Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

September 12, 2009

Obama Raises Taxes Without Vote of Congress

by Kevin Boyd

“I can make a firm pledge….no family making less than $250,000 will see any form of tax increase…..not any of your taxes”-Barack Obama, September 12, 2008

Once again, President Obama has lied to the country. After raising cigarette taxes earlier this year, Obama just ordered another tax increase. This time, he raised every American’s taxes without a vote of Congress and with the simple stroke of a pen. Obama increased taxes on Chinese-made tires.

In one of his first major decisions on trade policy, President Obama opted Friday to impose a tariff on tires from China, a move that fulfills his campaign promise to “crack down” on imports that unfairly undermine American workers but risks angering the nation’s second-largest trading partner.

The decision is intended to bolster the ailing U.S. tire industry, in which more than 5,000 jobs have been lost over the past five years as the volume of Chinese tires in the market has tripled.

It comes at a sensitive time, however. Leaders from the world’s largest economies are preparing to gather in Pittsburgh in less than two weeks to discuss more cooperation amid tensions over trade.

The tire tariff will amount to 35 percent the first year, 30 percent the second and 25 percent the third.

Which means American consumers will see an increase in prices of at least 35% for their tires in the name of saving 5,000 jobs. Chinese and US companies with factories overseas are not going to pay the tariffs, they’ll pass them on to consumers. There is also the latest example of the Obama administration diplomatic ineptness of angering trade partners before major trade talks with China among other countries. Also, there was not much public debate over this, since this decision was reached behind closed doors with the help of an obscure Federal trade panel with no citizen input.

Of course with the Obama administration, there’s always someone or some group to be paid back.

Although a federal trade panel had recommended higher levies — of 55, 45 and 35 percent, respectively — the decision is considered a victory for the United Steelworkers union, which filed the trade complaint.

The United Steelworkers union endorsed Obama’s presidential bid and the Steelworkers had a massive grassroots effort that claimed credit for helping win Pennsylvania, Ohio, and Virginia; among other states.

“Hope and Change” indeed.

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  • Mo

    Thank you President Smoot-Hawley-Hussein-Obama. Wasn’t this the same stupidity that gave us the Great Depression? Higher taxes, trade wars, crazy, irrational programs that made it impossible for businesses to plan for the future?

    The only difference is that they are putting out more money into circulation, so much so that we’ll end up with massive inflation, as evidenced by the rise of gold prices. Or really, stagflation as many things actually come down in price even in the face of monetary inflation.

    Trade wars with China…another bit of evidence that Obama is trying to destroy our economy.

  • Steve

    Thank goodness – someone has to stand up and protect American jobs.

  • TerryP

    This has to be one of his dumbest decisions yet, and he already has a few whoopers.

  • http://pith-n-vinegar.blogspot.com/ Quincy

    Steve, inflicting harm on millions of Americans through increased prices for tires to save thousands of American jobs is wonderful policy, isn’t it?

  • Steve

    Quincy, If you increase prices on Chinese made products less people will buy the Chinese made products. People will buy the American products because of their lower prices. If people buy American products, more Americans will need to be hired to make more American products.

  • Steve

    I can’t believe Americans are standing up for Chinese companies before other Americans simply because THIS President is “the decider.”

  • http://www.belowthebeltway.com Doug Mataconis

    Steve,

    I just don’t want the government telling me I have to pay more for something merely because it comes from another country.

  • http://pith-n-vinegar.blogspot.com/ Quincy

    Steve, great example of typical economically-ignorant thinking there… Did you ever stop to think that American-made tire prices might rise as well absent the price pressure from the Chinese?

  • Steve

    Quincy, That might be true if there were no other Tire Companies that the American Tire Companies compete with. You think the Chinese are the only ones who use price as a form of competition?

    Why don’t we stick to the issues – not personal attacks.

  • http://N/A KEN

    AMERICAN COMPANIES DON’T MAKE THESE CHEAP TIRES ANYWAY.THEY OUTSOURCE THEIR MANUFACTURE TO CHINA.IT IS A TAX ON THE POOR.READ THE WALL STREET JOURNAL TODAY,THEY HAVE 3 STORIES ON IT.

  • Steve

    Then it will encourage production in a country other than China, like the US.

  • TerryP

    Steve, it very well may incourage production in another country, maybe even the US, but it will still cost us more, because if someone else could have done it at a lower price then the Chinese they would have already been doing it.

    The whole tire issue is minor to what the Chinese may do in retaliation. They are a huge trading partner with us and they finance a majoirty of our debt. Without them financing that debt interest rates will have to increase to find others to finance it. That will hurt us all and may push us right back into a recession all over a few jobs being lost to cheap chinese tires so that the poor in the US can afford them. So the poor will have a harder time making ends meat, a few Americans may get a manufactruing job back, but very few, the price of all tires will likely increase, interest rates may increase some, and the Chinese may retaliate in some other manner that hurts not only Americans but the overall world economy as well. Sounds like a winner to me.

  • Norm

    Steve, In for a penny in for a pound. Why not stop all imports?

    btw maybe we can get all those in the poultry industry to make tires now that China has responded. (From the rubber chicken dept.)

  • Steve

    The reason that the tariff was imposed was because of an agreement made by China when it joined the WTO. They are flooding our shores with cheap tires to put our tire companies out of business. This is not some random act against tire companies. This is a defensive measure that is used to protect domestic firms.

    “The duties are to be imposed on September 26th under a part of American trade law known as “Section 421”. The American government argues that these tires are being imported into America from China in “such increased quantities and under such conditions as to cause or threaten to cause market disruption to domestic producers” of competing tires.

    America imported tyres worth $1.3 billion from China between January and the end of July this year. Under the terms of China’s accession to the WTO in 2001, countries have the right to impose tariffs in response to a “surge in imports” from China.”

    http://www.economist.com/businessfinance/displayStory.cfm?story_id=14442673

  • http://pith-n-vinegar.blogspot.com/ Quincy

    Steve, I was not attacking you, I was attacking your thinking. It was, and still is, economically-ignorant. Let me dissect it for you, using your own words:

    If you increase prices on Chinese made products less people will buy the Chinese made products. People will buy the American products because of their lower prices.

    Let’s put some numbers on this. China Tire Co. sells a model for $60. USA Tire Inc. sells an equivalent for $75. I, budget-conscious tire shopper, have the choice of equipping my car with tires for $240 with four China Tires or $300 with four USA tires.

    China Tire Co. is slapped with a 35% tarriff, with the new price of their product now being $81. I, budget-conscious tire shopper, now have the choice of equipping my car with tires for $324 with four China Tires or $300 with four USA tires.

    In the simple scenario I described, my point is absolutely true. Millions of tire buyers have to pay more so a few thousand can keep their job.

    Let’s make it more interesting…

    That might be true if there were no other Tire Companies that the American Tire Companies compete with. You think the Chinese are the only ones who use price as a form of competition?

    We introduce two new companies to our scenario: French Premium and Japanese Economy. French Premium sells an equivalent for $100 while Japan Economy sells one for $70. Now, the four options for equipping a car are:

    USA: $75 x 4 = $300
    China: $81 x 4 = $324
    French: $100 x 4 = $400
    Japan: $70 x 4 = $280

    The budget-conscious buyer is going to be buying tires from Japanese Economy, not USA Tire.

    Even still, millions of tire buyers end up paying more for tires so a few thousand Americans can keep their jobs. Nothing you’ve said refutes my point.

    This assumes that the tariffs are the only things that would save those jobs. There’s an alternate approach that is better for the Chinese *and* better for the American people. When government examines the way it is hobbling its producers through taxes and regulations and then lifts some of the weight off the producers shoulders, producers are able to make more product at a lower price while still paying as much or more than before.

    The corporate tax rate in this country is an obscene 35%. Every US-based company in the American tire supply chain is coughing up 35% of its income to Uncle Sam instead of using it to save or create jobs.

    Why is this not being discussed? Legislators would rather use tariffs to hobble international competitors than give up the revenue that fuels their own power.

    Tariffs make no economic sense, and hurt the people they’re purported to help. This has been true since the founding of the US, and there have been myriad examples of this, the most blatant being the Smoot-Hawley Tariff Act.

    Logic and history reveal the ignorance of your thinking on this subject. I’m sure you’re a perfectly unobjectionable, even pleasant individual, but your thinking and the arguments flowing from it on this subject are provably wrong.

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