What About Inflation Mr. President?

Crackdown on immigration and a bitter trade war involving billions in tariffs leave president struggling with inflation and restrains economic progress.

June 25, 2018

By: Bobby Casey, Managing Director GWP

inflation immigration tariffOnly last weekend we talked about the pending decision from the SCOTUS regarding the enforcement of online state sales tax, and a few days later we find out they ruled against small business and in favor of state theft.

Trump welcomed the ruling as a “win” for businesses and customers. Unless he’s taking cues from Bernie Sanders himself, I’m really not sure how he arrived at that conclusion. The same guy who rallied for major tax cuts upon setting foot in office, suddenly is defending the burden of online sales tax compliance?

Indeed, Trump’s economic doctrine is neither consistent, nor sound.

  • He led the charge to cut taxes. To his credit he wanted steeper cuts than what the US taxpayers ultimately received, but it was a huge success nonetheless.
  • He’s been chipping away at regulations with his own edict of cut two regulations for every one passed.
  • There’s been a surge of new jobs introduced during his term, and unemployment is very low.

But here’s where he gets stuck: inflation.

Wages are going up, but aren’t keeping up with the rate of inflation. What’s more, his other less effective – if not downright destructive policies – are going to undercut the progress made with the above policies.

  • His crackdown on immigration
  • His tariffs and trade war.
  • His inability to cut spending (worse yet, the increased spending)

We’ve covered all three of those things but this will come to an inevitable head. Here’s the general definition of inflation from Investopedia:

“Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.”

The price of goods and services are directly affected by regulations, taxes, and the costs of resources and labor. With the left hankering for higher wages, and the fascistic boot of border control, it’s tantamount to Americans shooting themselves in the foot as a labor force. What’s more it becomes a very circular argument:

  • I can’t afford child care. I need higher wages.
    • Immigrant is willing to provide affordable child care.
  • I can’t afford housing. I need higher wages.
    • Immigrant is willing to provide low cost labor to build new homes.
  • I can’t afford food. I need higher wages.
    • Immigrant is willing to harvest food for lower wages.
  • I can’t afford to buy the things I need.
    • China is willing to sell us affordable goods to meet that need.

Whatever the personal hang-ups might be – whether you’re ethically opposed to cheap labor, or just don’t like them damn foreigners out doing Americans – why is it necessary to make this a national burden to bear?

Why are people advocating the prohibition of affordable goods and services? If ever there was a privileged class, it’s voters who think that everyone can afford the costs of their woeful decisions.

Tougher immigration policy and enforcement leave America’s poor, working and middle class looking forward to 5%-6% jump in food prices with a reduction in quantity and variety at the groceries coupled with up to 90% hike in dairy products in particular.

27 percent reduction in meat production; up to a 31 percent drop in vegetable production; and as much as a 61 percent drop in fruit production. All told, farmers would see a 30 to 40 percent loss of net farm revenue due to the combination of lower production and higher labor costs precipitated by an enforcement only approach. Total agricultural output would fall by $30 to $60 billion. And according to the NMPF, one in six Americans dairy farms would likely close.”

In addition to the billions spent on border control (approximately $9 billion per year), there is the proposed cost of $18 billion on the wall. Immigration proponents are only too eager to volunteer their money and the money of others who oppose it to make that a reality. But the economic costs far outweigh the economic gains. Immigrants were serving as a counterweight to inflation in the US, and border control advocates are trying to do away with that.

Tariffs are nothing to scoff at either. I don’t know where people get the idea that tariffs are some form of economic justice: they are NOT. Sanctions, tariffs, embargoes, blockades… that’s economic aggression. Expatriation, emigration, inversion, divestment… that’s the creation of economic refugees.

Trump announced he would level a 25% tariff on $50 billion worth of Chinese goods. China responded they will be leveling a 25% tariff on 659 goods worth $50 billion starting July 6th. Who will suffer? We addressed Iowa a few weeks back, but as it turns out, they don’t even make the top ten of states that will feel the impact of China’s tariffs:

  • Texas: $8,022,380,040
  • Louisiana: $6,627,390,388
  • Washington: $5,231,988,100
  • California: $4,560,897,434
  • Alabama: $2,620,256,485
  • South Carolina: $2,588,390,677
  • Illinois: $2,123,222,976
  • Kentucky: $1,006,565,148
  • Michigan: $970,400,000
  • Ohio: $932,700,000

Thanks for offering up these states’ economies as sacrifices for your economic agenda! To think, conservatives allowing Texas to take one in the groin over this regressive nonsense! Oil and propane, are Texas’ bread and butter, and Trump just invited a multibillion-dollar blow to that state’s economy.

Tariffs don’t invite Americans to buy American and stimulate growth in American industry. That is a farce of biblical proportions. It increases the cost of American production and goods as well.

All this, combined with hikes in spending means Trump’s tax cuts will be very short-lived.

The truth is, it’s not the Chinese (or any developing world importer) or the immigrants that are destroying the economy and making life less affordable. It is, without equivocation, the government. Scapegoating is all well and good when it’s just rallying in the streets and railing on social media. It’s a totally different ball of wax when it becomes policy. The United States will soon feel the full brunt of stagflation and/or inflation.

This is unsustainable, unaffordable, and irresponsible. The everyday American relies on migrant workers and developing nations’ production to afford their costs of living. All the prosperity you saw from tax cuts will be destroyed by these centrally planned anti-free market government impositions.

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