Trump's Tariffs vs Cruz' Flat (and fair) Tax - Granite Grok

Trump’s Tariffs vs Cruz’ Flat (and fair) Tax

Debate Doodlings #2

USNews-GOPDebate-Cruz-TrumpIt is important to remember that the Great Depression was triggered by the combination of a protectionist president, and legislative malfeasance.

Donald Trump, meet Smoot and Hawley, the Godfathers of “beggar thy neighbor” tariffs. Got a problem with trade and currency imbalances?Hawley+Smoot Just slap a tariff on goods coming from the wrong places and presto!

Except that in the real world, those countries are going to turn around and slap tariffs right back on our goods, leading to a downward spiral in the economy. This flavor of populist snake oil NEVER works.

Contrast this with Cruz’ flat tax plan which, although incorrectly derided by opponents as a Value Added Tax, has important features that make it function a lot like the Fair Tax beloved by libertarians. The most important of these features is that all goods SOLD in the USA are subject to the business flat tax, but goods exported are not (border adjustable, in legalese).

Carrot vs stick – Trump would punish American companies manufacturing overseas, while Cruz would lower and simplify business taxes so that doing business here is the most attractive option.

Historians are afraid of Trump’s approach, while economists are hugely supportive of Cruz’ plan. (I don’t count Krugman as an economist)

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