to spend the dollars they receive back in the US or trade them in so someone else can. This results in more investment and capital at home.
Also, dumbing down the causes of the decline in manufacturing jobs, as Trump is doing, doesn’t help anyone. New technology facilitated the decline arguably more than outsourcing as US manufacturing output has risen in recent years while jobs have declined. The decline isn’t because of “crooked” or “cucked” trade deals like NAFTA. These deals don’t force firms to outsource or to automate. What forces firms to do so is overbearing tax rates and regulation.
By announcing tax cuts for corporations and a 75 percent regulation cut in the same meeting, the president has signaled he intends to implement pro-growth business policies. The “big border tax” and “renegotiation” of NAFTA won’t help. The tax cuts and deregulation, on the other hand, would.
Finally, President Trump’s reference to “fair trade” was naive and deceptive: “So I don’t call that free trade, what we want is fair trade, fair trade, and we’re going to treat other countries fairly but they have to treat us fairly,” he claimed. This seemingly was his second-worst stray into the Bernie Sanders level of economic illiteracy, after calling the free market, “the dumb market.”
In recent decades, “fair trade” has usually denoted the practice of those in wealthy countries paying inflated prices for goods in order to supposedly pay higher wages to those workers in less-developed countries who produce said product. In reality, this results in unemployment for many of the workers and those who keep their job aren’t paid all that much more. The bureaucracy involved in the deal is the primary beneficiary. It turns out folks could do a lot more good for less by buying the cheaper alternative to fair-trade boondoggles and donating the difference to charity.
The same goes for President Trump’s border tax plan. Just like proposals such as the minimum wage, this sounds altruistic, but it helps no one. The best way to bring jobs back is to make America the friendliest place in the world for innovators and job creators, not punish them for looking elsewhere for an alternative to business-killing taxation and regulation of the Obama years.