Recently by Gary North: The Swedish Welfare State Is on Fire
This is a recent discussion between the Export Tariff Guy and the Free Trade Guy.
ETG: What this country needs is an export tariff.
FTG: How would it work?
ETG: Every exporter would pay a tariff on the retail price of everything it exports.
FTG: So, it’s a sales tax on exports.
ETG: That’s correct.
FTG: And why should the government do this?
ETG: It needs the money.
FTG: So, you are in favor of added taxes.
ETG: Extra export sales taxes, yes.
FTG: So, you want the government to spend more money.
RTG: Correct.
FTG: So, you are a Keynesian.
ETG: Of course not. I am a defender of free enterprise.
FTG: You think that free enterprise is promoted by raising taxes.
ETG: Yes. Sales taxes. On exports.
FTG: Any other taxes?
ETG: Sales taxes on imports.
FTG: So, you want bigger government to help promote free enterprise.
ETG: Yes.
FTG: So do Keynesians.
ETG: But Keynesians are not supporters of real free enterprise.
FTG: What is real free enterprise?
ETG: Free enterprise that is promoted by high sales taxes on exports.
FTG: And imports.
ETG: Right.
FTG: How do taxes on exports promote free enterprise?
ETG: Because they reduce the number of exports.
FTG: How?
ETG: By raising prices to foreigners.
FTG: So, they will buy less from American exporters because post-tax prices are higher.
ETG: Correct.
FTG: Why is that good for free enterprise?
ETG: Because it makes available more American-made goods for Americans to buy.
FTG: Because the goods are not shipped to foreigners.
ETG: Correct. So, consumer prices will fall in America.
FTG: So, this is a subsidy to American buyers of American-made goods.
ETG: Correct.
FTG: This subsidy is paid for by Americans who want to buy foreign goods, but who will cut back because of reduced imports due to reduced exports.
ETG: Correct.
FTG: So, free enterprise requires government subsidies to one group of American buyers at the expense of another group of American buyers.
ETG: Correct.
FTG: But this is not Keynesianism.
ETG: No, it isn’t.
FTG: Why not?
ETG: Because Keynesians want the government to do the spending.
FTG: But you want the federal government to collect sales taxes.
ETG: Yes.
FTG: Won’t the government spend this money?
ETG: Not if it is used to pay down the national debt.
FTG: So, you think Congress will balance the budget.
ETG: Yes.
FTG: And then run a surplus.
ETG: Yes.
FTG: With the surplus, Congress will pay off the national debt.
ETG: Yes.
FTG: Has this ever happened before?
ETG: In 1836. The federal debt fell to zero.
FTG: And you think this will happen again.
ETG: Yes.
FTG: So, in the meantime, the federal government imposes an export tax to increase its revenues and also subsidize American consumers of American-made goods.
ETG: Yes.
FTG: What about the Americans working in the export sector?
ETG: A lot of them will lose their jobs.
FTG: Is this fair?
ETG: You have to break some eggs to make an omelet.
FTG: You mean Congress has to break some privately owned eggs to make its omelet.
ETG: I don’t see it that way.
ETG: How do you see it?
ETG: The American people must restore the free market.
FTG: By increasing taxes, making the government larger, and bankrupting marginal export firms.
ETG: Yes.
FTG: The free market way.
ETG: The true free market way.
FTG: But if foreigners don’t buy American exports, they will not buy dollars.
ETG: True.
FTG: But if they don’t buy dollars, the dollar will fall in value.
ETG: Precisely.
FTG: You mean you want the dollar to fall?
ETG: Yes.
FTG: Why?
May 29, 2013
Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 31-volume series, An Economic Commentary on the Bible.
Copyright © 2013 Gary North
