| 2023 | $150 – $300 (Best Buy and Amazon range) |
| 2005 | $4,000 (Sony) |
| 1997 | $22,900 (Fujitsu’s first 40″ plasma TV) |
The election year 2024 opens with many questions, but one is basic: Can a person, who has attempted to overthrow a settled election and has called for “termination” of unspecified parts of the Constitution, in good faith take an oath to “faithfully execute the office of President of the United States” and “preserve, protect, and defend the Constitution”?
Policy choices fall pretty far beneath this. (If they’re wrong, they can always be changed.) But they aren’t irrelevant and are sometimes connected to this large constitutional matter. Here, for example, is the former U.S. Trade Representative Amb. Robert Lighthizer, defending Trump campaign proposals for a 10% worldwide tariff and a sharp break in economic relations with China to a team of New York Times political writers by making a more general plea:
“If all you chase is efficiency — if you think the person is better off on the unemployment line with a third 40-inch television* than he is working with only two — then you’re not going to agree … There’s a group of people who think that consumption is the end. And my view is that production is the end, and safe and happy communities are the end. You should be willing to pay a price for that.”
The apparent idea is that if everyone’s cost of living rises and families buy fewer things, the country as a whole will be better off because it will make more things and unemployment will decline. More simply, if Americans are to be “rich” and secure, living standards must fall.
The flaw here is pretty obvious — if people are less affluent they will buy fewer things, and production of things will not rise but drop. Two illustrative examples of how this works, and then a thought on how this might relate to the really basic question:
1. TVs, Efficiency, Productivity, & Innovation: People buy TV sets, and by extension lots of things, on the basis of quality and price. An “efficient” firm will reduce costs through productivity, develop new products through innovation, and offer high-quality sets at low prices. Back in the 1970s, for example, Sony’s 19-inch color Trinitron introduced flatter screens with better visual resolution, and the company’s efficiency and productivity allowed it to sell them at the same prices its competitors charged for blurrier and heavier consoles. Late-1970s anti-dumping suits and import quotas didn’t change these facts. A generation later in 1997, a 10% tariff on Fujitsu’s inaugural $22,900 40-inch plasma might have been daunting even for the few hedge-funders and studio execs interested in showing one off, but wouldn’t have affected production much. Since then, efficiency has cut the cost of a 40-inch TV by 99% to a current range of $150-$300,* making today’s much better versions easily available to Amb. L’s supposedly spendthrift waitresses and bus drivers. The same tariff today would set them back about $20 (or $60 if they wanted to buy three). Over the entire TV-making and -selling world, this would likely put some retail clerks out of their jobs, but likewise wouldn’t affect production.
2. Metals, Tariff Payments, and Production: In the event of a 10% tariff, someone will pay and it’s pretty clear who it will be. The aluminum and steel tariffs the Trump administration imposed in March of 2018 (10% and 25% respectively, with some exclusions) offer a modest case study of the economy-wide effects of higher input prices and consequently reduced efficiency. The U.S. International Trade Commission’s March 2023 report summarizes their effects five years on:
“U.S. importers bore nearly the full cost of these tariffs. The USITC estimated that prices [of the metals] increased by about 1 percent for each 1 percent increase in tariffs. … U.S. production of steel was $1.3 billion higher due to Section 232 tariffs. U.S. production of aluminum was $0.9 billion higher in 2021 due to Section 232 tariffs. U.S. production in downstream industries [Editors note: the ITC’s major examples are machinery manufacturing, auto parts, hand tools, and cutlery] was $3.5 billion less in 2021 due to Section 232 tariffs.”
So the ITC’s finding is (a) a $2.2 billion increase in output of the metals (about 5%), compared to the model’s guess at an economy continuing on the same course without tariffs, (b) a somewhat larger decline of $3.5 billion in the machinery, auto parts, and tool-making industries using metals to make their products, and therefore (c) an overall slightly smaller manufacturing sector, though one in which the modestly diminished machinery- and parts-makers buy somewhat more metal from local mills.
In fairness, the administration’s stated reason for imposing the tariffs five years ago was not a hope for “generally higher manufacturing output.” Rather it was an argument that metals production is important enough to national security to sacrifice the interest of machinery and auto parts makers, plus a hope that tariffs would mean a large increase in metal output and mill capacity utilization. More on this in a few weeks (and a few stats below), but the many metal-tariff experiments over the last half-century suggest some skepticism about the latter point.
3. And the Constitutional issues: Apart from the economics, how exactly would this happen? Constitutionally, only Congress has the right to “lay and collect Taxes, Duties, Imposts and Excises.” Asked by the Times’ political team about how a President could create an entirely new tariff system by himself, the Ambassador cites some existing trade laws that might enable a President to declare a “national emergency” and impose it by decree. Which, sounding pretty consistent with the “termination” of parts of the document, makes these policy issues look quite relevant to the year’s really basic question.
* $200 is about 0.2% of America’s $74,850 median household income. Not an extravagance at all, and even three would be manageable for a lower-middle-income household.
From the National Archives, the official Constitution transcript (see Article I, Section 8, #1 for “Taxes, Duties, Imposts, and Excises”).
… and ex-USTR Lighthizer in the New York Times (subs. req.) on a second Trump program, national wealth through forgoing new TV sets, etc.
Metals:
The U.S. International Trade Commission models the effects of steel and aluminum tariffs five years later.
Or, from a different source — The U.S. Geological Survey’s record of steel use, trade, and production by year reports actual use and output rather than trying to model a non-tariff economy. Their 2022 summary reports 82 million tons of “raw steel production,” 8 million tons exported, 30 million tons imported, and 96 million tons “consumed” throughout the economy. By comparison, the 2017 report has 81.6 million tons produced, 9.5 million tons exported, 34.6 million imported, and 102 million tons used throughout the U.S. economy. The Bureau of Labor Statistics likewise reports employment essentially unchanged, at 83,000 in late 2017 and 82,600 at the end of 2022.
TVs:
CNET looks at TV prices, 1950-2017.
The Institute of Electrical and Electronics Engineers remembers Fujitsu’s first flat-screen TV.
And from the Washington Post archives (also subs. req.), a report on a 1977 TV “price war,” featuring Japanese innovation, import competition, and U.S. trade law.
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
