Bogus Tariff Bounty

Here’s the ‘good news’ now being heralded by the media and the administration. Fox:

US tariff take surges to $31B in August, setting new monthly high for 2025

Secretary of the Treasury Scott Bessent adds that the income from tariffs over the next 10 years should knock $4 trillion off of US debt. Not that the debt will be lower; it will be much higher. But according to Bessent, it will be $4 trillion less than it would otherwise have been. (The Congressional Budget Office estimated $3.3 trillion.)

Hallelujah?

But wait. A lower court found that Trump lacked the authority to impose his tariffs. The Wall Street Journal:

Appeals Court Rejects Trump’s Global Tariffs

Decision delivers blow to central prong of president’s economic agenda; levies will remain in place pending further proceedings

And now…it goes to the Supreme Court as the crackpot rhetoric reaches a fever pitch.

“If we lose this case,” says quack economist Peter Navarro, “it will be the end of the United States.”

And from the White House on Labor Day came a claim that tariffs have ‘helped to drive more than $8 trillion in new US investment.’

Just trying to stick to ‘facts,’ all we really know is that Foreign Direct Investment into the US is currently going down, according to Global Business Alliance, not up. After all, what kind of investor would make a major commitment of funds based on a program that could be struck down by the Supreme Court next month?

And while tariff revenue is hitting record highs…actual collections won’t come anywhere close to plugging the deficit hole. The July total for tariff revenue was $28 billion. But the feds’ deficit for the month was $291 billion, more than ten times as much.

Let us draw breath and consider what is really going on. Where does this tariff bounty come from?

Back when Trump passed his tax cut bill — in 2017 — the news then, too, was about what a happy moment it was. Many of our own dear readers couldn’t believe it when we failed to share the rampant joy.

“What’s wrong with you?” a reader asked. “You’ll save money on your taxes. What is it you don’t get about that?”

What we didn’t get was how the feds planned to pay for all their marvelous projects without taking the money from the citizens they were supposedly designed to benefit. Who else was going to pay?

The answer of course was that the money would be borrowed…and the real costs would be reckoned in inflation and defaults.

‘A tax cut without a concomitant spending cut is a fraud,’ we opined. The tax cut did not really reduce the cost of government, it simply disguised it. Net gain = zero.

And now cometh a new trick. Again, spending will not be touched. The feds have simply found another fake mustache. The costs will be paid, now, as a tax on consumption.

Businesses navigate based on their allowable margins. They try to maximize revenue by making every sale they can…while still preserving their profit margins. Without the profit, there is no reason to make the sale. So, they must pass along any cost increases — including the cost of tariffs.

The result is that the tariffs function like an insidious, capricious national sales tax, pretending to be a penalty paid by foreigners. Almost every penny of revenue from it originates with the American people, as always. Because the real cost of government is what it spends. One way or another it will get the money from its citizens. There is no other source.

Net gain = zero.

The real result, however, will be deeply negative. We don’t know which of the two frauds — tariffs or deficits — does the most harm. Both of them disrupt the economy, waste time and resources, impair trade, and cause sub-optimal behavior on the part of businesses, investors and consumers. Either way, common citizens pay the costs; favored elites get the benefits.

Wealth is not created by politicians or their programs, policies or money-printing bamboozles. Instead, it is the fruit of taxi drivers, doctors, accountants, jewelers…millions of people…including those who invest their own money and reap their just rewards. Builders, chemists, engineers, landscapers, farmers and factory hands – those are the people who create wealth. Tariffs are just another way take it from them.