Introduction

I’m one of those who believe that all government intervention does damage to the market economy. Taxes shift costs and distort the allocation of resources. The government always implements regulations that waste resources or have no real justification. Most government deficits create an expansion of the supply of money, which has the same effect as counterfeiting (as a stealth tax).

I would like to turn my attention to misguided “solutions” to imagined problems.

Trade Deficits: An Imaginary Problem

Business owners work hard to find products that will fulfill the needs of their customers. If they do not, they will quickly go out of business. They will seek sources of supply across the street, across town, across state lines, or across international boundaries.

In all cases, they will seek deals that they believe bring them value in excess of the dollars they pay. In all cases, they strike “fair” deals. The guy across the street does not rip them off, and the business in another country does not rip them off.

No one else in the country suffers harm from any of these deals. In fact, the customer benefits from the efforts of the business to find the best deals.

Trade “deficits” with neighbors, countrymen, or foreign supplies represent a problem only based on some sort of twisted logic.

Tariffs: Taxing The Beneficiaries of “Trade Deficits”

To resolve this imaginary problem, someone thought we should tax (or impose a tariff on) the very same people who benefit from the “trade deficit.” How stupid is that?

I use the term stupid advisedly. “Stupid” refers to actions that harm the actor and the party acted upon. Taxes, in any form, harm the taxer because they cause distortions in the market that the taxer allegedly wants to protect. Taxes harm taxpayers (i.e., consumers) because they reduce their ability to acquire goods they need.

Other Stupid Policies

To compensate for some of the market distortions the taxer refuses to acknowledge, he suggests other misguided policies.

Tariff Dividend

To address the costs associated with taxing citizens to resolve a non-existent problem, the government proposes a “tariff dividend.” This idea involves transferring money from one group of people to another.

At least with income taxation, the fraud remains in the open.

50 Year Mortgage

To promote the new mantra of “affordability,” the executive branch has proposed extending real estate loans for 50 years. Yes, that’s 50 years.

Two big stumbling blocks lie in the path of this proposal.

First, longer-term loans tend to demand higher interest rates.

Second, any minimal reduction in total payments for smaller principal payments will add to housing demand, causing, guess what: rising prices.

Has anyone thought ot reducing the monetary expansion that acts as the primary driver of increasing house prices?

Conclusion

An imaginary problem (trade deficits) + a destructive action = harm to many.

What will the people in government think of to do to us next?