I know one US business that used to make niche electronic product. Most components they used were from China. Got hit by the tariffs that wiped all the operating profit. Guy also had to sell his home and is now couchsurfing. Business is unlikely going to recover.
Of course he considered making chips and other components in the US, but he was few billions short to start the fab.
Good thing that the US cancelled collection of unemployment stats just as all these sorts of negative business effects were happening. If a job is lost in the forest and no one is there to hear it, does it make a sound?
Reminds me of a comment I think by Nancy Teeters the first female Federal Reserve board member. She said the other board members thought they could savage the US manufacturing industry to kill wage inflation and break the unions and it would come right back once they stopped. And it didn't.
From the other side of the Atlantic this sounds like straight Thatcherism, in which Chicago-school monetarism was an ideological anti-union weapon, and the Thatcher cabinet was not coy about it. However I think the US went that way first even if Reaganomics came later.
I think a lot of that in the US got spun up with Nixon, Reagan brought a lot of it to the mainstream though. Both of them hated unions with a passion that is for sure.
Unions are the best of all the bad solutions we’ve come up with so far for labor to compete with capital. The worst of course is collectivism through government, though that’s being tried again…
The best solution is antitrust enforcement and removal of anti-competitive laws/rules lobbied for by incumbents. When companies have to compete with each other for labor and customers, wages go up and prices go down. Whey they consolidate they can charge monopoly rents.
Unions often even make this worse because they'll latch on to a monopolistic employer and then lobby with them to retain the monopoly at the expense of all the workers who are their customers rather than their employees.
> removal of anti-competitive laws/rules lobbied for by incumbents.
If even if there are such ideas in new government, they quickly disappear over wine and steak dinners with the lobbyists.
Unfortunately this is not seen as bypass of democratic process. Nobody voted for having less rights and any bargaining power stripped and yet here we are.
That's where security services should come in (in many countries protection of democracy is their main statutory duty) - but they are not doing their job tax payers pay them to do.
Arguing that we shouldn't do something because it's hard to enact is defeatism. When it's the thing you need to do you need to do it anyway. It's not like anything else that would actually work would be easier to pass -- the thing you want is the thing they don't want.
Sure there are a number of Democratic Socialists and other progressives winning elections and driving changes but everything I’ve seen policy-wise has been directly targeted areas where unchecked capitalism has clearly failed their constituents. Even in those cases, there’s no dramatic shift towards government ownership.
> there’s no dramatic shift towards government ownership
Interesting that you mention this. It's not exactly the same thing, but someone in another thread here on HN pointed out that the feds have been acquiring non-trivial stakes in a number of companies. More than just the one or two that I had seen in headlines.
It's funny, because it's a bigger overt push in the direction of actual socialism than the dems have ever tried, by the group of people who most love to use socialism as a boogeyman.
But the argument in favor of it seemed compelling on it's face, at least worthy of debate.
FWIW Teeters was apparently one of the more dovish from that era and didn't think the high rates were a great idea: “You are pulling the financial fabric of this country so tight that it’s going to rip...once you tear a piece of fabric, it’s very difficult, almost impossible, to put it back together again.” An analogy which she also said none of the men understood because they had never sewn anything
They use interest rates to protect against inflationary (and deflationary) spirals, which are known to be devastating. The effect on the unemployment rate is a known, and predictable, side effect. But formal unemployment is small compared to labour force dropout anyway, and the latter is not necessarily so sensitive to economic conditions anyway. Besides which, the unemployment rate can't really keep going down forever.
Had it not been for COVID you'd be at more than 16 years without a(n NBER-determined) recession, long enough to suggest a fundamental shift vs. how things worked in the several decades before that.
Your observation is about distributional characteristics of the economy which, in terms of policy, are addressed by fiscal policy and not monetary policy; the former remains in the hands of Congress and the President without delegation to the Federal Reserve, which has been given only a narrow set of tools adapted to and a mission related to broad aggregate performance.
Have you ever read about people burning piles of German currency because it was better than using it to buy firewood with? Not to say we would get there, but allowing inflation to run is not kinder.
Inflation like that doesn’t just happen. It can only be the outcome of explicit government policy. Like in post WW1 Germany they wanted to wipe the value of all domestic government debt they accumulated during the war.
Eh my understanding was more that they had to cover fiscal deficits with printing, because they had heavy WW1 war reps (only payable in gold, so they couldn’t inflate it away).
There are times when it’s politically infeasible to defend the currency, even if they technically could. See the response in France to trying to raise the retirement age a bit, because their budget is in trouble.
Supposedly Germany was spending around 80% of its tax revenue on interest payments alone. They pretty much had to finance the war through domestic bonds.
So yes, pretty they didn’t have any money to spend on anything else. Of course bonds became worthless well before the peak in inflation.
Those are more recent examples, but I think Germany is still a more visceral example for a lot of Western nations because Germany was a high tech, educated industrial nation that was hit with such massive problems from government policy. It's closer to home. Other countries are (wrongfully) easier to dismiss as being just too different from our wealthy and enlightened selves.
Also, Germany was a great power seriously challenging the greatest power of the time, the British Empire. They fell a lot further than those other examples.
People get confused the hyper inflation in Germany was right after the end of WWI when Germany's economy was collapsing. Turns out you can't fix that with monetary policy.
A point. Economists like people to believe that hyper inflation lead to Hitler. When it was austerity policies at the start of the great depression 10 years later that lead to the Nazi's winning in 33. Same austerity policies in the US lead to FDR and the Democrats winning.
Unfortunately we're looking more like Hogan's Heroes than Germany. Both Zimbabwe and Argentina (and, quite frankly, Venezuela) were well developed before they went down the road of disastrous policies.
I am imagining Mexican cartels smuggling hardware into the US...
(But seriously I do not know how good US Customs is but in my country every day millions of packages from Asia arrive and they are checking not even a percent).
Counterfeits don't happen when you buy parts from reputable distributors (digikey, mouser, Newark, TTI, arrow, etc) that are not "marketplace" items. These parts often come right from the manufacturer or from a domestic distributor for the manufacturer. You get counterfeits when you buy from brokers.
Often with older electronics designs, the parts the engineers originally picked are no longer made. It's not the end of the world, there are solutions. Sometimes the vendor changes the part number due to a process change or the part design is sold to another company and goes under a new number. You can also sometimes find drop in compatible parts (common for the 7400/5400 series chips), these may be in a different package so you might have to design an interposer or deadbug it. The worst option is finding old stock using a broker. There are legit brokers that will source old stock and "refurbish" them for you (called re-lifeing). But there are also shady brokers that will buy counterfeits (or get tricked into buying them) that may or may not actually work. Sometimes the counterfeits are relabeled parts that are compatible but the new label gets a higher price because they aren't being made any more. Sometimes the counterfeit is actually a totally different design that is shoehorned into its desired purpose (like a new microcontroller masquerading as an old processor or ASIC). Other times it's just some random junk pulled from e-waste that's been relabelled. Other times you'll get a counterfeit that comes from a stolen design. Even when the counterfeit functions, it may not perform to the same spec as the original part (very important for military spec parts) or will have other characteristics that make it incompatible with the rest of the design (like drawing too much or too little current). When it comes to engineering in ISO9001, traceability is a huge thing and brokers just can't provide that.
At my job, we have an "absolutely no brokers" rule. They simply cannot guarantee that what they provide is genuine. If a legitimate distributor doesn't have stock of a discontinued part, they'll never have stock of it. Brokers will tell you what you want to hear while they go out and try to make it happen. I'm not saying all brokers are shady but if you are considering buying from a broker, you should be instead considering how you can replace that part.
Why exactly is China an enemy? They want to increase their standard of living and expand their sphere of influence. That doesn't have to hurt the US directly. What it may undermine is the idea that the US gets to unilaterally steer the developed world.
On the other hand, perhaps that's a burden the US should be excited about tossing off. It's expensive to be the World Police, and it's left them with a lot of strained reputation and burnt-through leverage. It also requires them to do a lot of "lead by example" stuff that they seem completely disinterested in (industrial policy, forming consensus, trying to present as a magnanimous moral model).
china is an enemy because they have a parallel financial institution that isn't controlled by the people who control the european/american financial hegemony and have enough military to stand up to te US uf war broke out.
a purported niche/low-volume electronics, but the profit is somehow dependent on BOM price? a tariff bump on a small BOM doesn’t take you from profitable to homeless.
if that happened, the business already had seriously bad margins, bad cash flow, over-leverage, or maybe he was just doing it out of love getting paid maybe back for his time or not.
tariffs might’ve hurt, but they don’t collapse a healthy niche hardware company where buyers are presumably also into the niche.
seems weird i dont get it. can you explain further?
gamers nexus did a great (and very long) video on the impact of tariffs on US computer businesses. Some of the manufacturers went into quite a bit of detail breaking down their costs and how tariffs would render some products so unprofitable that they would cease to serve the US market. Not sure if it necessarily applies to a niche/low volume business, but the impacts on a larger business were eye opening:
For example, the company can raise its prices. How well that works depends on whether there is competition for the company's product. If the competition is also hit by the tariffs, then they're on an even playing field. If the competition is using native parts, then the competitor gets the business.
There's concern that if all our chips come from one country, they could cut the supply off and make demands. That's called an "embargo".
It's also done to protect local industries, hence the term "protectionism". For example, Canada's large tariffs on American milk are there to protect the local Canadian milk producers.
AFAIK, Trump's tariffs are meant to serve the following purposes:
1. so critical supplies, like chips, will be produced domestically
2. to raise money for the treasury
3. to convince countries that have high tariffs to lower them in exchange for the US to reciprocate in lowering ours
4. to incentivize foreign manufacturers to invest in factories in the US
5. to use them as a negotiating tool for other terms favorable to US interests
These are not crazy things. We'll see how things play out.
What leads you to believe that the implementation of tariffs under this administration was done for the purposes that you have enumerated?
It seems that you're operating under the normally reasonable assumption that these policies were implemented after careful consideration with specific goals in mind. I don't think it's reasonable to assume that the people involved in this are doing what they're doing for well-thought out reasons or ones that are meant to benefit America.
> What leads you to believe that the implementation of tariffs under this administration was done for the purposes that you have enumerated?
That's what the administration has stated as the goals of them.
For example, many foreign companies have announced plans to invest in creating factories in the US. How that will eventually work out will take some time to see.
> I don't think it's reasonable to assume that the people involved in this are doing what they're doing for well-thought out reasons or ones that are meant to benefit America.
That's a pretty fantastic assumption. I cannot think of a single instance of any President imposing a policy meant to hurt America. Of course, in my opinion, a lot of Presidents have pushed policies that I regard as destructive, but they didn't mean it to be.
2. That every president and their administration operates with a coherent,
disciplined strategy
3. That competence can be assumed by default.
Unfortunately these assumptions simply don't match anything we've seen from this administration.
There's a difference between good intentions, stated intentions, and effective execution of policy and there's nothing to indicate that these things are aligned here.
There's also nothing to indicate that the American democratic process guarantees a President who always has Americas best interests in mind and there's nothing to indicate that every person who has filled that roll has had that as their primary motivation.
From my non US-ian vantage point, it really looks like the current US administration is really trying hard to help Putin as much as it can to destroy the USA we used to know and like.
And the rest of the world as well, as collateral damage.
Agreed. Tariffs should be used like a scalpel, precise and targeting very specific things to encourage development or even the playing field. The tariffs that have been implemented so far are more like a sledge hammer, used to extort and intimidate.
They’re not crazy goals, but the way these tariffs are being implemented does not further most of them.
3 and 5 are undermined by the fact that even nations with positive trade surpluses with the US, and countries like Japan with Trump first term negotiated trade treaties (which for Japan included major concessions already) are being hit with these tariffs.
1 and 4 are a problem because many of the inputs into building out US manufacturing capacity come from abroad and are hit by tariffs. Secondly many of the manufacturing inputs into making products in these factories would come from abroad and be tariffed, unless those supplies are bootstrapped domestically first but there is no policy to ensure this. Thirdly as soon as the tariffs go away, these factories would become uneconomical, so they are a gamble on that not happening in the lifetime of the factories.
Finally, who’s going to build and operate this huge new manufacturing sector? Infrastructure construction relies heavily on immigrant labour that’s being driven out, so does actual manufacturing, and there are no hordes of unemployed Americans lining up for manufacturing jobs. It’s addressing a problem that largely doesn’t exist, to build out less efficient more expensive ways to make stuff, in a way that can’t work anyway.
Manufacturing investment surged in the last few years with the introduction of the CHIPS and Inflation Reduction acts. It’s going to be hard to disentangle the continuing effects of that from the effects of the Tariffs, but it’s hard to see how the Tariffs can have a positive effect.
> but it’s hard to see how the Tariffs can have a positive effect.
Any change in policy will make things worse before they get better. For example, if you have surgery to remove a tumor, you'll endure a fair amount of pain and misery before getting better.
A bunch of easily psyopped morons aren't a large enough majority of the general consumer populace to be worth considering. For every 1 of someone like you, there's 50 people who blindly grab the cheapest product off the shelf that gets the job done.
The presence of a few nationalistic morons doesn't wholly negate the goals mentioned by GP, and in fact, may be more important than ever.
What happens when China finally decides to take back what they believe is 'rightfully theirs' and stops it for them? It's not exactly a position you want to be in.
> If the competition is also hit by the tariffs, then they're on an even playing field.
That assumes the customers are price insensitive. If you're making vintage parts for hobbyists and archivists, maybe they're not; maybe they don't get a raise just because the price went up and your thing is the thing they cut out of the budget when it all won't fit anymore.
Do you run a business with good margin, good cash flow, optimally leveraged and for profit? If yes, please tell us more about how tariffs have helped you.
Are your materials and supplies also locally made? The same for each of those suppliers. Very few things are entirely made in the US. How about your equipment? Are the motors, tools, electronics, etc also made in the US? Even companies making stuff in the US are being hit. Very few companies have their entire supply change within the US.
You cannot truly make anything locally these days. We had decades of free trade. It will take decades to roll back. And you will lose all the benefit that came with it.
Even if we pretend the policies are well-intentioned, it takes decades of investment to make the infrastructure and workforce ready to produce things locally at scale. With policies like the dismantling of department of education, I do not see any initiative being taken to prepare the workforce for the future.
Let's face it, tariffs are a disaster. The increased prices, hurt American businesses, caused job loss, and increased waste and bloat. The administration created a problem (tariff induced inflation), now they are selling the solution by rolling back tariffs to bring prices down. Anybody older than 8 years know this was the same playbook in previous administration. And they know their base is gullible eough to fall for it. It's just unfortunate that hacker news audience in included in there as well.
Your argument is so baseless that even a template AI response can refute it.
Yes, the DoE has been planting decade-scale workforce seeds since the Carter years—mostly via STEM/CTE programs that outlive administrations. Core idea: build adaptable skills (problem-solving, digital literacy, work-based learning) so kids & adults can pivot when AI/climate/whatever nukes today’s jobs.
*Carter-era kickoff*
- 1979: Science and Engineering Education Act (Carter signs) → first federal push for pre-college STEM pipelines. NSF/DoE joint grants still fund teacher training 45 yrs later.
*Reagan/Bush I*
- 1983 A Nation at Risk → DoE launches magnet schools & AP incentives. Many still running.
*Clinton*
- 1994 School-to-Work Opportunities Act → seed money for apprenticeships. morphed into Perkins.
*Bush II*
- 2006 Perkins IV → “programs of study” with stackable credentials. Still the backbone of high-school CTE.
*Obama*
- 2010 Race to the Top → $4B for state STEM/CTE alignment.
- 2014 Computer Science for All → CS now in 70% of HS nationwide.
*Biden*
- 2022 YOU Belong in STEM + 2025 DOL/DoE joint admin of WIOA/Perkins → less red tape, more training $.
*Caveats*
- Funding is ~$16B/yr total—peanuts vs GDP.
- 2025 DoE staff cuts (≈50%) threaten oversight.
- Europe still laps us on apprenticeships (3-yr paid tracks vs US 6-month internships).
Bottom line: DoE’s been playing the long game since disco. The programs work, but they’re chronically underpowered and politically fragile.
If that’s your only yardstick, American education is a 50-year failure despite spending tripling in real terms. That's common knowledge, and you probably can't change that without having immigrant parents. But literally every completion/access metric has exploded since the Carter admin:
Indeed, it's directly contributed to burgeoning administrative costs in universities through the Federal Student Loan program, and related the devaluing of college degrees.
It's probably helped in some aspects too, but the student debt crisis was created by the DOE. And most everyone can agree that college costs have ballooned in the US while the value of the degrees have decreased.
It's a perfect example of the worst of both worlds of government guarantees in a capitalist society, like Amtrak and US health care. It eliminates many aspects of competition and blurs incentives while remaining in a economy where decisions are profit-driven.
John Titor COULD have purchased those IBM parts from the empires of Eastasia or Eurasia, but the tariffs would, 10 years from now, become so vicious and brutal that it was preferable to simply say "to hell with it, I'm taking my dual singularity 1976 corvette back in time to get that part, then maybe I'll do some online trolling on the trip back home"
Not GP, but I would just like to say that while every time period has good and bad, 1997 was pretty damn great in the grand scheme of things. Not just that year, but the 90s in general. If I could pick a decade to live in and never leave...
There is no point. Despite being effective illegal immigrants, ducks regularly self-deport each year. This keeps them one step ahead of any enforcement action. The problem is that the northern border wall just isnt tall enough.
Quite funny to see the US import the utterly disastrous "Import Substitution" model that destroyed India's fledgling industrial base that was left-over after the British left.
We need manufacturing in the US. The service economy can't survive long term; you have to make things. Tariffs are not fun, but they are an important part of making that happen.
But, tariffs on used cameras or vintage electronics does not help bring manufacturing back. Let's just bring back the de minimis exemption for things like this. More industry targeted tariffs, fewer blanket tariffs.
No sure why you are being down-voted. Your argument is coherent and correct.
Targeted tariffs on specific goods leads to the development of local production of that good. Lots and lots of countries have these in place.
Blanket tariffs are, of course, useless. The US doesn't have the climate to grown coffee, so tarifing Brazil serves no purpose other than taxing coffee consumption.
A surgeon uses a scalpel, not an axe. Used well, tariffs are a very powerful tool. Used badly they create more harm, and don't achieve the goal of promoting local production.
Tariffs which are here today, but gone tomorrow, don't created the stable environment which long-term investment in local production requires.
Scale of the country matters. If Argentina (or any other small to medium size country) require extra work, businesses can just walk away - size of market does not justify extra efforts. Bet is that US market size is big enough that no global business can afford to walk away. At 20% of global GDP, US markets is also big enough to make scaled production feasible.
I'm not a coffee drinker normally, I have never acquired the taste, but I had some hand-picked perfectly roasted coffee on our last visit to Kona and it was divine. Completely straight, nothing added. I have some appreciation now of why some people like coffee, as I could drink that every day. I probably couldn't handle that much caffeine, however.
Hawaii would even have mountaineous and that island climate that's good for growing coffee. But labor costs probably mean they couldn't compete even if they tried
While tariffs on coffee do not incentivize coffee growing in US they do two things that are very beneficial for US economy
1) People replace coffee with hot cider, infusion tea or some other local substitute good.
2) Tariff on coffee as set up by Trump incentivize coffee producing countries to buy US goods whether it’s oil or cars to make trade balance more equal.
The only question is the scale of above but tariff on coffee is unquestionably help US producers.
Yes, tarifs can change behavior. I'm not sure that's the goal here, and I'm not convinced there's a local alternative to coffee (at the scale Americans drink coffee.)
>> Tariff on coffee as set up by Trump incentivize coffee producing countries to buy US goods whether it’s oil or cars to make trade balance more equal.
Countries don't buy goods, people do. Apparently insulting Canada didn't make them decide to consume more made-in-America goods. I'm not sure that random acts of insulting leads yo the effects you are proposing.
Overall there is a lot of manufacturing in the US. What the US doesn't have are manufacturing jobs because labor is more expensive than automation.
Maybe you meant the US should make sure to have some certain types of manufacturing like chips. In that case, targeted programs are a better approach than any sort of tariffs. See the CHIPS act for example.
Or targeted investment in relevant industries, similar to what the previous administration was doing before voters were suckered by the New York con man whose entire campaign was bemoaning everything about our country while apparently having some pretty spicy long-term kompromat hanging over him.
You're not very good at it though. You're too aristocratic in your thinking - let the coolies make the stuff, we'll consume it.
The reason services are such a big part of your economy is because you can sit in an air conditioned office, send some emails, push some numbers around on a spreadsheet, and call it work.
When there is enough demand for vintage parts, it'll motivate someone to create a time machine to manufacture them in larger volume in the past and bring them to the present. Win win.
that's so beyond obviously a sarcastic remark. In that regard I'd consider a vast majority of the humans totally capable of detecting dead pan sarcasm both in spoken and written speech.
I understand your sentiment, but I feel like your position is somewhat simplistic, and the actual situation is more complicated.
First, overall, the US has increased manufacturing output over the last couple decades. 2019 was the highest year ever, covid interupted a bit, but levels are back there again.
However the number of people involved has dropped a lot. US manufacturing prefers automation and prefers to manufacture things which are high-volume, low labor.
A good parallel is agriculture. Foods produced in the US (and the US produces a lot of food) tend towards low-labor. Think fields of wheat or corn, not vegetables. Most fresh produce comes from cheap-labor regions like Mexico (or is grown locally with foreign labor.)
So really your point is not about American manufacturing, but rather American labor.
Secondly, this free market you refer to is the American consumer. They are very price sensitive, and deeply favor cheap over good. This contrasts to a lot of the rest of the developed world which strikes more of a balance in this regard.
Since labor is cheaper elsewhere, it follows that cheap imports are favored (by the consumer) over the locally produced items. Unfortunately the imported good is often of a higher quality now (because foreign manufacturers can afford quality and still be cheap.)
So, the politicians you speak of (regardless of party) are reluctant to medel, partly because of unintended consequences, and mostly because the only real lever they have is to increase the cost of imported goods (ie tarrif them) which in turn gets consumers upset. (Witness the fury of the voter in 2020 because of more expensive goods.)
Thus while it's helpful to blame politicians, politicians are elected by consumers. Consumers who could by local, but choose not to. Consumers who vote against politicians that cause price hikes. (Even when those same politicians incentivise local production with things like CHIPS act.)
You can blame politicians, and indeed corporations all day long, but the consumers are voting with their wallets, and "cheap" is the only metric they care about.
> US has increased manufacturing output over the last couple decades. 2019 was the highest year ever, covid interupted a bit, but levels are back there again
Terms like "highest ever" conceal that US industrial production only grew by about 13% in the last 25 years [1]. However, in that same time, the US population increased from 281 to 340 million [2]. Meaning that per capita industrial production decreased by 6.6%.
> So really your point is not about American manufacturing, but rather American labor.
No, my point is about treating markets and the economy as if they have no effect on sovereignty or independence, and about only looking at the consumer, not the worker or the citizen.
> the only real lever they have is to increase the cost of imported goods
That's sure not the only lever that Chinese politicians have, and they took full advantage of that, first to industrialize, and now to take over industries left out to dry by their home governments who think the Free Market can do no wrong. Learned helplessness at its worst.
> However the number of people involved has dropped a lot. US manufacturing prefers automation and prefers to manufacture things which are high-volume, low labor.
That's fine and indeed about the only way it even can be done in a country with higher wages. The question is, why can't we do more of that? Basic simple components like capacitors should be possible to automate, so what's preventing it? Why don't we have policies tuned towards causing more domestic automation?
The number of jobs won't be what it was when it was done by hand, but that's never coming back either way, and some is better than none. Meanwhile you reduce dependency on adversarial countries.
> the only real lever they have is to increase the cost of imported goods (ie tarrif them) which in turn gets consumers upset.
There is another alternative: Lower the cost of domestic goods, i.e. lower taxes or provide credits to domestic manufacturers. For example, allow capital investments in domestic manufacturing to be deducted immediately rather than over time.
This is actually one of the longstanding major problems with the US tax code right now. It creates a preference for international supply chains because that allows profits to be shifted into countries with lower tax rates and penalizes purely domestic supply chains.
Subsidies are a definite tool, and subsidies are existent in many industries. Lots of farm products for example are subsidized.
Of course they encounter their own political hurdles. Think Solar, Electric Cars, CHIPS act etc. But they become political footballs, even to the detriment of local interests. (Witness Florida reps voting to repeal CHIPS even though Florida got a lot of CHIPS money.)
So yes, companies want consistency in the supply chain, and current US politics doesn't offer that.
They become political footballs when you do it wrong. If you make a tax credit for solar then it's partisan and the Republicans are going to try to get rid of it. If you make a tax credit for all manufacturing and some companies are using it to manufacture solar and lithium batteries then everybody still wants to keep it because there are also companies using it to manufacture trucks and gas turbines and mining equipment.
But that's the point isn't it? You can't (shouldn't?) subsidize all industries. That's unaffordable, and misses the concept of subsidizing things considered important to long term national security.
So subsidies, by their nature, are govt putting their finger on the scales, picking winners and losers.
And of course companies competing with those industries (coal versus solar) will lobby, and provide votes.
Bearing in mind of course that ultimately subsidies are just a tax on all citizens for the benefit of some.
All taxes are imperfect. The least distortionary one is a head tax and that's heinously regressive; it's basically a UBI with the sign inverted (which is also why a UBI is the least distortionary means of social assistance).
So the question then is, what are you going to tax and how much? The problem right now is that we're so bad at it. To begin with the government burns money like there is no consequence to it. Huge payouts to affluent retirees who don't need the money, defense contracts for things the military doesn't even want, etc. And yes, that means you need to stick your foot up the rear end of some lobbyists. Stop being the people who say it can't be done and start being the people doing it.
> You can't (shouldn't?) subsidize all industries.
If you stop wasting preposterous amounts of money then you could lower taxes across the board and remove the anti-subsidy. But taxes are also by category anyway.
So for example, don't lower the tax rate on dividends but create new credits and deductions and faster depreciation for capital investments, or make R&D fully deductible in the first year. In other words, if you make money and use it to buy a Ferrari, you're paying tax. If you use the same money to build a factory, you get to deduct it right away. Then you're effectively subsidizing all kinds of new factories or new construction, but not subsidizing purchases of imported products. Which is like a tariff in the sense that it makes domestic products relatively more attractive, except that it does it by making things less expensive rather than more expensive.
> First, overall, the US has increased manufacturing output over the last couple decades. 2019 was the highest year ever, covid interupted a bit, but levels are back there again.
> Motor vehicles, bodies and trailers, and parts: actual light vehicles produced down 11%, real gross output of vehicles up 39%, real value-added up 125%. Inputs as a percent of gross output rose from 74% to 77%.
> Steel mills & manufacturing from purchased steel: in raw tonnage, steel shipped is down 18%, real gross output is up 5%, real value-added is up 125%. Inputs as a percentage of gross output rose from 73% to 74%.
> If the quality adjustment is 32%, the value-added increase becomes 652%!
> Another “quirk” of real value-added is that inflation adjustments and quality adjustments get applied retroactively, which creates wild inflections from small changes. In simplified terms, let’s say that, in 1997, car sales were $100 billion, and were still $100 billion twenty years later in 2017, with no changes due to inflation or input costs. Input costs in both years were $75 billion, meaning $25 billion in value-added in both years. The only thing that changed, let’s say, was that the “quality” of cars got 10% higher thanks to software innovations like Apple CarPlay and design improvements like crumple zones for safety—neither of which add to recurring production input costs. So, let’s say, our economists would adjust the 2017 figure to be $110 billion in “real” terms and show a small 10% increase, right?
>
> Instead, the way it works is that a recent “base year” is taken, in this case 2017, and the base year is never adjusted. So rather than adjusting from $100 billion to $110 billion, the “real” output of 1997 is retroactively adjusted to be lower, in this case $91 billion, to get the same 10% increase. But then, our value-added in 1997 has fallen to $16 billion, and the increase in “real value-added manufacturing” has jumped from 10% to around 50%! We have created a 50% increase in car manufacturing not by actually producing 50% more cars or “objectively” making cars 50% better, but just by playing around with statistics and definitions.
It's not like every single Chinese consumer decided they didn't want American soybeans. More authoritarian countries have strong import controls; helps with both having high (inefficient) employment but also your citizens aren't going to wonder why all these cool stuff (fridges, etc) are always imported and the local stuff sucks.
How convenient for the investor class to have such a scapegoat to always fall back on. It's the consumer's fault! Not ours! Truly!
Nevermind that the bounds of what consumers have to buy/consume are entirely drawn and selected by investor prospectus, and business collusion, in an environment shaped by regulatory capture or selective compliance!
I'm open to accepting some blame on consumers, but trying to scapegoat them as the root of the problem is horseshit of the highest order.
MBA's and investors of the past 50 years drank deep of the draught of economic growth through regulatory arbitrage by off shoring, labor replacement above all else, and trying to chase shareholder returns over stakeholder returns. Fuck you, got mine in the socioeconomic sense.
... "cheap" is the main metric consumers care about because whenever anything can be supplied for less, the Federal Reserve calls that "deflationary" and creates enough new money to make sure prices go up to erase those gains. So the cost of buying anything isn't bottom of the barrel keeps going up in real terms. Most people can afford to swim against the current in one product category, and some people [the affluent] can afford to swim against the current in many product categories, but most people cannot afford to swim against the current in most product categories.
Dang it no! That isn’t remotely how deflationary works.
There’s always things being supplied for at lower prices. That is what product or service improvements do.
Your car is vastly safer than a Ford Model T. Air bags, better brakes, power steering, AC - all of which make it a vastly superior vehicle. If inflation worked the way you implied, the price of it would have constantly gone up, and never would it have managed to be affordable.
Firms reduce the cost of production and get to sell more to larger numbers of consumers. Total revenue = $ value * N customers.
You expand further on your position in the second part of your para, but that is fundamentally about how wages have not gone up over time. Which has nothing to do with inflation. It has MUCH more to do with the labor markets, and the pay people are getting for their labor.
> Air bags, better brakes, power steering, AC - all of which make it a vastly superior vehicle. If inflation worked the way you implied, the price of it would have constantly gone up, and never would it have managed to be affordable.
You're talking about something different than what I was - improvements that make a product better without the price going up (because the cost is small enough to become the new baseline, either by market stickiness or regulation). Those don't affect CPI, and therefore make life better at the same price. So I agree with where you're coming from there.
My point is about the manufacturing/product innovations that make prices go down (regardless of whether quality gets better or worse). Take for example offshoring, which was sold as maybe your local factory will have to lay off some people but we will have less expensive items at the store so we will all win on average. But it's a trick because the Fed creates a feedback loop that makes it so prices cannot go down on average.
Wages haven't risen as fast as consumer price inflation because that new money is injected into the financial industry (the fake "fiscal responsibility" of the Republican party). And when too much newly created money finally leads to too much demand for labor and wages start rising, the Fed then tamps down on the monetary creation.
Clearly monetary policy is a big subject, and yes the Fed has specific targets etc in mind.
But I was talking more about a mindset. And of course speaking generally- lots of people (everywhere) have budget constraints.
Having traveled in the US and Europe I'd suggest that in the US "volume" is rewarded as "good". For the same amount of money, "more" is preferred to "good". In contrast in Europe it's less "look how big the plate is" and more about "better quality."
So, to rather over-simply things, I'd describe US food as "bland, loaded with sugar, lots of it", whereas Europe is more "smaller quantities, less processing, more farmer's market".
Not just food. But across the board. Cheap = good.
And yes, I'm talking generally big-picture here - it's a culture thing - there are lots of counter examples if you look hard.
I definitely agree with this point. I'd say food is a special case though, where the US really did have much more than Europe after WWII. Why do most Americans seem allergic to spices and flavor? I wish I knew. And this applies even to food that is supposed to be flavorful like burritos when scaled to national chains - eg Chipotle/Qdoba/Fresh City.
But economics shapes culture, too. There are certainly no shortage of subcultures trying to swim against the grain - buy American, local/organic food, German tool enthusiasts, even the tech community's libre software and anti-cloud. It feels like they remain subcultures because they're fundamentally fighting an uphill battle against top-down prices/advertising/etc set by large market makers. Which is why I initially took issue with your comment, framing it solely in terms of individual choice.
But the dynamic extends other places too, say the housing market with everything "move in ready" being beige, spec grade fixtures, and "fancy" appliances bought from a market for lemons. Trying to chew on that it still feels like not exactly what people prefer, but rather what people don't disprefer - the least offensive option to enable economies of scale (which once again comes down to monetary policy supporting the housing bubble, but I'm certainly not trying to ram the whole topic back into that)
