An Honest Look At Tariffs

Let's try examining tariffs in an attempt to decouple the idea from the current political polarization. I'll use a similar approach to examining minimum wage in my post Intellectual Vision.

Tariffs are a tax on goods or services from another country. A tariff schedule includes a detailed list of products along with tariff rates (% of value and/or a specific amount) and country of origin. 

Raising Tariffs

If a country raises tariffs, the importer (not exporter) pays the fees. The importer can pay the fees out of profits or pass the costs onto customers. The customers may just agree to pay the extra costs or may decided not to buy the product. If they don't buy the product, they may be able to find another equivalent alternative. If they can find another alternative, it will most likely cost more than or not be the ideal fit of the import. If the alternative product is produced domestically, then these businesses can benefit from the additional demand and potentially increase production. Since this demand is essentially incentivized by the tariffs, the business is not experiencing competituve pressure to innovate or cut costs, potentially resulting in higher costs than necessary.

If the customers can't find an equivalent alternative, they will have to find a product that doesn't meet the same needs or may have to make due without the product. 

The fees paid by the importer are collected by the government. These fees can be used by the government for productive manipulation of the economy, for example, by lowering taxes on consumers, offsetting the increased costs. These fees can also be used for non-productive applications, such as paying for excess government spending or special programs. In this case, the customer of the tariffed product ends up subsidizing the government program.

With complicated global supply chains, raising tariffs can end up hurting domestic producers that rely on foreign goods to make their products. Raising tariffs can have hidden costs such as creating an extra burden on businesses to adapt to changing rules.

Lowering Tariffs

After WWII, the U.S. lowered tariffs to promote global trade and economic recovery to help with post-war reconstruction.

If tariffs are lowered, a greater variety and quality of products can be found by consumers. Prices typically drop and global competition forces all suppliers to become more efficient. Foreign products may harm domestic suppliers if they can compete with cheaper foreign imports (due to cheaper labor or less regulation). Some domestic producers may benefit if they can by cheaper foreign parts for their products. If companies become dependent on foreign parts, this could result in supply chain disruptions, for example during a pandemic or war. If a domestic product is considered nationally strategic (e.g. defense, semiconductors), then lowering tariffs can put the national interests at risk.

With lower tariffs, a foreign government may reciprocate with lower tariffs. If they do, this may open new foreign markets for domestic producers. 

An example of this is NAFTA (The North American Free Trade Agreement), where lower tariffs between the U.S., Mexico, and Canada resulted in generally lower prices on imports from the other countries, however many small Mexican corn farmers were put out of business as they couldn't compete with the large U.S. subsidized corn farms.

These last two examples bring up the issue of unfair trade practices, where a government can subsidize a product, then flood a foreign market with cheaper goods to destroy local industries. This can result in foreign monopolies taking over. This is the reasoning for high tariffs on many Chinese products.

Foreign governments may instead keep their tariffs high, creating an unfair trade balance. 

Additional Thoughts

Intellectual Humility - I am not an expert on the intracies of tariffs.

Intellectual Curiousity - I am curious enough to investigate the nuances of tariffs.

Intellectual Honesty - I am open to the truth about tariffs, even when it makes me uncomfortable.

Intellectual Access - I recommend going to objective sources of information and avoid politically motivated sources.

Intellectual Prudence - I have attempted to critically evaluate the pros and cons of tariffs and avoid sensationalism (though I may have oversimplified this whole idea of tariffs with this post).

Intellectual Tolerance - I haven't taken political or nation sides, recognizing the consequences on all parties.

Avoid Persuasion, Seek Understanding - I have tried to create a shared pool of understanding and not persuade you to take one position or the other.

Promote Empathy and Compassion - I recognize that their are winners in losers in the current system and in currently proposed changes, whether or not either are optimal. 

Reference:

https://en.wikipedia.org/wiki/History_of_tariffs_in_the_United_States

The Absurdity of Ideology

 

An ideological vision is more than a belief in a principle. It is the belief that that that principle is crucial or overriding, so that other principles or even empirical facts must give way when in conflict with it.

 -Thomas Sowell, "Knowledge and Decisions"

Analogy

Imagine that you are young and considering a future career. Your research leads you to Accounting. You find the premier accounting school, apply, and are elated when accepted into the program. At orientation, a senior classmate validates your decision with the following speech:

"Accounting is the most important career. You might ask how can that be? How about a brain surgeon? But where does a brain surgeon perform his best work? In a state-of-the-art operating room, in a hospital. It took money, budgets, and planning to pay for this facility. And who did that? Accountants. Where did that surgeon learn his skills? At a university. How did that place of learning come to exist and continue? Accountants. If you think about anything good in the world, it took Accountants to make it happen."

You're young and excited to be part of this critical community. The department has social events, study groups, and symposiums. With every encounter of your classmates, you hear testimonials of the superiority of accounting. You are unknowingly being indoctrinated. 

You throw yourself into your schoolwork but must take unrelated general education courses. You complain: "This is a distraction from my goal of being a great accountant!" You take a class on a whim that sounds interesting and find you enjoy it more than accounting. You spend extra hours on the coursework and shoot to the top of your class. It's easy...and fun! Your professor takes notice of you and invites you to work with him. You continue with sequential courses and are forced into a challenging situation. Do you change your major? You decide to follow your passion and change your major. You are shunned by the accounting students, but find a new group to associate with. You graduate and land an amazing job. Every day, you can't believe you are getting paid to do what you love.

Still, early indoctrination in accounting makes you doubt your decision. Rationally, you know you did the right thing, but deep down, you question your decision to leave Accounting.

Reality

The above analogy is meant to be a safe analogy: something we can all point at and agree is unsound. But how is this different than what, for example, people think of as the solution to world peace? 

The solution to world peace is Democracy|Mutually Assured Destruction|the UN|Nonviolence |Technology|AI|Social Equality|God|Love.

Each of these "ideas" is an incomplete understanding of reality. Yet, the ideologically inclined person grabs onto an idea that feels good and vehemently argues in favor of his or her idea. In my post, Intellectual Vision: Four Truths and Eightfold Path, I claim that while there is an absolute, objective reality that humans cannot know completely. 

Now, let's make this personal. Identify the ideology most important to you. Notice how you feel when you replace "accounting" in the analogy with your ideology. How do you feel now?

Chase Hughes, a leading behavior expert, said:

... if you can't see anything wrong with the side you agree with, and you can't see anything right with the side that you disagree with, you have been manipulated.

Why the title? "The Absurdity of Ideology." Ignoring empirical facts and a diversity of viewpoints is absurd. Our survival on this planet is due to continual adaptation. How many of the current major conflicts in the world are due to conflicting ideologies?

Why I Don't Think the End is Near

Many of my younger friends have shared with me their pessimism and grim outlook for the future. I then share my optimism, which earns the reply "How can I ignore all the frightening news?" This is what I tell them.

TL/DR;

The news media has been sharing the worst possible outcomes for many crises during my lifetime: The Cold War, Nuclear Weapons, Acid Rain, Skylab falling, the Energy Crisis, the Ozone Hole, Y2K, and the election of every president that I can remember. I have concluded that everyone is poor at predicting the future, especially when they present the worst case scenario. I decided to make the most of the present and ignore the noise.

The Cold War and Nuclear War

My entire upbringing we were under the threat of communism with the potential for nuclear winter and the extinction of the human species. Ronald Reagan called the USSR the "Evil Empire", movies showed the Soviets invading the U.S. 

Resolution: 

In 1989, the unthinkable happened when the Berlin Wall came down. In 1991, the Soviet Union collapsed. Nuclear Disarmament treaties significantly reduced the world's stockpiles of atomic weapons. While there is still a nuclear threat, the fear mongering has decreased. (By the way, I highly recommend the Netflix documentary "Turning Point: the Bomb and the Cold War."

Acid Rain and Smog Days

During the 1970s and 1980s, pollution in the air would turn the rain to acid, ruining national monuments, killing wildlife in our streams and rivers, and ruining lakes and forests. The pollution was also causing respiratory problems. The nightly news announced the threat of acid rain in ominous tones. I remember as a child having "Smog Days" at school when the air quality was too poor to allow us to go out at recess and play. 

Resolution: 

The Clean Air Act was amended, and the Geneva Convention on Long-Range Transboundary Air Pollution created an international agreement that resulted in improvements. While it is still a problem in some countries with potential long-term environmental impact, we don't hear much about it.

Sky Lab Re-Entry

In 1979, the United States' first space station re-entered the Earth's atmosphere. NASA couldn't predict where it would fall, raising concerns that it could kill millions of people. 

Resolution:

It fell on parts of the Indian Ocean and Australia and didn't kill anyone.

The Energy Crisis

In 1973, OPEC had an Oil embargo against the U.S. and its allies. This resulted in a recession and high inflation. Gas was rationed resulting in long lines at the pump and the federal government imposing a national 55 MPH speed limit (Have you heard the song "I Can't Drive 55" by Sammy Hagar? I got a few speeding tickets during this period).  

Resolution: 

The U.S. adopted efficiency standards and the economy returned to normal (I won't list the reasons here.)

The Ozone Hole

In the 1980's, the big scare was the Ozone Hole. The concern was that it would keep getting bigger, increasing our risk of cancer, cataracts, and environmental damage.

Resolution: 

Montreal Protocol (1987) banned CFCs, with ozone hole recovery trends observed.

Y2K

In 1999, there was a fear that our infrastructure would collapse due to the Y2K bug. The year 2000 came with no significant problems.

Honorable Mentions

I didn't include these as they are too rife with controversy.

• COVID-19
• Gay Marriage
• Climate Change
• Artificial Intelligence

Fears about U.S. Presidents (that I remember)

Jimmy Carter was considered an outsider and weak on foreign affairs. He gave us economic struggles (inflation, gas shortages), the Iran hostage crisis, and perceived weak leadership.

Ronald Reagan was too old (69 at inauguration), a former actor, had extreme right-wing policies, and increased the risk of nuclear war. His trickle-down economics would hurt the poor, and he was marred by the Iran-Contra scandal.

George H. W. Bush was just Reagan 2.0.

Bill Clinton was too young and inexperienced, a country baffoon, a womanizer, and a draft dodger. He was scandalous (Whitewater, Monica Lewinsky). He was the only president on this list to balance the federal budget and start to pay off the debt. Way to go, Bill!

George W. Bush wasn't intelligent enough, was elected under controversy (2000 recount), and gave us the forever wars (Iraq War under false pretences) and the economic collapse (2008 recession).

Barack Obama was inexperienced, secretly a radical, and people questioned his birthplace and religion. He pushed for government overreach (Obamacare). Racial tensions increased.

Donald Trump 1.0 had no political experience, was reckless, had an unfit temperament, and authoritarian tendencies. In office, he was divisive, attacked institutions, mishandled COVID-19, and resisted the election results.

Joe Biden was considered too old, cognitively declining, a weak leader. He caused inflation, a border crisis, and a botched Afghanistan withdrawal.

Donald Trump 2.0 - Concerned that he would be another Hitler and Stalin and bring the world order to an end. 

This Isn't New

Predictions of Doomsday have been going on for a long time.

From Benjamin Franklin

The Bible (too many instances to quote here).

Conclusion

I've become numb to the overhyped fearmongering and dire predictions in the media. I have tried unsuccessfully to predict the future and realize that I am not only bad at it, but so is everyone else.

I decided to make the most of the present and wait a few years to see if other's predictions actually pan out.

Biography

"The Culture of Fear" by Barry Glassner.

"Hate, Inc." by Matt Taibbi.

An Honest Look at D.O.G.E

We need to take an honest look at the Department of Government Efficiency (D.O.G.E), specifically:

1. The current state of the federal debt and deficit
2. The criticisms and successes of Elon Musk as the apparent force behind D.O.G.E.
3. Other options for fiscal responsibility.

A Debt Crisis

The U.S. Federal government has had many episodes of peaking debt in the last two centuries. Typically, these are due to war (the Civil War, WWI, WWII, the Cold War, the War on Terrorism) or major financial crises (the Great Depression, 2008 Credit Crunch, COVID). For each of these, there is a precipitous drop in debt due to spending cuts, raising taxes, and economic growth. Except for our current 25-year run-up in debt.

For example, America experienced a massive economic boom after WWII since our infrastructure was unscathed, allowing us to be competitive worldwide.  

After the end of the Cold War in the early 1990s, Bill Clinton, with bipartisan support from Congress, was able to balance the budget and start paying off the debt. They used tax increases and spending cuts. They also benefited from the tech boom of the late 1990s, which resulted in higher tax revenues. Unfortunately, they also used Social Security surpluses to offset deficits.

A good measure of debt is the ratio of debt to GDP, with debt typically rising 30% to 80% about pre-crisis levels.  The previous highest level was 119% at the height of WWII. The debt is now at about 122%. Twenty years of the war on terror, the financial crisis in 2008, COVID in 2020, all contributed to the debt, but the country also experienced steady growth during this time.

The Federal government spends $2 trillion more each year than it takes in. Half of that is used to pay the interest on our current $36 trillion debt. I recommend examining the US Debt Clock or reading my post If We Ran Our Households Like The Federal Government.

So why can't we just keep doing what we've been doing?

The risk is a "debt spiral". Printing money results in higher interest rates, which result in higher debt, requiring more money to be printed, etc. Additionally, higher debt-to-income ratios result in slower growth, which results in lower income. The classic example is Hyperinflation in the Weimar Republic. While the U.S. economy has proven more resilient than the Weimar Republic, the current trend is unsustainable. We may "grow our way" out of this, but it would be more responsible to use all means possible to return to sustainability.

Is Elon Musk the guy who can fix this?

Surprisingly, the debt wasn't even raised during the presidential debate between Donald Trump and Kamala Harris. Elon Musk is the first to make the debt part of the national debate. It's worth taking a detailed look at Elon Musk, including the good and the bad. I'll start this investigation with the claim that Elon is a disruptor. Disruption can be both bad and good. Some of  the ways Elon achieves disruption that I would like to focus on are:

• First Principles Thinking - Break down complex problems into fundamental truths, ignoring conventional wisdom. For example, how much should this car or rocket part cost? Start with the cost of raw materials and the labor to convert them into the needed part.
• Long-Term Vision.
• Leverage Technology and Automation.
• Fail Fast, Fix Fast - take action quickly, and when you fail, learn from it. 
• Running Lean Organizations - "Delete any part or process you can. If it turns out you need it, add it back later." 

As you can imagine, these approaches result in much criticism, often well deserved.

Let's examine a few of his ventures for pros and cons across various industries:

• Banking (PayPal)
• Aerospace (SpaceX)
• Energy (SolarCity and Gigafactories)
• Automotive (Tesla)
• Social Media (Twitter/X)

PayPal

Good: Have you ever used PayPal or Venmo? Elon realized there wasn't a lot of innovation in the financial services sector and that money was low bandwidth (you didn't need a lot of infrastructure like banks or ATMs) (video). Moving money from one person to another via email was much faster and became a popular feature of their financial offerings.

Bad: Elon is criticized for his authoritarian management style, and his vision for a broader financial platform was too ambitious, which led to his ouster as CEO.

“Going from PayPal, I thought well, what are some of the other problems that are likely to most affect the future of humanity?” 

SpaceX

U.S. space travel was in a state of stagnation, marked by high costs and limited ambition. From 2011 to 2020, NASA paid Russia $70-$90 million per seat to ferry astronauts to the ISS on Soyuz rockets - a humiliating dependency. 

Good:  SpaceX significantly cut the cost of launching payloads into space with streamlined operations and reusable rockets. The result was the commercialization of space exploration and inspiring space industry growth.

Bad: Elon over-promises and under-delivers, setting highly ambitious, often missed timelines. SpaceX is known for its intense work culture, with employees working long hours to meet deadlines. Some have criticized the environmental impact of an increased number of rocket launches. Privatization of Space has also drawn criticism as the folly of Billionaires playing "astronaut".

SolarCity and Gigafactories

Elon Musk challenged utilities by pushing for decentralized power. Solar panels could capture the sun's energy and store it in batteries for later use.

Good: Musk's vision for a sustainable future encouraged broader investments in green energy. His focus on scale and efficiency accelerated technological improvements at his companies, SolarCity and Tesla Energy, helping advance clean, renewable energy that reduces carbon emissions and our dependence on fossil fuels. Homeowners and businesses can have more control over their energy consumption. 

Bad: SolarCity and Tesla Energy products have benefitted from government subsidies and incentives. SolarCity's business model included leasing options, sometimes leading to financial difficulties. Battery production and lithium mining have been linked to environmental concerns, such as mining pollution and waste disposal.

Tesla

Good: Tesla is also part of Musk's vision for a sustainable future. His leadership and innovation have led to the adoption of EVs worldwide, with Tesla representing about 2/3rds of the EVs in the U.S. Telsa cars are stylish, high-performance, high-tech, competitive alternatives to other cars. Ford CEO Jim Farley said they struggle to compete with Tesla due to the integrated software development and ability to rapidly update vehicle features and pricing through over-the-air updates, which traditional car manufacturers struggle with due to their complex legacy system and dealer networks (video short). Additionally, the Tesla supercharger network is unparalleled (they realized the infrastructure was required for EV adoption, so they built it). 

 

Bad: 

Once again, Elon is criticized for over-promising and under-delivering. He also has the same intense management style, which is high-pressure and demands long hours.  Tesla has faced regulatory scrutiny and legal challenges due to its aggressive business practices, product claims, and workplace issues.

In August 2021, Joe Biden held an Electric Vehicle summit at the White House to promote the transition to cleaner transportation and address climate change.  The Detroit's big three automakers were invited with President Biden highlighting GM's CEO Mary Barra, stating "I think she's one of the reasons we're here today". No one from Tesla was invited, and no recognition was given for Tesla's contributions. 

Twitter/X

Before Musk bought Twitter in October of 2022, the platform had several issues: frustrated users, investors, and even some employees. Growth had plateaued, innovations were minimal, and the company rarely turned a profit. The Twitter workforce was bloated. Content moderation was a mess with rampant bots and spam. With the release of the Twitter files, evidence showed inappropriate government influence in censorship, shadowbanning, and election interference.

Good: Elon emphasized his commitment to free speech and said he would be more open to diverse opinions and less prone to content moderation and censorship. His vision was to allow people to engage in open dialogue, fostering a marketplace of ideas without heavy-handed moderation. He made efforts to combat bots and fake accounts. He streamlined operations and adopted cost-cutting measures to make the platform more profitable. For example, he found that many employees were idle, that company-provided gourmet lunches were thrown in the trash, etc. He has explored using artificial intelligence to improve user experience and content moderation.

Bad: The first problem is that Elon didn't practice due diligence in his purchase and significantly overpaid for Twitter. Some believe that hate speech, misinformation, and harassment have become more prevalent. The uncertainty during the transition resulted in revenue decreases and advertisers leaving the platform.

D.O.G.E

Good: Elon is a proven efficiency expert with an outsider perspective. He has tech-driven innovation and attempts to promote public accountability by posting about inefficiencies on the X platform. He is acting fast, as opposed to the usual stalemate of government action.

Bad: Musk has massive conflicts of interest with many government agencies providing oversight of his various companies. His "fail fast, fix fast" style could destabilize the government and paralyze critical services. Musk lacks public administration expertise, where public trust is paramount. After the Chornobyl disaster, Mikhail Gorbachev said:

Everything that a top leader says in such situations has to be carefluly weighed and has to be very fully informed. So you always have to bear in mind that in such situations there is always a danger of panic. 

For example, Elon posted on X a list of the number of people in various age ranges in the Social Security database, showing many people over 120 years of age. To follow Gorabachev's advice, this should have included more information, such as how many of those people were actively receiving benefits and details on some of the outliers over 200 years old. Instead, there was a lot of confusion.

Only time will tell how much good or harm Musk will do in this role.

Who should fix the U.S. debt Crisis?

Recently, I was referred to the "Tangle" podcast and have enjoyed their balanced reporting. I eagerly listened to "The legal fight over DOGE's budget cuts." They present the Left's take, the Right's take, and then "My take". "My take" was presented by Ari Weitzman. I agree with his criticisms of the cutting being done by DOGE. 

He asked, "Why not leverage an existing agency - the Government Accountability Office (GAO) or the Congressional Budget Office - to lead the charge?" I thought this was a good point, but then I thought, "Why aren't they already doing this? Why haven't they been sounding the alarms?"

In the Netflix documentary "Turning Point: The Bomb and the Cold War," there are several instances that the World has moments away from nuclear annihilation. Stanislav Petrov (at great risk) ignored a false alarm of U.S. incoming nuclear missiles, avoiding full-scale nuclear war. A Soviet overreaction to U.S. military games, Able Archer, in 1983, was de-escalated when Leonard Perroots recommended winding down the U.S. operations. Daniel Ellsberg said, 

"We see time and again that it's the individuals who have the courage to stand up and make a call, not the system that necessarily works." 

Remember that Daniel Ellsberg was the one who released the Pentagon Papers in 1971, revealing government deception regarding the Vietnam War.

Can we rely on our current system to resolve our budget crisis? Or do we need a brave individual? I don't know who should do it, but I'm glad it's part of the national conversation. Hopefully, we can be more honest about it.

Empathy and Compassion

People will be hurt no matter what is done or who does it. If the cost cutting results in loss of jobs, those jobs represent people with families, mortgages, and other living expenses. Cancelled projects may affect people in need with no other source of help. If taxes are raised, then that will be a burden on the taxpayers.

If nothing is done, our children and grandchildren will have to pay the bill in the future.

If nothing can be done (which is what I'm hearing a lot), then we are headed for economic collapse that will affect not only Americans but all of the world.

If Elon Musk and Pres. Trump are somehow able to restore financial solvency without creating hardship for anyone but criminals and fraudsters (a purely hypothetical result), then there will be people that have been personally hurt by either man who will most likely not see justice served.

If you find yourself in a position where you are safe from hardship, it's essential to recognize the hardship that others may face.

Musings on God

 Imagine all the amazing creations: the starry night, brilliant sunset, flowers, fruit on the vine, etc. It's easy to assume there is a craftsman who created harmonious beauty: the oceans evaporate, clouds form, the wind blows the clouds to land, the clouds drop rain on the plants, the plants grow flowers, the bees pollinate the flowers, the flowers turn into fruit, animals eat the fruit and spread the seed, bacteria and insects break down the animal's waste making fertilizer for the plants to grow.

We humans consider ourselves to be the most significant of creations. But let's look at how humans fit into these creations over space and time.

The craftsman (God) has been creating for billions of years, yet man has only been around for a fraction of that (0.002%). Imagine a craftsman who has produced countless works of art for 70 years, and then 9 hours ago, the craftsman created something new (man). How could you claim that this most recent creation was the most significant? Could tomorrow's creation (in 500,000 years) or next month's creation (in 15 million years) be superior? 

What about the vastness of space? God's work can be found all around the visible universe, billions of light-years away, with portions of the universe that exist beyond what we can see. A spectacular galaxy appears as nothing more than one of a billion bright dots in our night sky. It would be as if our hypothetical craftsman reproduced all of the works of art on the planet, miniaturized them, and placed them as the period at the end of this sentence. What's the point of that?  (no pun intended). If we are the most significant creation, and all of this was created for us, what's the point of so much beauty we can't see with the naked eye? Sure, we can be in awe at what our telescopes discover, but what about all humans who never saw more than a speck in the sky? Is it wasteful: the immensity of space and the fact that we could never reach any of it in a lifetime?

Humans are just a little figurine crafted 9 hours ago in the corner of an immense workshop.

But surely, the craftsman cares most about this creation. How often do people fall on their knees, pleading for help from the craftsman? How often do these cries go unanswered? Is God an interventionist being who is willing to step in and repair our situation? Surely, the millions of Jewish people who died during the Holocaust deserved an intervention. Surely, the millions of Hindus and Muslims who died from famine and violence before and after obtaining independence in India from the British deserved an intervention. Surely, the 40 to 80 million who died of starvation and persecution under Mao Zedong deserved an intervention. This list could continue for pages.

Maybe God isn't an interventionist. 

Maybe God is just a craftsman who created a beautiful world for us.