Milton Friedman once paraphrased Ronald Reagan describing tariffs as shooting a hole in a boat with a group of friends. If your friends start shooting holes in the boat, the best way to stop them isn’t to start shooting holes too. That just causes more damage to the boat harming both your friends and you.

In general, I like most, believe tariffs are harmful. Here I tell why, while also giving the case for why they can also help. In other words, “the good, the bad, and the ugly.”

The Deficit

I’m a libertarian. There are different types. From the least government anarcho-capitalist to the more, but still limited, classical liberal. I consider my position as in between. I’m a minarchist, more or less. In other words, I believe some form of limited government can be beneficial.

If there should be government, then there needs to be a way to fund it. We refer to that as taxes. Many libertarians, especially anarcho-capitalists, like to say “Taxation is theft”. That should be qualified. “All taxation is theft” might be appropriate for an anarcho-capitalist. For a minarchist, or at least my definition, “some taxation is theft” would be a better qualified statement. Which taxation? As a starting point, only taxation that’s authorized. For example, with regards to the US Federal government, that would mean by the US Constitution.

The Good

Of course, much theft is currently occurring there, but “the good” of a tariff is more about the hidden taxation. The deficit. For 2024, the US Government had a deficit of roughly $1.8 trillion. It’s an immorality that our government borrows on the credit of future generations to fund current spending. As of August 2024, we’ve already accumulated over $35 trillion.

While I’d love to see spending cut, until then, the government should collect sufficient revenue. Therefore, increased revenue is welcomed.

I spent a lot of time debating the Fair Tax. One concept that came up a lot was “embedded taxes”. Basically meaning that all goods and services produced in the US had income taxes embedded in their cost. It was a selling point of the Fair Tax. Many nations are able to remove those from exports and place additional taxes on imports via a Value-Added Tax. The US doesn’t currently employ a VAT, so tariffs are the next best things to even the advantage between domestically produced goods and those of foreign origin.

The Bad

Even taking into account the good above, using tariffs to remove the deficit is a heavy lift. In 2024, the US collected roughly $77 billion from tariffs. Remember, that’s needed to address an $1,800 billion deficit.

Tariffs, of course, also raise prices on foreign goods. That is bad for those purchasing the goods. It’s also bad for the producers.

It’s not just consumers that suffer. Many US producers use foreign imports for their products. This will also raise the prices of domestically produced goods. Goods are consumed domestically, as well as being exported.

The Ugly

Finally, the worst thing about tariffs? Central planning. The vast majority of government’s using tariffs has been to change the behavior of societal segments. Sometimes it’s foreign governments. So they’ll lower their tariffs. Sometimes to address other things. Like fight fentanyl.

And to get domestic consumers to buy domestically. But this always boils down to raising the price of goods. As the Irish found out, it can be devasting. Not the first time central planning has led to mass starvation.

Bottom Line

Governments need to be funded. Tariffs are one source. Maybe raising them to address other governmental issues if beneficial. Maybe even using them in lieu of other government revenue sources is desired. But they shouldn’t be used as political weapons to pick winners and losers in the economy. In the end, we all become the losers.

Here is me brief conversation with Chat GPT about recent government shutdowns. You can find my thoughts on the “hostage taking” here.

FBD : Can you give me a brief summary of every US Federal Government Shutdown since 2008 with quotes from both sides of the debate?

Chat GPT :

Since 2008, the U.S. federal government has experienced several shutdowns due to funding disputes. Here’s a brief overview of each, including perspectives from both sides of the debates:

1. October 2013 (16 days):

• Cause: Disagreement over the implementation of the Affordable Care Act (ACA).
• Republican Perspective: Many Republicans, particularly in the House, sought to defund or delay the ACA, arguing it was flawed and would harm the economy.
• Democratic Perspective: Democrats insisted on preserving the ACA, emphasizing its role in expanding healthcare coverage.

2. January 2018 (3 days):

• Cause: Dispute over immigration policy, specifically the Deferred Action for Childhood Arrivals (DACA) program.
• Republican Perspective: Focused on securing funding for border security and addressing immigration reforms without linking them to budget negotiations.
• Democratic Perspective: Pushed for protections for DACA recipients to be included in the funding bill.

3. December 2018 – January 2019 (35 days):

• Cause: Disagreement over funding for a U.S.-Mexico border wall.
• Republican Perspective: President Trump and his supporters demanded $5.7 billion for the border wall, emphasizing national security concerns.
• Democratic Perspective: Opposed the wall funding, viewing it as an ineffective solution and advocating for alternative border security measures.

4. December 2024 (Averted):

• Cause: Potential shutdown due to disagreements over spending bills and the debt ceiling.
• Republican Perspective: Some Republicans, influenced by President-elect Trump, opposed temporary funding extensions without addressing long-term fiscal issues.
• Democratic Perspective: Advocated for passing the stopgap spending bill to prevent a shutdown and ensure continuity of government services.

Each of these shutdowns stemmed from deep policy disagreements, reflecting the challenges in reaching bipartisan consensus on critical issues.

FBD : During that time, which political party was to blame according to the concensus of legacy media?

Chat GPT :

The consensus of legacy media (mainstream outlets like The New York Times, Washington Post, CNN, ABC, NBC, CBS) has generally leaned toward blaming Republicans for most government shutdowns since 2008. Here’s how they framed each event:

1. 2013 Shutdown (16 days – ACA dispute) → Blame: Republicans
   • Legacy media largely blamed House Republicans, particularly the Tea Party faction, for attempting to use government funding as leverage to repeal or delay the Affordable Care Act (CNN: “GOP-led House triggers shutdown over Obamacare”; NYT: “Republicans’ hard-line stance led to shutdown”).
   • Democrats, including President Obama, were portrayed as holding firm against what was described as “hostage-taking” by the GOP.
2. 2018 Shutdown (3 days – DACA dispute) → Blame: Mixed, but leaned toward Republicans
   • While Democrats initiated the holdout by demanding DACA protections, coverage often framed it as a failure of Republican leadership under Trump to negotiate effectively (Washington Post: “Republicans control Congress but can’t keep the government open”).
   • Some outlets acknowledged Democrats’ role but suggested that the GOP, controlling both chambers and the White House, should have prevented the shutdown.
3. 2018-2019 Shutdown (35 days – Border wall dispute) → Blame: Republicans/Trump
   • Media consensus strongly blamed Trump for the shutdown, as he had openly stated, “I will take the mantle. I will be the one to shut it down” in a meeting with Democratic leaders.
   • Coverage emphasized the economic harm and unpaid federal workers, often portraying Trump as stubborn and unwilling to compromise (NYT: “Trump’s shutdown: Chaos with no end in sight”; CNN: “Trump’s border wall obsession led to longest shutdown in history”).
4. 2024 Potential Shutdown (Averted) → Blame: Republicans (especially Trump-aligned faction)
   • Coverage suggested that hard-right House Republicans aligned with Trump were making negotiations difficult (NBC: “MAGA Republicans threaten another shutdown”; WaPo: “House GOP dysfunction puts government funding at risk”).
   • The framing suggested that while both parties were involved, it was mainly the GOP infighting that risked a shutdown.

Overall Trend:

Legacy media narratives have largely assigned blame to Republicans, emphasizing their use of shutdowns as a political bargaining tool. While Democrats have been involved in some of these disputes, coverage tends to portray them as defending existing policies rather than instigating the shutdowns.

FBD : In any of these events, had Republicans proposed funding smaller portions of the government?

Chat GPT :

Yes, during the 2013 and 2018-2019 shutdowns, Republicans proposed funding smaller portions of the government to mitigate the impact while negotiations continued. However, these efforts were largely rejected by Democrats.

2013 Shutdown (ACA Dispute)

• House Republicans, led by Speaker John Boehner, attempted a piecemeal funding strategy to reopen specific parts of the government, such as:
  • National Parks and museums
  • Veterans’ benefits
  • The National Institutes of Health (NIH)
• Senate Democrats and the Obama administration rejected these proposals, insisting on a full funding bill rather than a selective reopening.
• Obama’s stance: “You don’t get to pick and choose which parts of the government to fund.” (Washington Post, Oct 2013)

2018-2019 Shutdown (Border Wall Dispute)

• As the shutdown dragged on, Republicans proposed funding all government agencies except for Homeland Security, where the border wall dispute was centered.
• Senate Democrats, led by Chuck Schumer, rejected this, arguing that piecemeal funding would reduce pressure on Trump and Republicans to fully reopen the government.
• Schumer’s stance: “The president is holding government services hostage over his wall.” (CNN, Jan 2019)

Media and Democratic Response

• Legacy media and Democrats framed these partial funding efforts as a political stunt rather than a serious attempt to govern.
• Republicans countered by saying Democrats were refusing to negotiate, prioritizing politics over reopening essential services.

Outcome

• These piecemeal funding bills failed, as Democratic leaders refused to pass them in the Senate or accept them in negotiations.
• The shutdowns ultimately ended when broader funding deals were reached.

In short, Republicans did propose funding smaller portions of the government, but these efforts were rejected in favor of pushing for full funding resolutions.