Politicians from Franklin Roosevelt to Donald Trump have declared themselves the champions of “the forgotten man.” They claim to support the average working-class American whom Washington has purportedly overlooked and left behind.
To some modern commentators, recalling these forgotten men and women requires a robust tariff regime, designed to benefit domestic industries, especially manufacturing. To this end, Trump became a prolific protectionist, and President Joe Biden has perpetuated and augmented Trump’s anti-trade ideas and schemes.
But to refer to the “forgotten man” as the person whom government policies (such as tariffs) intend to help bastardizes the phrase’s original meaning. Coined in the 19th century by economist William Graham Sumner, the “forgotten man” refers instead to the person whom the government burdens — or takes money from — in the course of its attempt to help somebody else. Rediscovering that original meaning illuminates the follies of protectionism generally and its disastrous consequences for the truly forgotten Americans.
Tariffs, like any tax, raise the price of taxed products, thereby benefiting protected industries. Simultaneously, this inflicts far greater harm on American businesses downstream of protected industries and on consumers who must pay the inflated prices.
Indeed, tariffs force the forgotten majority to incur higher costs to ameliorate special interests’ often self-inflicted business failures. The protective tariff “consists in delivering every man over to be plundered by his neighbor and in teaching him to believe that it is a good thing for him and his country because he may take his turn at plundering the rest,” Sumner argued.
Put differently, it constitutes rank redistributionism wedded to corporate welfare, with a tendency toward logrolling.
Tariffs’ net economic impact is negative. The Tax Foundation’s Erica York reports that “the Trump-Biden Section 301 and Section 232 tariffs will reduce long-run gross domestic product (GDP) by 0.2%, the capital stock by 0.1%, and hours worked by 142,000 full-time equivalent jobs.”
Protectionism, nonetheless, often dodges widespread political backlash since its benefits accrue to a narrow slice of highly self-interested industries. Meanwhile, its costs are spread thin across the U.S. economy at large.
Tariffs impact small businesses particularly acutely. Kristen Rae, founder of Inspire Travel Luggage, told the Taxpayers Protection Alliance (TPA) that the costs imposed by tariffs — and the looming threat of future rate hikes — proved so burdensome that she chose to move her formerly overseas manufacturing operations stateside. “My tariff bills were going to go up at least $15,000 every import,” Rae said.
“The country of origin does not pay tariffs,” Rae said, adding, “These are paid by people like me, it gets added to your product cost, and it gets passed on because … you [the business owner] have to figure all of your costs in to make sure you have enough for a profit margin.”
A years-long process, onshoring has cost Rae substantially and required her to pause operations during the transition. Manufacturing in America, moreover, has raised her product costs. Luckily, she had other projects on which she could rely for income until her line relaunches in August.
Other small businesses are less lucky and, consequently, remain caught in the protectionist web. Rae, who works with many other entrepreneurs, says she has heard these concerns firsthand. “It’s the government picking winners and losers…putting a lot of small businesses out of business, quite possibly,” she said.
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When shopping for her family, Rae says that, as a consumer, she experiences tariffs’ costs a second time. “Before accounting for behavioral effects, the $79 billion in higher tariffs amounts to an average annual tax increase on US households of $625,” York writes. “Based on actual revenue collections data, trade war tariffs have directly increased tax collections by $200 to $300 annually per U.S. household, on average.” However, York clarifies that these estimates omit consumer costs stemming from such ills as lost output and consumer choice and, therefore, likely understate protectionism’s harms.
Too many politicians, blind to the not-immediately-seen outcomes their policies produce, insist on inflicting substantial economic damage on their constituents to assuage narrow special interest groups. Indeed, while blustering away about their efforts to help the working class, Biden and Trump have succumbed to anti-trade corporate lobbying. Both candidates should review their basic economics and remember the voters whom they have thus far forgotten.
David B. McGarry is a policy analyst at the Taxpayers Protection Alliance.