Subject: Tariff
paulkrugman@substack.com

Krugman has an interesting piece on tariffs. First - from T

"Donald J. Trump @realDonaldTrump
The Tariffs, and Tariffs alone, created this vast wealth for our Country. Then we switched over to Income Tax. We were never so wealthy as during this period. Tariffs will pay off our debt and, MAKE AMERICA WEALTHY AGAIN!"

Does T really think this? K's thesis @sum Don't put it past him - it could be extortion too - companies buy exemptions by contributions or buying crypto.
More words.

There's a possibility no one will tell him he's wrong about tariffs. Would Dope tell him?

K: "What this means in the current context is that almost all attempts to refute Trump’s claims that he can replace income taxes with tariffs aim too high. I’m a great admirer of Clausing and Obstfeld’s work on the amount of revenue we could possibly collect from tariffs, showing that it couldn’t possibly replace the income tax. Here’s their chart showing that there really is a tariff-rate Laffer curve:

Substitute for a nice multi-colored graph.
At the revenue-maximizing tariff rate of 50 percent, customs revenue peaks at about $780 billion, less than 40 percent of what income taxes
bring in. Tariff revenue Laffer curves for different elasticity assumptions, annual revenue, billions of dollars, 2023 $1,200

But when Trump or Andreesen ask why we can’t go back to the McKinley era, when the government subsisted on tariffs and didn’t need an income tax, their problem isn’t failure to understand the revenue function; it’s failure to appreciate the simple fact that in the 1890s America barely had a government by modern standards:

Sure, tariffs could pay for a government without Social Security, Medicare and Medicaid, at a time when even the military was tiny. But the constituency for returning to that kind of small government consists, as far as I can tell, of a couple of dozen libertarians in bow ties. And the kind of government we have now needs a lot more than tariffs to pay its way.

Which brings me back to what is likely to happen on tariffs. You might think that it’s obvious that Trump’s announced plans, or concepts of plans, are unworkable. But it’s probably not obvious to Trump — and who’s going to tell him? (Would LM tell him?)

So he may really try to go through with this stuff."