FOX commentator Charles Payne recently repeated Pat Buchanan’s old post hoc, ergo propter hoc fallacy (After this, therefore because of this) about tariffs in a Breitbart column. The fallacy goes like this: 1). Economic growth occurred during the post Civil War period up to the turn of the century. 2). High protectionist tariffs were imposed during the Lincoln regime and lasted for some fifty years. 3). Therefore, the protectionist tariffs caused the economic growth. Yes, and the rooster crows in the morning, then the sun comes up, therefore the rooster crowing causes the sun to come up.
It was the absence of income taxation and a hardly noticeable regulatory regime that were the most important policy issues related to post Civil War growth, along with the existence of the gold standard (in various forms). International trade was a small fraction of the entire economy, so tariff taxes on imports could not possibly have been the One Cause of post-war prosperity as Buchanan and now Payne argue. In addition, many of the tariff taxes were imposed on inputs used in the manufacturing process by American corporations, hindering economic growth. This period of protectionist tariff plunder was especially harmful to American farmers because a tax on imports eventually becomes a de facto tax on exports, and farmers exported huge amounts of their produce. This is because impoverishing America’s trading partners by blocking them from selling here results in the fact that they then have fewer dollars with which to buy American goods. At the time that was overwhelmingly American farm produce. Tariff taxes also reduced the disposable income of the American working class during that period, as all taxation does.
Furthermore, if what these two cheerleaders for the quintessentially anti-populist policy of protectionist plunder of average Americans were true, then there should have been hardly any economic growth at all from the end of World War II until today, when the average tariff rate declined for 78 years from about 11 percent to 2.5 percent last year as shown in this graph. That was before President Trump proposed an almost sixfold increase in the average tariff tax rate last week.
No one ever created prosperity by raising taxes and as Ron Unz recently wrote, President Trump’s tariff tax increase proposal could well turn out to be the biggest one-time tax increase in world history.
