08.31.2009 0

The Barstool Economist: Was Barack Obamas Tire Tariff more like Smoot-Hawley or Hugo Chavez?

  • On: 09/23/2009 09:34:32
  • In: Economy
  • Was Barack Obama’s Tire Tariff more like Smoot-Hawley or Hugo Chavez?

    By Justin Williams

    When Barack Obama slapped a 35 percent tariff on tires shipped from China, many people saw this move as a direct parallel with the Smoot-Hawley Tariff passed by Congress on the eve of the Great Depression. Of course, being that the Smoot-Hawley Tariff is soundly condemned by most economists for worsening the Great Depression, this is a comparison that should not be taken lightly.

    One of the nation’s top trade economists, Douglas Irwin posits in a paper entitled “The Smoot-Hawley Tariff: A Quantitative Assessment,” that the Smoot-Hawley Tariff reduced America’s imports “by about 12-20%.” And that disaster did not include, of course, the loss of exports that were a result of other countries matching American punitive tariffs.

    So for a nation that now imports 2.112 trillion dollars worth of goods, it might be worthwhile to be extra hesitant when possibly starting a trade war with one of our largest trading partners – and the world at large, as well.

    That being the case, it’s good thing the Founders set up the American Constitutional Republic to be a slow process, with what they hoped were ironclads safeguards. The Constitution states in the first line under the powers of Congress that “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States…” and later “To regulate Commerce with foreign Nations…”

    Yet, lo and behold, even with the high important issue of international trade and the constitutional safeguards put in place, Barack Obama defied both with one hastily move: Proclamation 8414.

    In Proclamation 8414, Obama writes, “under the authority vested in me by the Constitution and the laws of the United States of America, including but not limited to sections 421 and 604 of the Trade Act…” And it goes on to stamp that 35 percent tariff on imported Chinese tires because they allegedly “threaten to cause market disruption to the domestic producers…”

    So in one swift move — and without Congressional approval as required by law — Barack Obama implemented an unconstitutional action (while citing the Constitution nonetheless), starting a trade war, and defying more than a few vital economic laws that many people have understood since the days of Adam Smith.

    It’s all part of a transparent pay-off by Barack to his union cronies. In 2008, union boss of bosses Andy Stern (of the ACORN-created SEIU) boasted, “We spent a fortune to elect Barack Obama — $60.7 million to be exact – and we’re proud of it.” No doubt, Mr. Stern is even prouder of the Obama tariff payback.

    And now the trade war has begun with the recent investigations by the Chinese into the American chicken market. Richard Lobb of the National Chicken Council stated to the Chicago Tribune that “This is clearly a government-to-government dispute, and we’re innocent bystanders getting caught in the middle.”

    The chicken farmers and producers, of course, are not the only bystanders that will be caught in the middle. Every American will face soaring prices and lower domestic production, since we depend on China and other countries both for what we buy and for what we sell.

    History records that after Smoot-Hawley’s ill-conceived tariffs, U.S. imports plummeted a staggering 66 percent from 1929-1933. Exports fared only slightly better, collapsing some 61 percent during the same time period. Not so coincidentally, unemployment soared from 3.2 percent to 24.9 percent.

    And, oh, by the way, the Smoot-Hawley Tariff was only 13.5 percent – less than half of the 35 percent Obama has cobbled together as a pay off to his union cronies.

    Justin Williams is the Senior Commentary Editor of ALG News Bureau and, as always, he takes questions and comments at [email protected]


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