Commenting on this blog post at Cafe Hayek, Donald Jansen writes:
Yes, yes, protectionism is evil. Still. The government needs revenue. Why are tariffs inferior to other taxation schemes? During the many decades of US history in which the tariff was the primary means of financing the US government, the federal government’s share of GDP consistently averaged 3%. Who would not gladly prefer those circumstances over what we have today?
Below is an extended response to him I left:
To the extent a government is desirable, it will need to be financed. To that end, you want a tax, whatever it be, that’ll maximize revenue while minimizing costs. In other words, you’d want the lowest tax rate possible to finance the government.
But note that an optimal tax is a fundamentally different beast than the tariff discussed here. Don is discussing protectionist tariffs, tariffs not meant to fund government but meant to control behavior. The “butwhatabouts” want tariffs to “protect” industry, not to finance government. They want it to achieve some goal different from finance. To that end, the tariff is more likely to be harmful than helpful (barring an extreme set of assumptions).
Understanding the end-goal of an action is important when it comes to discussing the action. If the goal of a tariff is to fund government, then it will be radically different than a tariff meant to discourage imports. The former will try to keep imports as high as possible. The latter wants to keep them as low as possible. While both beasts have similar names, they have quite disparate goals. it makes no sense to object to the argument against a protective tariff by pointing out the theoretical benefits of an optimal tariff; it’s comparing apples and oranges.
A Force for Good 