Tariffs: Manna from Heaven? And a modest suggestion to reopen the government

Tariffs: Manna from Heaven? And a modest suggestion to reopen the government

Some time ago I raised the question as to whether the president knew that he could not unilaterally use the revenue from the tariffs on any project that he desired. He promised that tariffs would make us rich as hell. It was as if tariffs would be manna from Heaven. A wonderous outflowing of billions into our coffers to solve all our fiscal problems. But since tariffs are paid by the domestic importer and not the foreign exporter, they were akin to raising taxes – and increased taxes have never made any nation rich as hell. Estimates are that the tariffs will effectively decrease real household income by $2,000. Again, the fiscal effect of tariffs is akin to transferring money from one pocket to the next. But the impact is an overall negative one on GDP. Most estimates of GDP (outside of the administration’s estimates) are for a slowing of GDP growth due to the tariffs.

Regardless, the president said that he would use the tariff revenue to maybe give us a $5,000 rebate. Maybe he would give the farmers $28 billion. Maybe he would reduce income taxes. Maybe he would pay down the national debt. Maybe he would use it to pay the troops. He even said that maybe it could be used for nutrition assistance. Maybe. Maybe. Maybe.

Remember when China stopped buying US soybeans? The president said “We’re going to take some of that tariff money that we made, we’re going to give it to our farmers, who are, for a little while, going to be hurt until the tariffs kick in to their benefit. So we’re going to make sure that our farmers are in great shape, because we’re taking in a lot of money.”

Well if the president is going to use any of the $200 billion or so currently from tariffs, he is going to have to get an act of congress to allocate the money. That is because tariffs flow into the general fund at the Treasury and only the congress can approve its allocation or reallocation. Granted the president has exercised his power by freezing funds already appropriated by the congress (subject to judicial approval) but he lacks the authority to raid the nation’s piggy bank. One republican member of congress politely reminded the president of this when he said “So while I’m certainly interested in the White House and President Trump’s suggestions, there’s the necessity of Congress acting to implement that suggestion, if that’s the conclusion of Congress.” One of the president’s officials admitted that it would be nice if it weren’t so but “I mean, listen, when the tariff money comes in, it goes to the Treasury of the United States. And Congress has to tell it — has to authorize it and appropriate it — right?” Right.

The vice president who is prone to speak while not being briefed on matters had said that during the shutdown the tariffs would be used to fund military pay. Wrong. That pay is coming from other funds says the Office of Management and Budget. Instead of waiting on congress to authorize payment to farmers out of the tariffs, the administration instead is going to use money from a Department of Agriculture emergency fund. It has even found money laying around to fund nutritional assistance.

If the administration did get the congress to write a bill authorizing the use of the tariffs from the general fund, what would it look like? Would it be a Christmas tree bill using the money in hundreds of different ways? Would there be a different bill for each proposed use? Regardless, the republican leadership is probably hesitant to bring any bill up for authorization because of what the democrats might do. You can be certain that they will want to use the tariffs to fund their own priorities. 

Now a modest proposal: I am actually surprised that those in congress or the president haven’t thought of using the tariffs to address the current standoff over Obamacare subsidies. The Congressional Budget Office (one of my old employers) estimates that the cost of continuing the Obamacare subsidies will be $350 billion over ten years. Well that is “only” $35 billion a year and the tariffs have already brought in $200 billion and are estimated (ceteris paribus) to bring in $4 trillion over that same 10 year period. Currently some republicans are starting to feel the heat because they have constituents who have become hooked on the Obamacare subsidies. So why not just use the tariff money to solve the shutdown farce and reopen the government?

BTW, I am categorically opposed to the costly, inefficient Rube Goldberg machine that is Obamacare and wish for its repeal. I am just offering up a possible solution to the shutdown using the tariff (which I also oppose) monies.