Governing and Running a Business are Not the Same

 

One of the misconceptions held by the Trump faithful is that, since Trump was such a successful businessman, he would be able to run our government the same way. This logic fails in so many ways. First, governments are not profit oriented and they should never be run with such an objective. Governments are a tax supported service entity providing for the needs of its people, not a business designed to make a profit for owners and shareholders. We won’t go into the personal business acumen that went into numerous bankruptcies, failed businesses, and losses suffered by others when Trump was involved honing his Art of the Deal skills.

Trump has idolized President McKinley and his support for tariffs in the 1930s. By some twisted perversion of history, he seems to ignore the end result of the Smoot-Hawley Tariff Act that was designed to protect farmers. It failed in this effort and made farmers worse off than before. It triggered retaliatory tariffs, reduced global trade, worsened the economic downturn, and exacerbated the Great Depression. Overall, world trade decreased by some 66% between 1929 and 1934. Unemployment went from 8% in 1930 to 25% in 1932-1933. FDR ended much of the tariff problem with the Reciprocal Trade Agreements Act of 1934.

Of course, history is not Trump’s strong suit, assuming he has one that isn’t blue. The disastrous outcome of Smoot-Hawley was perhaps preordained by the backroom deals that attempted to carve out exemptions. Everybody wanted their industries to have protection to gain an advantage in the market. This is similar to what is happening under Trump, a man who loves backroom deals. Industry leaders come with fawning praise for the ego-centric Trump and offer “contributions” that bring a smile to the face of a man who never saw a hand filled with cash with anything but delight.

In a recent interview, Trump who had promised that his tariffs would be a bonanza for the economy, now says that we shouldn’t expect anything this year or the next. We will need to wait for things to get better. He envisions a return to the days of those great factory jobs. He predicts this will be preceded with a construction boom. The problem seems to be that prices are higher and jobless numbers are higher, even after putting someone in charge to get some “better numbers.”

In a recent Meet the Press interview, the US Secretary of the Treasury, Scott Bessent, defended Trump’s tariffs saying that some companies are saying they are “eating the tariffs” and holding prices steady but refused to admit that tariffs are a tax. My question would be, if companies are taking losses and are currently paying the tariffs, how is this not a tax? How long can they eat these losses?

It was said that the Smoot–Hawley was, “the child of unimaginative politicians with limited worldviews and even more limited knowledge of economics, and who likely wouldn’t see the allegorical lesson in Frankenstein, and for whom only one thing mattered: surviving from one election cycle to the next.” The Frankenstein reference was to the 1931 movie where a pack of frenzied villagers hunt down the Monster to avenge the drowning of a little girl, a reaction similar to the degeneration of American industry, special interest groups, and Congress into an unruly mob terrified by its own monster: foreign imports.