A Tariff Most Certainly Is A Subsidy

Yesterday, I challenged AC on what I perceive to be an inconsistency in his economic beliefs. While he openly attacks corporations that are subsidized by our government, he also supports tariffs that, in his words, "equal the playing field a smidge".

In my post I asked the question: "Is a tariff not a subsidy?". He responded with

Well, first of all, no, a tariff is not a subsidy -- it is a tax. I'm not the biggest fan of taxation but it seems to me that the best tax is one on corporations who, either by situation or choice, operate outside of the United States of America.

As such they do not provide Americans with jobs or other benefits, they only use their "comparative advantage" to provide our market with goods. No problem there but these companies do not provide us with anything but the final good. They use the cheap labor and the lax regulations in other countries to provide a good for a lower price. All we get is the price. All other benefits to our economy are lost.

A tariff, a tax on foreign goods, recoups some of these missed benefits.

His response is extremely naive. A tariff may be sold by populist politicians as a tax on those funny talking foreigners, but who is it that lobbies for that "tax"? It wasn't long ago that the Bush administration supported and implemented a steel tariff. Does anyone actually believe that the purpose of that tariff was to raise revenue? I hope not? Anyone in their right mind knows that it was the steel industry and the steel worker's union that lobbied for that tariff. The administration's support of it was just a political stunt to garner support from the steel union.

The tariff on Brazilian ethanol is essentially a subsidy for the American ethanol industry. Brazil has figured out a way to make ethanol from sugar much less expensively than the United States can make it from corn. As a result of our government "equaling the playing field a smidge", we not only have a smaller supply of ethanol, but the ethanol that we have is so expensive to refine, that it ends up costing more than the consumer is willing to pay. Ethanol from corn costs about $1.74 per gallon to produce, compared with 95 cents to produce a gallon on gasoline. So in order to help a few agri-corps, our government is willing to hurt the American consumer. That is what tariffs do.

Not only does free trade allow the American consumer to buy less expensive products, thus making their dollar worth more, but it also promotes diplomacy. Nations that are active trade partners tend to make nice and not go to war. They need each other's trade dollars too much to risk bad relations. A tariff only protects American corporations, and it always amounts to bad diplomacy.

Paleo-conservatives and populist liberals need to get honest. Complaining about corporate subsidies in one breath and supporting a tariff on Brazilian ethanol in another, just doesn't cut it.