Many have wondered what era the “Again” in “Make America Great Again” referred to in Trump-speak. He just told us, and he is startlingly specific: “1870 to 1913,” an era of tariffs, the era in which he says, “We were the richest country in the world.”
Here’s the transcript and the video clip [the bold is mine]:
You see the power of the tariff. I mean, the tariff is good, and nobody can compete with us because we have by far the biggest piggy bank. And so that will take place very quickly. But also we'll be doing pharmaceuticals to bring our industry back. We want to bring pharmaceuticals back to the country.
And the way you bring it back to the country is by Putting up a wall, and the wall was a tariff wall. We were the richest country in the world. We were at our richest from 1870 to 1913. That's when we had, we were a tariff country.
Video (click here to watch on YouTube), and note that this appeared on Fox News on January 30 or February 1:
He proposes to raise a “tariff wall” against overseas manufacture of pharmaceuticals—an action that would surely raise drug prices even higher. (Much of drug manufacture is done overseas by multinational drug companies.) That’s worrisome enough, but he also declares his favorite period in U.S. history to be “1870 to 1913.”
Between 1870 and 1913 in the U.S. the commoners paid while the industrialists and bankers skated almost tax free. The federal government was funded almost entirely by levying tariffs on imports instead of the (variably) progressive income taxes we are accustomed to today. Until 1913 arguments raged over whether levying a tax on income violated the Constitution. Until 1913 the major source of revenue for the federal government was obtained through tariffs. During the Civil War a temporary and self-expiring progressive income tax (and an inheritance tax) was enacted and modified in a series of Revenue Acts passed in 1861, 1862, and 1864. But this income tax was only a temporary add-on to the underlying tariff revenue, and it was understood as such. The first peacetime income tax was enacted in 1894, but the next year the Supreme Court handed down a 5-4 decision that effectively declared any tax on income to be unconstitutional. (The “History” section of this Wikipedia entry does a great job of providing the details of the history of the U.S. income tax.)
It took eighteen years of controversy to overturn the Supreme Court’s ruling via a Constitutional Amendment. On February 3, 2013, the Sixteenth Amendment was ratified, making federal taxation based on income specifically constitutional and, thereby, initiating a radical change in the way the federal government was, and is, funded. Tariff levels were gradually lowered, but to this day provide a small percentage of federal government funding.
In contrast to Trump’s unilateral tariff threats of our current time, in the 1800s tariffs were hammered out in contentious debates, passed by Congress and signed by the President before they were levied. William McKinley is one of only two presidents (the other is Andrew Jackson) for whom Donald Trump has expressed a modicum of respect. (Remember that one of Trump’s recent executive orders supposedly renames Denali, the tallest mountain in the northern hemisphere, as Mount McKinley.) In the years McKinley served in Congress before he was elected President in 1896, he was considered the Republican tariff expert and pushed hard to ever higher protective tariffs—while Democrats argued for lower tariffs and imposition of a progressive income tax. Levels of tariffs and which goods and which countries were subject to particular tariff levels were the subject of lengthy debate.
Trump did not randomly pick 1913 as the end of the era of riches for the wealthy to which he wishes to return. He picked 1913 because of the enactment of the 16th Amendment, the amendment that enables the progressive income tax that he and his oligarchs loathe.
Tariffs have their uses, of course, not the least of which is to provide revenue disproportionately from the working class while many of the working class (at least in our day and age) fail to understand that it is they who are paying what are effectively federal government taxes in the form of a higher cost of living. Trump persistently claims that tariffs are paid by the countries on whose products the tariffs are levied. This is a bald-faced lie often repeated in an effort to deceive.
The nifty trick with a tariff is that the consumer never sees any tariff paperwork, just a rising price for consumer goods. If the federal government is solely funded by tariff revenues (as it mostly was until 1913) the only people who see any paperwork that reminds them of taxes are those engaging in importing goods from foreign countries. Here’s how it works: Pretend that an across-the-board 20% tariff is enacted against country Z. A U.S. entity wishes to buy a widget whose sticker price is $10 from country Z. When the widget arrives at the border a $2 tariff (20%) is tacked on to the base price. The U.S. entity buying the widget pays a total price of $12, $10 of which goes to the exporter in country Z while the $2 tariff amount goes to the U.S. Treasury. The U.S. entity that bought the widget has to market the widget for more than $12 in order to make any profit, putting the entity at a disadvantage relative to a domestic widget manufacturer who now gets to market its widget to the U.S. consumer for a price that slightly undercuts the importer.
If you’ve ever been overseas and brought back an item on which you had to pay a “duty” at U.S. Customs you personally experienced a tariff. The $10 on which you paid a 20% duty of $2, now has a total cost to you of $12. The only difference in this example is that you know that you paid $2 extra because you went through the paperwork, whereas in the prior example the in-U.S. consumer of a tariffed product is often mostly unaware of the tacked on expense.
It should surprise no one, given Trump’s deference to the Elon Musk and the tech bros, that he would yearn for the circumstances of a bygone era in which the wealthy and corporations paid no progressive income taxes, domestic business was enabled to sell at higher prices, and the laboring class funded the federal government via a higher cost of living.
Remember when Republicans, especially Speaker of the House Paul Ryan (R-WI), pushed for a “flat (income) tax”, i.e. a single tax bracket for every taxpayer from the commoners to the CEOs? Advertised, in part, as “tax simplification,” its real intent was to shift the cost of funding government from the corporations and the wealthy to the common people by trashing the progressiveness of the income tax. Trump’s touting tariffs is simply the radical reactionary version of the same intention.
This is a class-based question that goes all the way back to the founding of our country: who funds the government, the wealthy or the common people? Trump’s specifically citing “1870 to 1913” is transparently all about the class-based question of who pays.
Now we know exactly what we mean with the chant, “WE WON’T GO BACK!”
Keep to the high ground,
Jerry
P.S. That Trump (or any U.S. president) even has the Constitutional authority to threaten placing massive, across-the-board tariffs on other countries has been and may be again a subject of contention with Congress, mediated by the courts. Here is an article that discusses that delegation of authority in some detail.
P.S.S. In the 1800s the U.S. was undergoing a massive economic boom thanks to territorial expansion, discovery of and exploitation of natural resources, industrialization, the extension of railroad access. That the entire U.S. federal government was funded at that time through tariffs—and that these tariffs were erected to “protect” domestic industry from foreign competition—might have made some sense. Trump’s statement, “We were the richest country in the world,” between 1870 and 1913 may be close to true, but only in comparison to the other countries of the time that had already been through their own expansion phase—and at the expense of a high level of income and wealth inequality. Tariffs played a role in insuring that the expansion protected the profits of domestic rather than foreign industry.