Many members of my extended family participated in demonstrations on Saturday, January 21 pledging resistance to the far right agenda of the Republican Congress and their leader, Donald Trump. We marched in solidarity with women disgusted by the thought of a sexist, sexual predator in the White House.
We marched in solidarity with the black lives matter movement fearful that his promise to end the so-called carnage in America will mean more black bodies lying dead on the street or rotting prison for decades.
We marched in solidarity with and the immigrant rights movements fearful that his promise to
“control the border” will mean more broken families due to future deportations.
We marched in solidarity with our Muslim fellow citizens already demonized by his lies about Muslims refusing to turn in potential terrorists and the energized white nationalists who are coming out from under the rocks where they have been biding their time for decades.
We marched in opposition to an even more emboldened minority of racists and xenophobes who are the new shock troops for a billionaire corporate attempt to roll back not just LBJ’s Great Society but FDR’s entire New Deal.
Hopefully, many of us came home determined to stay involved --- no longer content to write checks to our favorites political and civic organizations and vote every two years --- but resolved to become engaged citizens.
One way I have attempted to fulfill my citizen responsibility is to figure out ways to break through the wall of misinformation which has convinced too many of our fellow citizens that the lies spread by Trump and his handlers in the Republican Congress and the far right media -- that up is down, day is night, global warming is a hoax, Muslims are dangerous, black folks are criminals, Christians are being persecuted by the “gay agenda,” and illegal immigrants have caused massive unemployment to “real” Americans.
(I have had a recent very unpleasant experience of exchanging e-mails with a pro-Trump true believer. The amount of totally false assertions this person sent me was mind boggling. Hopefully that person is NOT typical of a Trump voter.)
Well here’s one very straightforward economic proposal. Contact your Senators and Representative (trying calling, it’s hard to get through --- send a letter rather than an e-mail --- show up at a town hall --- be persistent).
[For details on how to put persistent pressure on your elected representatives, check out the Indivisible Guide created by former Congressional Staffers at www.indivisibleguide.com. I have found their suggestions very useful.]
Ask you Senators and Representatives to put forward an amendment to that bill that will be introduced to fund Trump’s wall on the US Southern border. The amendment would state that the construction costs of the wall be financed by a temporary surcharge on the incomes of people making over $5 million a year. The surcharge should be 10% since that is the surcharge that was part of the tax bill passed in the first year of the first Clinton Administration. The financing amendment should state that the money will be rebated back to the taxpayers when and only when Trump succeeds in making Mexico pay for the wall.
(The amendment must specify that an independent agency – the tax foundation – the Congressional Budget Office --- must certify that Mexico has indeed paid for the wall and the details of how the group came to that conclusion must be presented publicly to Congress through televised hearings so that the public can indeed be confident that Mexico did pay for that wall.)
Why do I think it is worth making this proposal? Because I believe that many people who voted for Trump (hopefully a majority of Trump voters) do not share his racism, sexism and xenophobia. Many did so because they believed he would make their lives better. And some Trump supporters do believe that one way to make the lives of working class Americans better is to end so-called illegal immigration. (By the way, many Republicans in Congress want to go much further and reduce ALL immigration but that is a topic for another commentary.)
So building a wall and making Mexico pay for it is something favored by many Trump supporters.
The members of the billionaire class, on the other hand, mainly supported Trump because he promised to cut their taxes and reduce regulations that reduce their profits. This group will howl like stuck pigs in opposition to a surcharge on their bloated incomes (as they did in 1993 when the Clinton tax plan passed Congress). Our response can be ---- don’t worry, you’ll get your money back once Trump figures out how to get Mexico to pay for the wall.
We know that Trump will not be able to get Mexico to pay for the wall because any effort to do so (the 20% tariff for example) will create massive disruption of the very lucrative trade that our businesses have with Mexico.
Instead, what will happen (whatever Congress does with the surcharge proposal) is that the slow, laborious process of exposing Trump and the Trump campaign as one big con job will have begun.
However, the proposed 20% border tax (Trump’s spokesperson Sean Spicer said it might be applied to goods coming from EVERY country with which the US has a trade deficit) is worth a much more detailed look from the perspective of economics. First of all, if such a bill were ever passed it would blow up almost 70 years of trade policy because every trade deal we have negotiated going all the way back to the General Agreement on Tariffs and Trade first signed in 1947 has the promise to treat all signatories as well as we treat our “most favored nation.” The whole point of the most favored nation clause in all of these agreements was to get away from the bilateral agreements the followed the breakdown of world trade during the Great Derpession of the 1930s. But let’s ignore that legal problem for now.
Suppose we imposed a 20% tariff on all goods being imported from Mexico as a way to get that country to “pay for” the wall. As many business journalists have pointed out, the people paying for the wall will be American consumers who will pay higher prices for all those Mexican imports. That, of course assumes that every American who used to buy imports from Mexico (69% of which are taken up by vehicles, electrical machinery and other machinery)
[for the graph see www.businessinsider.com/us-imports-from-mexico-2017-1]
will buy the same amount as before and just pay a 20% higher price. But of course, that’s not how it works. Imagine if the 20% border tax makes these imported items so expensive that demand for them falls to zero (very unlikely but bear with me). In that case, “Mexico” will pay for the wall with higher unemployment and lower incomes, American taxpayers will be on the hook for every penny of the wall’s costs, and American consumers will face higher prices because they will end up buying a more expensive product than the one that utilized the Mexican imports.
In reality, the situation will be somewhere between the two extremes discussed. Some of the cost of the wall will be paid by US consumers with higher prices. Some of the cost of the wall will be paid by US taxpayers. Meanwhile, some Mexican workers will lose their jobs, some American consumers will pay higher prices and some US workers will stay in their jobs or even find new jobs to the extent that US producers increase production to make up for the decline in Mexican imports.
The only way to make Mexicans pay for the wall will be to impose that same 20% tax on US EXPORTS sold in Mexico. In that case, a similar combination will occur. Mexican consumers will pay for part of the wall with higher prices – but not with increases to cover the entire 20%^ of the tax. Some Mexican workers will find work within Mexico producing goods that are now more competitive because the price of the same goods coming from the US will be higher. Some American workers will lose their jobs because US exports to Mexico will fall. Finally, some of the cost will still be borne by US taxpayers unless Mexican consumers react to the US export tax by just paying the higher prices and not seeking alternative products. By the way, a tax on US exports is a total non-starter in Congress. American businesses actually want the tax code to make it MORE advantageous to export not less.
Thus, the idea of using a border tax to make Mexico pay for the wall fails the Econ 101 test. It is amazing that Trump, supposedly a smart business man who went to the Wharton School (where I know they teach economics) should have been willing to float such a ridiculous idea as a way of making Mexico pay for the wall. Maybe his attention span when at Wharton was as bad as it is now.
SO --- let’s write, call, visit our member of Congress and tell him or her to promise to introduce the amendment proposed above. That the wall will be financed by a ten percent surcharge on taxes paid on all incomes above $5,000,000 – to be rebated when and only when a neutral body certifies that Mexico has indeed “paid for” the wall.
This is an effective, straightforward way to fight back against the Trump agenda. We take a proposal that has support within his base and marry it to a proposal to tax the billionaire class and watch the thieves fall out.
Michael Meeropol is professor emeritus of Economics at Western New England University. He is the author (with Howard Sherman) of Principles of Macroeconomics: Activist vs. Austerity Policies.
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