In reading through this post on macro economic stuff I found quite a few things that, while not incorrect, might be presented in a more centrist and truthful light. It is very easy to editorialize and we all do it or we wouldn't be putting up diaries and editorial posts. And we should begin with the fact that Madison and Jefferson opposed the central bank and the Democratic-Republican party of that day, which was Jefferson and Madison, were dead set against most of Hamilton's ideas.
Yet that is probably not important in that what would become the Republican and Democratic parties have swapped places several times since their inception. The latest train wreck was civil rights. I am mostly concerned with the less than full coverage of the depression and the tariffs.
Only a moronic idiot Republican searching for a life preserver in the disaster created by lack of regulation in the 1920's would crank up something like Smoot-Hawley. It was typical Republican shoot from the hip while the public is in trouble methodology. The Republicans blamed trade and the tariffs were huge and their imposition started a trade war. The underlying stupidity was that the USA had a TRADE SURPLUS at the time. This nation was in 1930 a beneficiary of free trade. And THAT is the mark of Republican "win at all costs" lying. It has always been about grabbing the misinformed "conventional wisdom" and offering the people any solution that "sounds good" in a the bad economy that Republicans always seem to create and manipulate.
That was then and this is now. And the United States has a very large account deficit as well as a very large budget deficit. And while it is a idiot that raises import tariffs when the economy is aided by trade (export surplus), it is the exact opposite when a nation is operating with a severe trade deficit. There is no harm that will be visited on the American economy from a deterioration in trade across the board. As trade diminishes the American middle class benefits. This is important because if other nations respond to our insinuation of import duties then our exports will be harmed. But if other nations respond to our tariffs of say, 10% by erecting a 10% tariff on goods from the USA, we win BIG TIME. Even if other nations erect much higher tariffs, our internal economy, striving for self sufficiency, is still going to be better for it. This is, of course, conditioned on the premise that the economy is measured as the prosperity of the middle class as opposed to some neoconomist banker worrying over a non existent inflation monster.
I mention inflation because that will be the next voodoo doll out of the mouths of the Republicans and the Republican light ConservaDems. One should consider the advantages of MODERATE inflation along with the BOOGERMAN downside. As a matter of fact, I can't actually see any downside at all to inflation less than 6%. Moderate inflation is a necessary component of monetary policy in that it removes the zero bound problem. And to that subject I will devote the rest of this diary.
It matters WHY prices rise, and this is the determinate of whether MODERATE inflation is basically good or bad. If prices rise because there is an shortage of some basic need in the economy (such as an energy shortage), then inflation might be a bad thing. But if prices rise because the common people have more buying power then inflation is certainly not a bad thing for the common people. In that case inflation is a bad thing for those who hoard money and refuse to loan it or invest it. Common people PUSH inflation (a rise in prices caused by an increased purchasing power of the common people) is a very good thing for the common people and for debtors. And it is a bad thing for creditors who have loaned money at fixed rates of interest or those who refuse to loan their money and just sit on it hoping for a depression.
So my one size fits all prescription is REBATED import tariffs. The "rebate" is the use of all the funds collected from the tariffs to the common people that would have to "pay more" for the goods because of the tax. You must remember that in MACRO land we deal in aggregates and not individual effects. And I/we admit that the proposed system is inefficient. There is the cost of collecting the tax and the cost of issuing the rebates and this would tend to impose some inefficiency. But there are GAINS from this system and they depend on the form of the rebate. We could go hard left and propose that the funds be used to support the poor or even to fund deployment of windmills and an HVDC electrical backbone. We could go hard "right" and use the money to round up and deport people. But instead, the proper mechanism is what we will call the Stimulus Trust Fund. As the import duties are collected they are added to the trust fund. Every quarter, the funds is used to send out stimulus checks or to deposit the funds in the bank accounts of the individuals in a manner consistent with the stimulus checks that went out in 2008. High income people do not get a stimulus check, but the vast majority of the middle class does get a stimulus check.
Now the magic begins:
The people who are really stupid will use their stimulus checks to buy stuff at WalMart. The smarter ones might shop at Target or Fred Myer on the off chance that they may actually get something made in America.
Corporate taxation is not a smart thing to do because the corporations simply realize their gains outside the US tax jurisdiction and avoid the tax. But they CANNOT escape the import duties. If they offshore the manufacturing then they will have to pay the import duties.