The next four years are going to be interesting. Trump has really split many libertarians on whether or not to support him.
Of course, the answer is simple. As libertarians, we should cheer him on when he is right, and we should oppose him when he is wrong. And when he is wrong, we should explain why he is incorrect and what the libertarian answer is.
Trump has been great in opposing much of the establishment. Most of the people I most loathe are enemies of Trump. Therefore, I conclude that Trump must have some good qualities.
For this piece though, I must oppose him. He is simply wrong on the issue of bringing jobs back to the United States.
Not long after being elected, Trump took credit for saving jobs that the company Carrier was going to move outside the country. This was an issue that divided many libertarians.
Libertarians are often divided on the subject of targeted tax deductions. Some will say that any tax deduction should be supported because it means less money for the government, and it is allowing someone to keep more of their own money.
Some libertarians oppose targeted tax deductions because it does not put everyone on a level playing field. They say if we are going to lower taxes, it should be done for everyone, or at least everyone paying that particular tax. In addition, when the government uses debt to finance some of its expenditures, the decreased taxes for one company or individual really can come at the expense of others.
I tend to side more with the first group, while still being sympathetic to the latter. Still, with this Trump/ Carrier story, I thought the libertarian critics might be on to something. And as it turns out, I now think they were on to something important.
Trump is already starting to act as something of an economic dictator. He should not be singling out individual companies unless those companies are getting specific government benefits in the first place.
After Trump was criticizing Ford and General Motors (two companies, particularly the latter, that we should not feel sorry for because of government favors), he is now going after car companies based outside of the United States. Trump recently went after Toyota, saying they could face a big border tax if the company built cars in Mexico and then sold them in the U.S. market.
As this article points out, Nissan could really be in trouble, as it produces more than 800,000 cars per year in Mexico, and it has been producing cars there for a long time now.
Many of these plants have been established for a long time, and it would be very costly to move them into the United States. In the case of Nissan, the inexpensive (relatively) Versa and Sentra are produced in Mexico. These are cars that are affordable to some Americans who otherwise wouldn’t be able to afford a new car at all. If Trump forces these companies to move operations to the U.S. or face a border tax, the price of these cars will rise significantly.
With all that said, here is the biggest problem with Trump on this issue. He is simply wrong in his economic analysis. It should not be his goal to create jobs. It should not be his goal to bring jobs into the United States from foreign countries.
This is a major economic fallacy than even many conservatives and libertarian-leaning people get wrong.
In order to increase our living standards, the key to success is increased productivity. We don’t want to create jobs for the sake of creating jobs. If it is being done through government interference, it is harming production and misallocating resources.
Trump needs to learn the concept of comparative advantage. Perhaps no cars should be built in the United States from an economic efficiency point of view. Some jobs are better left for others. Is Trump going to try to bring manufacturing back to his hometown of New York City? After all, New York City barely produces any manufactured goods. They are mostly dealing with digital services.
If cars can be made cheaper in Mexico, that is fine. There are plenty of jobs to be done as long as we live in a world with scarce resources. There is nothing wrong with Americans specializing in providing services. This should all be sorted out by the free market.
Now, it could be the case that some of these jobs in Mexico (or anywhere else) might not have gone there in the first place if the U.S. government did not impose high corporate taxes and a high regulatory burden. Of course, this should be corrected in the form of reduced regulations and lower corporate taxes (and even individual taxes). This is something that Trump could work towards fixing that would actually improve our economy and our living standards.
Placing tariffs on goods for the sake of punishing companies is counter productive. It just hurts American consumers, which is basically everyone living inside the United States.
Trump should stop trying to save jobs, other than freeing up the marketplace. If he continues with these threats – or worse, imposes tariffs – it is going to make the economy worse.
Creating jobs does not make us wealthier. Increased production that is in accordance with consumer demand makes us wealthier.