[UPDATE: Amash clarified what happened; see the bottom of the post. Now I can sleep peacefully.]
In Episode 799 of the Tom Woods Show, I was the guest and we were talking about the Carrier deal. Tom brought up the fact that I had mentioned on Twitter that I thought Rep. Justin Amash (R-MI) had misunderstood (at least initially) the point that Dilbert creator Scott Adams brought up.
I’ve had a few people challenge me, saying that *I* was the one missing things. I wasn’t going to bother with this, because I don’t want it to seem like I was taking Trump’s (or Adams’) side on the broader debate. FOR THE RECORD: I TOTALLY AGREE WITH JUSTIN AMASH’S DEFENSE OF FREE TRADE, AND HIS OPPOSITION TO TRUMP’S THREATS AGAINST U.S. COMPANIES THAT ARE CONSIDERING OUTSOURCING.
However, since I guess the cat’s already out of the bag, I might as well be clear on exactly what motivated my remarks on Tom’s show. One last thing, though: If you go and listen carefully, I hedged and said something like, “At the very least, one reading Amash’s tweets would understandably *think* that he didn’t get the point.”
So anyway, here we go. I’ll paste in a selection of Amash’s tweets taken from the debate, with my commentary following each:
— Justin Amash (@justinamash) December 4, 2016
This is what got the ball rolling. Clearly, at this point Amash is thinking of a general tariff that actually gets implemented. If he *weren’t* thinking that, then the 35% figure would be wrong (because it would be arbitrary). For example, suppose it would only take, say, a 28% tariff to scare every US firm and keep it from outsourcing. Well then, if Trump had threatened a 28% tariff, then no company would move, and Amash would tweet, “This is a 28% tax on all Americans…” If Trump then jacks it up to 35%, it would still be the case that no company moved, but that wouldn’t make their products more expensive yet again. In that case, Amash would still have to write, “This is a 28% tax on all Americans…”
Thus, at this initial stage, when Amash is first responding to Trump’s twitter rant, it is clear that Amash is thinking the 35% tariff will actually be triggered, and *that’s* why Amash is (correctly!) saying it’s not just a penalty on the outsourcing company, but on American consumers.
In the next stage, Scott Adams replies:
No, the whole point is that no company would move with that risk hanging over them. So no tax is triggered. https://t.co/1XJnuiuIyp
— Scott Adams (@ScottAdamsSays) December 5, 2016
OK, so we see that Adams is challenging the initial logic. (By the way, I had never considered this possibility until Adams brought it up. I don’t know whether Trump himself was thinking this.) OK fair enough. Let’s see what Amash says in reply:
No. American consumers are taxed even if no companies move. Tariff increases production costs & limits competition. This is basic economics. https://t.co/JjBAnpflbE
— Justin Amash (@justinamash) December 5, 2016
OK, so *this* is the point where I, Bob Murphy, jumped into the twitter debate. At this point, it sure seemed like Amash missed what Adams had argued. For one thing, Amash is talking about a tariff increasing production costs. But in this scenario, there IS NO tariff. Rather, it’s the THREAT of a tariff that is doing the work.
That may sound like quibbling to some (and we’ll get to that in a moment, over the narrow vs. broad use of the term “tax”), but look how weird Amash’s usage would be in other circumstances. Suppose Trump says, “If a CEO wants to outsource, I will shoot him in the head.” Then Amash says, “Outrageous! Bullets hurt brains.” Then Scott Adams says, “No, the idea is that no CEO will want to get shot in the head, so no outsourcing.” Them Amash comes back and says, “No, even if no company moves, the bullet still causes damage. This is basic physiology.” Wouldn’t people think Amash had misunderstood?
OK, you still don’t believe me? Then what about Amash’s claim in the tweet that, “This is basic economics.” If we interpret the previous sentence to mean, “A tariff is imposed on goods coming into the US,” then yes of course, it IS basic economics. But if we interpret the previous sentence to mean, “No tariff is actually imposed, but the threat of it keeps companies from outsourcing and thereby keeps their production costs artificially high, and makes US consumer prices higher than they would otherwise be,” then HECK NO that’s not basic economics. In fact this is the first time I’ve ever heard such a claim. I *agree* with it, but it’s not basic economics.
Thus, I think I was on solid ground when I said, at this point in the debate, that Amash had missed Scott Adams’ point.
Next, Amash tweeted out a link to Don Boudreaux’s blog post:
Open Letter to “Dilbert’s” Scott Adams https://t.co/w4nhqOmPGX
— Justin Amash (@justinamash) December 5, 2016
Now here I made a mistake. I started skimming Don’s piece, and saw that he immediately said that Amash was right and Scott Adams was wrong. Since at this point I was confident that Amash had misunderstood Adams’ point, I stopped reading (I was in an airport, cut me some slack) and I tweeted that Amash and Don were both missing the point. However, I realized later (when I had time to carefully read Don’s post) that Don fully understood Adams’ point, and gave a great reply.
At this point, let me just post a screen shot of the back-and-forth Amash and I had:
OK, so after I said I thought Amash and Don were missing Adams’ “narrow point,” Amash assures me he gets it. I PROMISE YOU, folks, at this point I totally believed him. After all, Amash is a sharp guy, and Adams’ point wasn’t too hard to grasp.
So I threw in the towel, and said, “OK,” and just clarified why I thought he had been unclear by calling it a tax, rather than a *threat* of a tax. I was ready to walk away; my work was done here. At this point, I would’ve bet $1,000 that Amash understood Adams’ point.
And yet… and yet… look at how Amash then replied to me, in the last item above. The entire point of Scott Adams’ argument was that no tariff would exist. And yet Amash chooses to wrap up the debate by saying, “…the existence of a tariff increases prices…” Again, for someone trying to convince me that he understands we’re talking about a scenario where no tariff exists, summarizing his whole position as being based on the existence of a tariff is a bit confusing.
In light of the above, I stand by my remarks on Tom’s show. After his last comment, I would no longer bet $1,000 that Amash fully grasped Scott Adams’ original point. Maybe he did, maybe he didn’t, but at this point I was once again unsure.
AND JUST TO REPEAT: I TOTALLY OPPOSE TRUMP’S THREATS AGAINST COMPANIES. I SUPPORT AMASH’S DEFENSE OF FREE TRADE.
Update: Amash read this post and then resolved all problems by explaining:
@BobMurphyEcon Ha. Twitter's character limit has made this more complicated than necessary. Tariff can exist (in law) even if not triggered.
— Justin Amash (@justinamash) December 10, 2016