Some Links
As for the anti-growth idea, Mr. Trump also highlighted a tax deduction for loan interest payments on U.S.-made cars. This is subsidy for consumption of a subset of a single product, akin to Mr. Biden’s electric-vehicle favoritism. The interest deduction could help offset higher prices from his tariffs and boost demand in the short term.
But the subsidy would also fuel higher prices and make cars less affordable over time, which is what has happened with homes from the mortgage interest deduction. The carve-out would further complicate the tax code while subsidizing debt over investment. The Tax Foundation estimates a deduction for all auto loans would cost the Treasury some $60 billion over 10 years.
Bureaucrats will decide whether a car counts as “made in America” amid a corporate lobbying blitz. This is what has happened with the Inflation Reduction Act’s rules for EV credits, which are conditioned on a certain share of their battery components and minerals being made in North America and countries with which the U.S. has free-trade agreements.
Steven Kamin makes clear that the decline in manufacturing employment as a share of total employment is not a ‘problem’ caused by monetary or trade policies; it’s a benefit caused by rising productivity. (HT Arnold Kling) A slice:
In fact, the declining share of employment in manufacturing is hardly limited to the United States. As indicated in the chart below, countries with persistent trade surpluses (Germany, Japan, South Korea) as well as trade deficits (UK, US, Australia) have all experienced trend declines in the share of manufacturing jobs, and of roughly the same extent. These shared trends importantly reflect the rapid pace of productivity growth in manufacturing, which shrinks the need for labor even as it boosts manufacturing output.
Wisdom from the late, great Paul Heyne. (HT Kevin Briggs)
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