10-26-24 The Weekend Hour 2: Trump Tariffs & Income Taxes; Explanation of Tariffs

Episode Transcript

Speaker 1 (00:00):
The Night.

Speaker 2 (00:01):
Michael Brown joins me here, the former FEMA director of
talk show host Michael Brown.

Speaker 1 (00:04):
Brownie, no, Brownie, You're doing a heck of a job.

Speaker 2 (00:07):
The Weekend with Michael Brown.

Speaker 1 (00:09):
Hey, you've stumbled onto The Weekend with Michael Brown, and
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(00:50):
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So we're talking, we're talking a little bit. We're kind
of combining topics here of the Rogan interview with Donald
Trump last night. By the way, he did that interview

(01:11):
in Austin in Rogan Studios out there for three hours,
did that interview plus the rally that he did before that,
then a three hour interview, then flies to Michigan and
doesn't does a rally in Michigan. This guy is like
the energizer money Kamala Harris. She is to get beyoncey

(01:33):
to show up at a rally in Houston and then
gets booed when the audience realizes this is not a
Beyonce concert. Kids. No, she's just here to introduce Kamala Harris. Yeah,
I guess you got to drag him in. Remember James Carvel,
the Bill Clinton political advisor, famously talked about you know, uh,

(01:53):
it's the economy stupid. He also talked about dragging you know,
a dollar bill through a trailer park and you can
find hose anywhere. Just just just just drag that dollar
bill through the trailer park. Yeah, that was that was
James Carble right there. That was James Carble. Anyway, during
the course of this discussion, they start talking about the

(02:15):
idea of you know, maybe what we ought to do
is get rid of the income tax, which is of
course a brilliant idea. If we recognize that if you
get rid of the income tax, two things are going
to have to happen. So let's kind of set the
stage for this. You first have to replace it with something. Now,

(02:38):
prior to the sixteenth Amendment and the imposition of the
income tax, the federal government relied on excise taxes and
tariffs and that funded everything. And then we go along
and we get the progressive idea of an income tax
unless tax Americans labor, and then go just mushroom, blew

(03:02):
up like an atomic bomb. Just caboo. Well, if you
get rid of the income tax, you have to do
two things. You have to replace it with something. Because
we're not anarchists, we do believe that. You know, I
do want a strong military. I would like a secure border.

(03:22):
And I think you got to pay Congressman something. I
think the I think they're overpaid. I think they ought
to get the same median income as the average worker
in America, you know, thirty six thousand dollars a year
or something. Cut their pay, cut their expenses. But this

(03:43):
idea of cutting the income tax is at least being discussed.
Did you just float out the idea of getting rid
of income taxes and replacing it with tariffs, Well, okay,
we'rey serious about the hell yeah, sure? Why not?

Speaker 2 (04:00):
Because we ready our country was the richest in the
relatively in the eighties. In eighties and eighteen nineties, a
PRIs president who was assassinated named McKinley. It was the

(04:21):
tariff King. He spoke beautifully of tariffs, a language was
really beautiful.

Speaker 1 (04:31):
We will not allow.

Speaker 2 (04:34):
The enemy to come in and take our jobs, and
take our pctrees, and take our workers, and take our
families unless they pay a big price, and the big
prices tariffs. And he speak like that, but he was right.

(04:58):
And then around in the early night two hundreds they
switched over stupidly to frankly an income and you know why,
because countries were put out of pressure. In America, we
don't want to pay tariffs, please, don't you. You know,
they believe me they can. He's absolutely right about that.

(05:18):
Sorry for the quality of that clip. He's absolutely right
about that. So what how would how would this work?
And and what's some of what's some of the history. Well,
the concept might seem far fetched, particularly in today's size

(05:38):
of the federal government. You really wasn't that long ago
that we really did rely almost entirely of federal funding
through tariff revenue, tariff and excise taxes. As I mentioned
earlier in the last hour, Trump actually first flowed that
idea at a barber shop in the Bronx. Got of attention,

(06:01):
but not a lot of attention. But Trump pointed this out.
It had all tariffs the federal government. It didn't have
an income tax. And then he expressed concern about the
financial burden that income taxes imposed on citizens. He said,

(06:22):
they're paying tax and they don't have the money to
pay the tax. But not only do you pay the tax,
but when you think about all of the manpower, all
of the hours, all of the paperwork, you know, there's
a great I think it was George Carlin.

Speaker 1 (06:37):
I mean to be wrong about the comedian that talked
about you know, the income tax is the one place
where the federal government tells you that you os money.
You ask how much and they say, well, we don't know.
You have to tell us. And then they say, well
can I you know? You say, well, can I guess?
And they say well, you can guess, but if you

(06:58):
guess wrong, you're going to go to jail. And that's
that's pretty much how it operates under the I r
S rules. There is no due process. You are guilty
until you yourself prove your until you yourself prove yourself
your own innocence. It's insane. This, this idea is absolutely insane. Now,

(07:20):
I don't know that we could go to only tariffs
and still have enough money to pay for everything that
we pay for. But what if we got rid of
the income tax? I mean, and this everything has to happen.
You can't say, hey, we're going to have an income
tax here and then in five years we're going to
phase it out as we phase in tariffs or we

(07:41):
phase in a national sales tax where we fit are
we uh we phase in a flat tax or a
fair tax? No, no, you you have to just boom
do it. And you know why is if you try
to phase out the income tax, it will never go away.
And then you have the whole idea of what what
do you do about the the not just the income tax,

(08:03):
but what do you do about the payroll taxes? Because
that in essence, those are income taxes also because they
come out of your paycheck, and if you're self employed,
you have to pay those based upon your self employment income,
and those go to pay Social Security, Medicare medicate all
of those. So how do you replace the money for
all of that. Well, on the campaign trail, Trump pushes

(08:29):
for a more aggressive US tariff policy. And usually when
you just say the word tariffs, everybody runs to their
corner and everybody hides. Everybody's either for it or they're
against it, and nobody ever stops and thinks, Wait a minute,
is there any sort of middle ground at all? H
let's see if there is. It's The Weekend with Michael Brown.

(08:50):
Follow me on x It's at Michael Brown USA. Be
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(09:10):
Hang tight, we'll be right back. Hey, welcome back to
the Weekend with Michael Brown. Really glad to have you
with me. Remember text any question or comment to this
number three three one zero three three three one zero three.
Start your message with the word Mike or Michael one
or the other. Tell me anything, ask me anything, Get

(09:32):
over there and follow me on X at Michael Brown USA. So,
Donald Trump is proposed introducing a broad tariff regime on
foreign imports ranging from ten to twenty percent, with a
much larger sixty percent tariff on goods that are imported
from China. Now, the former president has also said that
we should retaliate against any country that tariff's our goods,

(09:57):
even if those tariffs are one hundred or two hundred percent. Now,
there are a lot of nations, several nations, I probably
should say several nations that have really strong diplomatic and
economic ties to our country, that still maintain extraordinarily high
tariffs on our manufactured goods, especially cars automobiles. Both Germany

(10:20):
and Japan have been able to tax or tariff American
car makers for almost eighty years because of the post
World War II Marshall Plan. But Trump proposes that that
arrangement should change, with either the countries dropping their high
tariffs or this country, our country, enacting our own tariffs

(10:45):
and taxes on German and Japanese cars. Tariffs are a
negotiating tool, and we have just allowed both Japan and
Germany to keep our cars out of their country. Well,
their cars flow freely into our country. Today, tariffs account

(11:08):
for only about instead of one hundred percent, only about
two percent of all federal revenues, while income taxes comprise
about ninety four percent of the current cash flow of
the US government. Now, while a ramp up in tariffs
and the use of tariffs would drastically change that dynamic,

(11:33):
cuts to federal spending would still likely be needed. And
you're thinking to yourself, so, what's the downside. I don't
know that there is a downside. I mean, obviously there
are downsides. There are always unintended consequences. But if if
you couldn't, if you can't raise enough money through tariffs

(11:54):
and excise taxes to cover all of the costs, that's
just an emission that we've had a spending problem for
decades upon decades, and we've never done anything to address
that spending. How many times do I have to explain
whatever Congress talks about a cut and spending, and they
all they all go ballistic, they all have they're just

(12:17):
apoplectic because, oh my god, we can't cut spending. Well,
for them, a cut in spending is only a reduction
in the increase in spending. I'm going to keep preaching
that and preaching that till everybody, till everybody understands it.
We never cut spending. We never cut spending from one

(12:37):
hundred dollars to ninety dollars. Hell's bells, if we would
just cut Now this is probably outdated, but it was
either Cato or the Heritage Foundation years ago did a
study that if we would just cut federal spending by
like one percent, one percent, you know, like probably your

(13:01):
companies had to do, or your businesses had to do,
or your household budgets had to cut. If we had
the federal government do that and maybe exempt the military,
we could balance the budget in within a decade. But
we don't. Instead, they tell us they're cutting the budget
because well, we were gonna spend We're spending one hundred

(13:23):
dollars a month now, we wanted to increase that to
one hundred and twenty dollars. But all of you conservative
libertarian nut jobs out there, all you right wing nut jobs,
wants to cut spending. So we're gonna cut spending. So
we're gonna go instead of one hundred to one hundred
and twenty, we're gonna go from one hundred to one
hundred and eighteen dollars. And they call that a cut.

(13:45):
I call it bull crap. So you would need a
ramp up in tariff use, but you would still need
to cut spending. Currently, our imports total approximately three trillion
dollars annually. Well, income and payroll taxes bring in four
point two trillion. Well, if we just cut some spending

(14:12):
by trillion dollars a year, like I don't know, maybe
the Inflation Reduction Act, the Infrastructure Spending Bill, we could,
We could, we could easily cut out a trillion dollars.
But there's some truths about tariffs. Democrats and some anti
Trump Republicans have tried to brand tariffs as inflationary. But

(14:32):
those are tax those are tacks, are highly miss and
I do mean highly misleading. The The idea is, well,
let me go back to inflation in just a minute. Tariffs,

(14:53):
in the most simple terms, is a form of a
consumption tax. Like most taxes, consumption taxes are deflationary in
their economic effect. Properly understood, inflation is either caused by
increased demand driven by an expanding money supply, or by
the constriction of the supply of goods through policy or

(15:16):
some other means, or some other incident or event. You see,
Tariffs neither increase the monetary supply, nor do they prevent
consumers from accessing goods. They're merely taxes that the importers
pay on foreign goods. The most famous tariff legislation in
the country in our entire history, the Smooth Holly Act,

(15:40):
actually had a deflationary impact on the economy, not an
inflationary impact. So this idea that we can't do TIFFs
because well, we don't have enough money. Okay, well, then
cut some spending. You know, I've heard from my entire life,
how many times have you heard politicians running on I
want to cut government spending. I want to get rid

(16:02):
of waste, fraud and abuse. I now want to vomit
every time I hear that, because I know they're lying
to me, and I know they're never going to do it.
There are too many vested interests. And why are there
too many invested interests? Because we have too many federal
programs at the government level that fund NGOs or fund

(16:24):
you know, some preferred industry or business or fund individuals,
and we just are now addicted to it. So we
all need to go to rehab. We all need to
go to rehab and say just no, no more. Focus
on the border, focus on a minimal a minimal social

(16:45):
safety net, focus on national defense, and pretty much everything
else lead up to the States. I know it seems radical,
but when you go back and read the Constitution and
you look at the enumerated powers of con that's pretty
much it. People argue with me, for example, about the
post office all the time. Now, I know I've got

(17:07):
a lot of postal workers that listen to this program,
and what I'm about to say is going to cause
you to to scream at your radio. But the Constitution
does not require a postal service. It simply says that
Congress may establish post offices. Do we still need post offices?

(17:29):
Do I still need? Every single week I get a flyer,
a multi page, cheap paper flyer that's got I don't know,
q pons and crap in it, and every single week
it goes right in the trash. I don't need that,
I don't want that. I can't stop it. It's a
book mail sometimes aka junk mail, but that'll offend them too.

(17:55):
There are all sorts of ways we can cut spending
if we really wanted to. With too many Americans, they're
addicted to it. Hang tight, I'll be right back tonight.

Speaker 2 (18:09):
Michael Brown joins me here, the former FEMA director of
talk show host Michael Brown. Brownie, no, Brownie, You're doing
a heck of a job the Weekend with Michael Brown.

Speaker 1 (18:18):
Hey, welcome back to the Weekend with Michael Brown. Glad
to have you with me. If you like what you
hear during the week you can also listen weekdays from
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(18:40):
And of course you can always download the podcast on
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The Situation with Michael Brown, hit that subscribe button, and
then download the program that will get you all five
days of the weekday program and the weekend program too.
So chop, chop, go, get that done right now. So
I'm want to go back to the tariff one last time.
I started in that last segment to go into one

(19:06):
of the reasons that I think that Trump's tariff critics
are wrong about price increases and inflation. Now I thought
about during the break, and I think I think we
should walk through it, because as long as this discussion
is going to occur, which by the way, you don't
hear anybody else talking about it except well some Democrats

(19:27):
and then a bunch of never Trumpers. So this plan
to use what I consider to be at least broad
and then both broad and targeted tariffs to protect and
restore American manufacturing kind of draws bizarre counter arguments. Now,
this plan that he's announced could see tariffs of upwards

(19:51):
of twenty percent, and I said others maybe up upwards
of sixty percent. But the critics of that plan, even
though it's very general right now, they're raising this wide
range of objections, many of which are kind of nonsensical
when you really inspect them closer. So this is kind

(20:12):
of a brief overview of why nations use tariffs, the
history of tariffs, and how I think the Trump's critics
get the monetary and the physical impacts of tariffs. I'm
mostly wrong do we even really understand what a tariff is.
It's just a form of taxation, but it's one that

(20:34):
has specific impacts on a nation's imports and their exports.
Our trade. Now you think about our trade. Now, we
have abdicated a lot of our trade because of the
North American Free Trade Agreement or the new one. I
forgets uh brain fart on the name of the new one.

(20:58):
And of course all of our manufacturing that we ran
to China. Everybody thought that China was one and they
are there cheap manufacturers of goods mainly because of us.
Shouldn't say mainly, but primarily because they're a poor nation
and they use slave labor, and right now their economies
in the crapper. It's totally in the crapper. But the

(21:20):
most common form of tariff is called a protective tariff,
and that kind of tariff aims to either insulate or
kind of stabilize a crucial domestic industry in a given
country from foreign competition. It could take the form of
a fixed tax rate on an imported or an exported

(21:44):
good mean that would mean a constant set sum or
a percentage, or that tariff could be applied at a
variable rate that fluctuates with the tariff target's value. Whatever
that product is, that value goes up or down, the
tariff percentage goes up or down. Broader blanket tariffs are

(22:09):
a lot less common than very specific industry or products
specific tariffs, but they're still used by governments, especially against
foreign countries that engage in unfair trade practices such as
currency manipulation, which China does all of the time. At
the most basic level, the goal of a tariff, what

(22:32):
do you think the goal of a tariff is? Is
to try to dissuade the consumption of a foreign good
instead of an identical or a similar domestic manufactured or
produced good. Pushing consumption towards domestic products boosts the domestic economy.

(22:54):
So the more we get people to produce, manufacture, and
for us to consume American goods, the better that is
for the American economy, and it eases it eases foreign
competition pressures, and then it lowers our trade deficit. The
other point that I would make is terifs are tools

(23:15):
that are used to punish countries that engage in what's
called dumping. Well, what's dumping that's flooding foreign markets with
artificially underpriced goods. Now, how do other countries get underpriced
goods into this country? Well, they heavily subsidize. China will

(23:36):
heavily subsidize something that they want to dump into the
American market so that it is priced significantly lower than
a similar product produced in this country. And what does
that do. Well, that weekends or wipes out the rival
nations domestic industry because they can't compete with it. Unless

(23:59):
we make the mistake, which I think is a mistake,
then we start subsidizing that same good. Well, that just
increases government spending and pretty soon you'd have inflationary pressures again.
So that begs the question of do tariffs actually work.
Tariffs are just I don't know. I hadn't thought about

(24:23):
this before. I don't have many tools the nation uses
to tilt international markets in their favor. But there are
a lot of different things that we can do. But
in short, tariffs work and they can benefit us dramatically.
Now that's to say there are some drawbacks. For most
of our history, this country maintained a very wide range

(24:48):
of tariffs as a matter of policy. What was that policy?
That policy was to promote and protect critical domestic industries.
It wasn't that we were mad at some country. We
were trying to protect what we produced in this country. Now,
prior to the gratification of the Constitution and the granting

(25:09):
of taxing authority to Congress, tarifs were pretty much the
only way that the federal government could raise any money.
Tariff's also comprised a cornerstone of Alexander Hamilton's economic blueprint
as the first Secretary of the Treasury for the United States.
So you go throughout the entire nineteenth century, throughout the

(25:30):
eighteen hundreds, tariffs were common in this country, and that
helped to fuel the growth of American industry. I would
even argue that it helped spur the American Industrial Revolution.
And Congress often instituted tariff measures in response to the
dumping of foreign goods, such as when the Brits began

(25:51):
flooding our markets with imports following the War of eighteen twelve.
The Brits, you know, one way to get back at
us for winning the War of eighteen twelve, Let's just
subsidize and dump all of our goods into the United States. Well,
the use of tariffs then fell out of favor following

(26:15):
the Smoot Holy Terriff Act of nineteen thirty and the
Great Depression, because a lot of people saw that law
as kind of exacerbating the economic depressions. Effects on the
country's economy post Great Depression, and then throughout the remainder
of the twentieth century, all through the nineteen hundreds, important

(26:38):
export taxes remained relatively low, I'd say very low. Populous
nationalists point to that period. Think about the nineteen Voice,
read about the nineteen twenties, the Roaring twenties right well.
Populous and nationalists point to that period as one in
which American jobs accurately began to shift oversea, especially following

(27:02):
Nixon's decision to lift foreign capital controls, and once Nixon
did that, manufacturing initially started just running out of the country.
Are tariffs inflationary? Do tariffs cause inflation? That's the latest
argument that critics of Trump's plan is that his plan

(27:29):
is to harness inflationary fears among Americans in an attempt
to falsely convince them that tariffs are going to make
matters worse, it's going to cost you more money. And
social media it's been flooded with claims that the Trump
tariff plan will only make inflation worse, which, of course
the media and we talked about at the very beginning

(27:49):
of the program that most people don't have trust in. Well,
here's one reason why, because they keep asserting, they keep
repeating the assertion as well that if you do this plan,
it's going to cause him prices are going to be
even higher and the marriage are paying any more for
all the projects that we buy all the time, those
claims are not even remotely correct. Tariffs are, in essence, taxes.

(28:11):
Taxation is inherently deflationary. Why because it either it does
one of two things. It either takes dollars from our
monetary supply or it creates what I've often talked about
in my program during the weekday demand destruction by directly
suppressing the demand for something. You know. That's true, the

(28:35):
more you tax something, the less of it you're going
to get. Now, by removing dollars from circulation through taxation
like income taxes, the upward pressure on prices that are
created by an increasing monetary supply that gets reduced in
the meantime, Taxes like a consumption based sales tax or

(29:00):
a tariff increase the cost for consumer or producer reducing demand.
If it reduces demand, think of a taxing cigarettes by
taxing the sale at a higher rate. The long term
goal of lawmakers was to reduce the consumption of cigarettes,
and they accomplish that. Now it's important to note that

(29:22):
there are there are instances where producers choose to absorb
the increased cost of production that's caused by a tariff
instead of passing it on to a consumer, especially if
they're trying to maintain market competitiveness or they're trying to
maintain market share, so they'll make that choice. A business

(29:43):
gets to make that choice. So while a tariff might
appear to be inflationary in the short term because it
can raise prices, in the long term, the encouragement of
domestic investment, stabilized kind of calm, equal production capacity, and
stable and sustainable consumption all reduce inflation and strengthen American industry.

(30:10):
So the claims that tariffs are inflationary just fall flat
on their face when they're simply tools that the most
infamous tariff policy in American history Smoot Holly. One last
comment about Smoot Holly and then we'll move on. But
I want you to understand that what Trump is suggesting here,

(30:30):
it's not inflationary and over the long term, might reduce
federal spending and might increase American manufacturing. I'll be right back. Hey,
welcome back to the weekend with Michael Brown. Glad to
have you with me. So I got a couple of
text message messages reminding me that taxpayers don't pay for

(30:52):
the United States Postal Service. Not yet, USPS has now.
I don't know the current figure, but I think it's
an ex as of one hundred billion dollars in unfunded
liabilities for its pension program. Well, the problem with that
unfunded liability is that at some point the Pension Benefit

(31:13):
Guarantee Corporation, which is a federal agency and that is
that is a federal agency funded by the taxpayers. And
what does that agency do. It bails out pension programs.
Taxpayers fund that. Now beneficiaries pay for it too, we
all pay for it. At some point the USPS retirement fund,

(31:39):
those unfunded liabilities are going to have to be funded,
and that's where the PBGC comes in, and the PBGC
will then use taxpayer money to bail it out. So
while I think since nineteen seventy or somewhere in the seventies,
the USPS went from being the the United States it

(32:03):
became the United States Postal Service and became this private
public company. The No, we don't directly fund, but we
will and do indirectly. And I don't know why, but
postal workers. It's kind of like teachers and their public
employee retirement plans. Firefighters, teachers, nobody wants to talk about

(32:26):
all their unfunded liabilities, which eventually taxpayers will end up
having to pay for. And the same thing is true
with the USPS. So that's why I get a little
wrapped around the axle about, Oh, their taxpayers don't pay anything,
to which I had to say yet, but eventually we
will have to. So let's talk about whether or not

(32:48):
tariffs are inflationary. Go back to the Smooth Holly Act
of nineteen thirty. Now. Some contend that the tariff policy exacerbation,
that the tariff policy in the nineteen thirties made the
Great Depression even worse by setting off a cascade of
retaliatory foreign tariffs against US, and that helped crater domestic

(33:14):
and foreign consumption and through the money the country into
a deflationary cycle. Now, while the timing of the Tariff
Act may have contributed to some negative impacts, most economists
now agree to smoot Holly's contribution to the deflationary crisis
that kicked off the depression is way overblown. But therein

(33:36):
lies the problem for those that criticize Trump's plan. It
cannot be both inflationary and deflationary, and historically tariffs are deflationary.
That's just the history of the tariffs. So while there
is always a risk of a retaliatory tariff from another country,

(33:58):
the United States currently as a relatively minimal tariff stance
against almost all foreign nations, which gives us lots of
wiggle room. And that's when Trump talks about tariffs are
a negotiating tool. That's precisely what he's talking about. But

(34:18):
in the meantime, like right now, countries like Japan, Mexico, Germany,
they already use tariff policies to tilt, for example, the
auto manufacturing industry in their favor, and there is virtually
In fact, I would argue that there is no resistance
from the American government whatsoever. Oh, there's a lot, there's
a there is a lot of chess beating about protecting

(34:44):
American and domestic auto manufacturers. But that's all it is,
imposing higher tariffs on automobile imports from just those three
countries alone. We all he would do was level the
playing field for US auto manufacturers, and then you cannot
discuss taroffs without addressing China. Now, while the communist country

(35:10):
does engage in forms of tariff protectionism, China's greatest weapon
is currency manipulation. Using purchases and sales of our treasuries,
our bonds, the Communists purposely deflate their currency to ensure
that domestic Chinese manufacturing costs remain artificially, if not extremely

(35:34):
artificially low. What does that do well? That alone encourages
foreign investment, particularly from Americans, in Chinese industry, and drives
multinational corporations to do what to outsource their workforce to China.
Broad Based tariffs on Chinese goods are, in short, the

(35:58):
only way to combat just how radically the Communists have
tilted international trade in their favor. Every time you hear
about tarots and Donald Trump mentioning them, just remember that
it's not just about it's about taxation. Terrors cannot be

(36:19):
both simultaneously deflationary and inflationary. At the same time, you
think about how many autos we sell in Japan, Germany
and Mexico pretty much zero. And then you think about
what China does in terms of its currency manipulation, so
that they are in essence subsidizing their manufacturing costs to
keep it low, so that the transnational corporations in this

(36:42):
country run to China for their manufacturing. Tariff's in a
nutshell more than you probably wanted to know. I hope
it explains a little. So we came with Michael Brown
text the word Michael, Michael, the three three, one zero three.
I'll be right back,