I don’t support the tariffs, but that’s not really true. Tariffs are basically taxes. They go to the government. Presumably they would then be redistributed through government programs. You can say what you will about how effective those programs are, but the money does not just disappear and is certainly not destroyed.
Tariffs only go to the government when people can actually afford to pay them.
When Tariffs jack up the costs of goods in a supply chain exponentially higher than they’ve even been, small to medium sized business can’t afford their now Tariffed supply chain and don’t pay.
That’s how the money disappears. Whatever industry Tariffs are added to is now an industry that small to mid size companies can no longer afford to manufacture in. Which lowers the total value of that market as the profits smaller businesses had are now captured and destroyed by Tariffs.
Without Tariffs, the supply chain is affordable. With Tariffs, it’s destroyed and doesn’t magically come back.
Soy bean market? Literally no more future profit potential now that our largest buyer has gone elsewhere.
Tariffs just effectively convert long term viable market wealth to short term government wealth in a time when markets are already suffering.
In no reasonable calculation will the gains of any Tariff offset the long term losses in the market those Tariffs destabilize. There’s literally hundreds of years of historical evidence supporting this as the outcome.
Eldritch is right, but it’s kinda like Newtonian physics vs general relativity: you can think of (federal) taxes as “funding the government” and it’s not a terrible approximation. But it’s not the reality.
The reality is more like what Eldritch said: money is spent into existence, and taxed out of existence. The issuer of a currency doesn’t need to take the currency from you in order to spend it — they need to destroy it so that their newly-printed currency is actually worth chasing after.
Sounds like a distinction without a difference, right?
Except it matters when we talk about “tariffs funding the government” (cuz they don’t) or “how are we gonna pay for something like the green new deal?” (paying for it is the easy part, controlling inflation is the real constraint).
When we talk about major economic initiatives, it kinda matters for people to understand how money actually works. Musk, for example, had no clue and thought he had uncovered some massive scandal when he gained access to the federal payment system and was confused at how the funds don’t actually come from anywhere: https://stephaniekelton.substack.com/p/elon-musk-discovers-the-magic-of
I’m not going to pretend I’m an economist, but the idea that the government prints money is not new to me. If the government is “funded” via destroying money (because there is an inflation rate they are attempting to keep constant meaning they can spend X for every Y they destroy) then taking in “funding” via tariffs allows them to either print more money to make up for the additional “income” (aka increased government spending ideally on the public good) or need less money from other sources (lower other taxes - not how it happens but theoretically a possibility), or apply that “excess” to the debt (basically print directly to the debt holders). This does not make taxes or tariffs irrelevant. It is the way the government is “funded” since it needs income to maintain inflation. Is this not a correct reading? I’m legitimately open to learning something right now, but replacing “spend” with “print” and “tax” with burn does not really affect anything considering inflation is a constraint. I understand it’s not 1:1 but that does not mean taxes are “disappeared” in any meaningful sense in this context.
I don’t support the tariffs, but that’s not really true. Tariffs are basically taxes. They go to the government. Presumably they would then be redistributed through government programs. You can say what you will about how effective those programs are, but the money does not just disappear and is certainly not destroyed.
Tariffs only go to the government when people can actually afford to pay them.
When Tariffs jack up the costs of goods in a supply chain exponentially higher than they’ve even been, small to medium sized business can’t afford their now Tariffed supply chain and don’t pay.
That’s how the money disappears. Whatever industry Tariffs are added to is now an industry that small to mid size companies can no longer afford to manufacture in. Which lowers the total value of that market as the profits smaller businesses had are now captured and destroyed by Tariffs.
Without Tariffs, the supply chain is affordable. With Tariffs, it’s destroyed and doesn’t magically come back. Soy bean market? Literally no more future profit potential now that our largest buyer has gone elsewhere.
Tariffs just effectively convert long term viable market wealth to short term government wealth in a time when markets are already suffering.
In no reasonable calculation will the gains of any Tariff offset the long term losses in the market those Tariffs destabilize. There’s literally hundreds of years of historical evidence supporting this as the outcome.
Eldritch is right, but it’s kinda like Newtonian physics vs general relativity: you can think of (federal) taxes as “funding the government” and it’s not a terrible approximation. But it’s not the reality.
The reality is more like what Eldritch said: money is spent into existence, and taxed out of existence. The issuer of a currency doesn’t need to take the currency from you in order to spend it — they need to destroy it so that their newly-printed currency is actually worth chasing after.
Sounds like a distinction without a difference, right?
Except it matters when we talk about “tariffs funding the government” (cuz they don’t) or “how are we gonna pay for something like the green new deal?” (paying for it is the easy part, controlling inflation is the real constraint).
When we talk about major economic initiatives, it kinda matters for people to understand how money actually works. Musk, for example, had no clue and thought he had uncovered some massive scandal when he gained access to the federal payment system and was confused at how the funds don’t actually come from anywhere: https://stephaniekelton.substack.com/p/elon-musk-discovers-the-magic-of
I’m not going to pretend I’m an economist, but the idea that the government prints money is not new to me. If the government is “funded” via destroying money (because there is an inflation rate they are attempting to keep constant meaning they can spend X for every Y they destroy) then taking in “funding” via tariffs allows them to either print more money to make up for the additional “income” (aka increased government spending ideally on the public good) or need less money from other sources (lower other taxes - not how it happens but theoretically a possibility), or apply that “excess” to the debt (basically print directly to the debt holders). This does not make taxes or tariffs irrelevant. It is the way the government is “funded” since it needs income to maintain inflation. Is this not a correct reading? I’m legitimately open to learning something right now, but replacing “spend” with “print” and “tax” with burn does not really affect anything considering inflation is a constraint. I understand it’s not 1:1 but that does not mean taxes are “disappeared” in any meaningful sense in this context.