What President Trump Can Do With The American System 2.0 - Flipbook - Page 9
almost never dipped below 20 percent, and
there were extended periods when tari昀昀s of 40
to 50 percent were in e昀昀ect.
For 40 years, from 1861 through 1901, tari昀昀
rates averaged over 45 percent. This was the
“era of American protectionism,” and its chief
champion was Congressman and later President
William McKinley. In recent decades, it has become fashionable to dismiss tari昀昀s as woefully
outmoded relics of a bygone era, but the reality is that they worked magni昀椀cently. Between
1861 and 1901, the United States created the
greatest industrial revolution in human history,
one which permeated every aspect of manufacturing, agriculture, energy and infrastructure.
During those 40 years, income from the tari昀昀s
accounted for anywhere between 33 percent
and 50 percent of all federal revenue (while the
personal income tax was basically nonexistent).
Disastrous Modern Free Trade Era
President Franklin Roosevelt is often portrayed as anti-tari昀昀, but this is simply not true.
Yes, he opposed the 1930 Smoot-Hawley Tari昀昀
and, after 1934, he marginally reduced tari昀昀
rates. But, at the time of Roosevelt’s death in
1945, U.S. tari昀昀 rates still averaged 38 percent,
almost double what had existed under Woodrow Wilson in 1920.
It was under Harry Truman that everything
began to change. In 1947, the United States became a founding member of the General Agreement on Trade and Tari昀昀s (GATT). Between
1947 and 1950, in just three years, U.S. tari昀昀 rates
were slashed from more than 35 percent down
to 14 percent; then, they continued to ratchet
down to less than 5 percent by 1975.
A historic U.S. trade surplus had started in
1870, driven by tari昀昀s and rapid industrial advancement, and peaking around 1920. By 1970,
we had a trade de昀椀cit, and, in 1971, that trade
de昀椀cit contributed to major shocks to the global
昀椀nancial system, leading President Nixon to
take the dollar o昀昀 the gold reserve. This initiated the disastrous modern global free trade and
昀椀nancial deregulation era.
In January 1995, the United States became a
founding member of the World Trade Organization, ushering in the last 30-year era of radical
free trade, which led to the almost complete disappearance of large-scale manufacturing inside
the United States. This was the new paradigm
of deindustrialization and globalization. Elites
imposed a policy in which our nation abandoned its heritage as a nation of producers, becoming a nation reliant on imports produced by
cheap labor (exactly what our Founding Fathers
feared). Without a regulated and protective U.S.
trade and 昀椀nancial system, the central bank and
national income tax regime became increasingly oppressive for the American people, with
higher in昀氀ation, higher trade de昀椀cits, and lower
wages.
President Trump has publicly expressed interest in the recent proposal to enact a 10 percent general tari昀昀 on all imports, and has suggested rates as high as 20 percent. Some have
Tariffs vs Personal Income Tax as Percentage of Total Federal Revenue
90%
Tariff Revenue
Income Tax Revenue
60%
30%
0%
1900
Promethean Action
1925
1950
1975
2000
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