Making The Case For Trump’s Tariffs

BIANNA GOLODRYGA, ANCHOR: Well, now, from tariffs to tax cuts, President-Elect Donald Trump promises he’ll revitalize the United States, bringing in a new golden age. Economist Oren Cass runs the conservative think tank American Compass, which aims to emphasize the importance of family, community, and industry to the nation’s prosperity and liberty. He joins Walter Isaacson to discuss changing Republican fiscal policies and what he thinks of Trump’s plans.

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WALTER ISAACSON, CO-HOST, AMANPOUR AND CO.: Thank you, Bianna. And, Oren Cass, welcome to the show.

OREN CASS, FOUNDER AND CHIEF ECONOMIST, AMERICAN COMPASS: Oh, thanks so much for having me.

ISAACSON: You were an adviser to Mitt Romney in 2012, but after that election, you helped start a group called American Compass. And it really helped shift the Republican Party, and your own thinking shifted, I think, away from just a growth-oriented economy to one that was more populous. Tell me if that’s right, and explain why and how that happened.

CASS: It’s mostly right. I should say I think growth is still hugely important, right? I don’t want to go live in a log cabin in the woods, but I think the way that we had focused on growth was just sort of growth for its own sake and assumed that all growth was good. And, you know, I always refer to the — we hear so much the economic pie metaphor, right? We’re going to grow the pie and then everyone can have more pie. And we really didn’t pay attention to what was in the pie or who got to help bake it. If — maybe take the metaphor too far. But you know, people don’t just consume stuff, they — it’s very important. Their identities as workers. It’s very important that we have an economy that still make stuff, that we don’t just become dependent on other countries. And I think, you know, really, over the last decade and since 2012, we saw the cost of not caring about those things. And so, you know, my focus, American Compass’ focus, increasingly, the focus of conservatives is, yes, we want growth but what kind of growth is it? How do we make sure it’s a growth that really supports workers and helps them support families?

ISAACSON: Tariffs seem to be part part of the center of the argument of this new conservative populism. But in some ways, conservatism and Republicans have generally been for free trade. What changed?

CASS: Well, it’s funny. It depends what time frame you look at. Republicans were the party of tariffs for most of Republican history. Abraham Lincoln was proudly a tariff man. McKinley, huge tariff man, Teddy Roosevelt, very skeptical of free trade. You know, Eisenhower has a whole chapter — a section in his memoir where he talks about how, yes, we started to open up free trade after World War II, but always with an eye, first and foremost, toward protecting American workers. Even Ronald Reagan, when it when he came to Japan, especially, he was so protectionist that the libertarian Cato Institute called him the most protectionist president since Herbert Hoover. And so, it’s really a post- Cold War phenomenon that you had a number of folks on the right of center really, who I would say, are libertarian and kind of market fundamentalists, more so than conservatives, who joined with a lot of folks on the left of center. A lot of economists, you know, the Larry Summers of the world, who is Bill Clinton’s treasury secretary to all say, free trade is the answer, and free trade is going to somehow make everybody better off. And the reality is that hasn’t worked.

ISAACSON: We’ve just gone through an election in which inflation was this huge issue. Aren’t you worried that tariffs could raise the price of American goods?

CASS: Well, tariffs will definitely have some effect on prices, especially in the short run. That’s in part the point, right, is to make it more attractive to buy things made here in America. I think the right way to think about it is with reference to the past, to think about where we were in the year 2000 when people were saying we should get rid of our tariffs, we should do free trade with China, that will make people better off. And we have to ask ourselves, did it make people better off? Yes, it made some things cheaper, but I think the overwhelming majority of Americans recognized that it was a bad tradeoff. And so, what we’re talking about now is making the other tradeoff instead, accepting that the cheapest thing sometimes made with slave labor subsidized by a communist party isn’t actually necessarily. It’s certainly not free market to be buying that, and it doesn’t actually serve families well in the long run. It doesn’t serve communities well. And so, nothing is free there. There are tradeoffs in all of our policy decisions, but if we believe we made the tradeoff wrong when we leaned all in on free trade, then we should actually have a lot of confidence that will be getting the tradeoff right when we go the other way instead.

ISAACSON: Well, what’s the point of doing that? Is it to bring back manufacturing jobs? Is it to have much more of a made in America program?

CASS: I think the fundamental goal is to bring our economy back into balance. You know, high levels of trade could be a great thing if it was actually trade, right? And that was the story that was told to us. There are things that other people can make more efficiently for us, and we’ll make things more efficiently for them, and everyone will be better off. And if we can do that, that would be great. But what’s happened instead is things we used to make now get made somewhere else, and there isn’t anything else that we make instead. And so, the goal —

ISAACSON: But isn’t that on us? Isn’t that a problem with our own manufacturing?

CASS: No, it’s not. Because the reason that everything moved offshore isn’t because there’s anything wrong with American workers. In fact, American workers are among the most productive in the world. It’s because foreign countries weren’t playing by the rules. China was aggressively subsidizing, you know, paying for the cost of most of went into making things there. Helping companies exploit workers there. You know, another good example, even in very high technology products, think semiconductors. We invented semiconductors. We were the world leader in semiconductors. Why does Taiwan now make the world’s most advanced semiconductors? Not because there’s anything special about that particular rocky outcropping off the coast of China, it’s because Taiwan’s government plowed all of the money into saying, come build the semiconductors here. And so, the model did not work because economists didn’t really think very hard about how the people — how the countries were behaving. And so, I think if we can get back to a situation where there actually is a level playing field, we can get back to the kind of free market that certainly I want to have. And that does typically work for people, which is one where, yes, it would be great if we’re buying things from other countries, but they also need to be buying things from us, and that’s what’s going to create better jobs and stronger communities in the United States, and it’s just going to create, frankly, more resilience. I think one thing we’ve learned in this country, particularly through the pandemic, was that if you just rely on others to make stuff for you, you end up in a very vulnerable position.

ISAACSON: Now, you have a whole range of things that could be made in America if you put a whole lot of tariffs on, ranging from semiconductors, which you just mentioned, to say, down in Louisiana, Mississippi, where there used to be a lot of textiles and blue jeans being made. Do you think it should be across the board, or are there certain things that you think we should put tariffs on and specialize on in America?

CASS: Well, the nice thing about a tariff across the board is it actually does, in a sense, let the market decide. So, let’s say we put a 10 percent tariff across the board. Anything that you can make in the U.S. for within 10 percent of the cost of making it somewhere else is something you’ll think about bringing back to the U.S. And if we do that, we don’t have to have somebody in government deciding. oh, that’s t-shirts, oh, no, that’s chemicals. Oh, no, that’s semiconductors. It’s actually much more consistent with a free market to say, look, making things in America matters. So, we’re going to put a thumb on the scale for making more things in America. But in terms of what gets made in America, who makes the investments, where the stuff gets built, I would much rather leave that up to the market. And then to your point about, you know, semiconductors, if there are particular things you really care about making here, for defense and so forth, then you can have a special program to support that. And that’s what we have, the CHIPS Act, which is now supporting all of these semiconductor plants in the United States, is a very focused support because I think rightly people recognize that chips are special. But we don’t want to be going and picking and choosing every special thing. We want to have a broad policy that then lets people in the market figure out what makes the most sense to build here.

ISAACSON: Well, you just talked about the CHIPS Act, which was, in some ways, an industrial policy along the lines of some of the things you recommended, to get manufacturing back. Do you think that the Trump administration should keep the CHIPS Act intact?

CASS: Yes, absolutely. You know, I’ve been — American Compass has been very strong supporters of the CHIPS Act. It was bipartisan legislation. It had significant support from Republicans in the Senate. I’d actually started out several years earlier as a Republican proposal in the context of the National Defense Act. And so, I think so far, the indications are that it’s been very successful. The chips — you know, the plants are getting built. They’re starting to come online and perform very well. And so, I think that’s the place where we’re getting an excellent return on investment.

ISAACSON: President Trump’s tax cuts from before are set to expire next year, and I can’t quite tell from reading you to the extent that you also subscribe to what has generally been the Republican orthodoxy, which is cut taxes, cut taxes, cut taxes.

CASS: Well, I don’t typically subscribe to the kind of market fundamentalist view that we’ve had in the past few decades on the right, that you should just always — just cut taxes more, no matter what. And again, that’s a relatively recent thing. You know, Ronald Reagan, after his initial tax cut, left the government with less revenue than he expected. Reagan raised taxes five times to close the budget deficit. And so, I think all things equal, of course, we should want taxes to be as low as they can be. No one likes paying taxes, but we do have to pay — we do have to raise enough taxes to pay for the government that we want to have. And I think what we’ve seen in recent years is that, you know, there was this theory, well, you cut taxes and they pay for themselves or you cut taxes, and that just creates so much growth that we’re all better off anyway, and that just hasn’t come true.

ISAACSON: When you created American Compass, you said part of its goal was to be to figure out what the post-Trump right of center is going to be. Well, we ended up having not post-Trump, but another Trump term. To what extent is he a good messenger or a good leader for this movement? And to what extent some of what you’re proposing conflict with what Donald Trump believes?

CASS: Well, I think we’ve seen that, you know, Trump has done an extraordinary service to the Republican Party and the conservative movement and as a result to the nation in disrupting and rejecting a lot of the kind of old orthodoxy that was just not serving anybody well. And he’s brought a lot of new thinking, some of which I agree with, some of which I don’t, on a whole range of issues. And it has really created the space for conservatives to stop just, you know, flipping through their 1980 playbook and imagine that it’s always Ronald Reagan’s first term and instead say, look, it’s the 2020s. We have a different set of problems today, and we’re going to have to apply conservative principles to solving those problems. And so, I think there are some places where he’s on exactly the right track. You know, tariffs and trade policy is obviously one of those areas. There are other areas where I would disagree with him, but I think the direction is a very —

ISAACSON: Like what?

CASS: You know, labor policy is an area where, you know, I tend to think we need to focus much more on worker power and actually be concerned with workers having leverage to negotiate against employers. I think his view tends to be much more in the traditional Republican model or mold that says, you know, we want sort of businesses to have freedom of movement and if they do what’s best for profits, then that will end up working out for workers as well. So, there are lots of places where I would say we’re kind of in the middle of a transition. But if I look at the direction we’re going, look at the choice of someone like J. D. Vance as his vice president, now, Marco Rubio is his secretary of state, I think we are clearly heading in a direction for a much healthier and more genuinely conservative Republican Party that is going to be serving the interests of workers and their families. And I think what we see in the election results from this year is that the American people are noticing that, too.

ISAACSON: One of the other things you’ve pushed for, and this aligns with what Trump wants even more so than you do, which is stopping immigration, having e-verify mass deportations of immigrants who are here without documentation or illegally. To what extent is that, to you, a way to help America’s workers? And wouldn’t that fundamentally gut large parts of the American economy, from agriculture to construction?

CASS: Well, I should say, first of all, you know, to be clear about what I want. First of all, I want to enforce the law. I think in any topic that we are talking about, basic law and order and enforcing the laws we have has to be our starting point. And that’s like, well, I don’t want to stop immigration, but I want to have an immigration policy that considers the labor market effects of immigration. When we have a lot of workers in America, American citizens, people who are here legally, who are working in very low wage jobs, really struggling to make ends meet, the idea of bringing in millions more workers to compete with them I think is absurd and does an extraordinary disservice to them. And instead, what I’d like to see is to make a clear commitment, and this goes back to that basic point about capitalism, that the way to be successful in the U.S., if you are an employer, if you’re running a business, is by creating businesses that have good productive jobs that Americans can and will do and allow them to support families. And every time businesses are facing that challenge, they set their hair on fire and run around screaming labor shortage, labor shortage, please, we need more cheap labor instead. And the answer has to be to say no, you don’t get more labor, cheap labor, you get the enjoyment of solving this challenge, which is make your workforce more productive. That is the secret sauce that brings prosperity to everybody. And it’s what we have to demand of our economy instead of trying to earn a lot of money without doing that.

ISAACSON: Let me read you something you wrote. You said, if Mr. Trump brings business executives into the government to improve customer service and create greater space for private sector innovation, he will earn well deserved praise. Then you have a sort of but, comma, if he unleashes them, as they seem to be asking, to shut down agencies, eliminate programs on which people can rely, and role play scenes from Ayn Rand novels, even some of the savvier politicians in his own party will turn against him. That phrase role play scenes from Ayn Rand novels, it almost evokes Elon Musk or maybe Vivek Ramaswamy. Are you worried about what they’re doing?

CASS: Well, you know, my concern is with the understanding that you see it a lot of segments of the Republican Party still that what the American people want is to just sort of slash and burn government and get rid of all of these programs. And what we find whenever we do research on what Americans actually want is they’re very frustrated with government that doesn’t work well, that doesn’t work efficiently, but there’s almost nothing that they want government to do less of. When you actually go through the major things that government does, the kinds of support that government provides, even when you’re just asking conservative Republicans, even when you’re talking about things like helping people afford health insurance, there’s an overwhelming preference for saying the government should either still doing the same or, in fact, doing more. Now, obviously, that has to be balanced against what we can afford. And there are situations, if we’re going to get our budget back in control, we are going to have to find some ways to reduce spending. But the idea that there are huge areas of the government that people are just hoping we can get rid of, that is a very narrow unpopular approach. And I think, unfortunately, we have a lot of leaders, some political, but especially from the business community who don’t necessarily understand that. And so, I think there’s tremendous opportunity for government deficiency, that would be a wonderful thing to pursue. But it’s very important to stay focused on the idea that what successful — well, you want to call it populism or just good conservative government looks like isn’t getting rid of government, it’s actually making it work better for people.

ISAACSON: Oren Cass, thank you so much for joining us. Appreciate it.

CASS: This was wonderful. Thank you.