There’s an old saw: If you lay every economist end to end, they still won’t reach a conclusion. Not true. Every economist except for ex-con Peter Navarro, who was recently exposed as having invented an imaginary expert to bolster his research, concluded that President Trump’s now-paused tariff policy was not just wrong but idiotic.
Trump’s embarrassing retreat last week from both global tariffs and about a quarter of the tariffs on Chinese goods (by letting “Tim Apple” and other makers of smart phones and computers off the hook) was such big news that it obscured what is likely coming next: A tariff exemption system that essentially puts a “For Sale” sign on the U.S. Government.
Lifting tariffs on iPhones and other tech imports wasn’t even the first major exemption this year. While screwing most of the world with his original “Liberation Day” tariffs, Trump quietly exempted metals and minerals that Elon Musk and other manufacturers need. The tariffs were Swiss cheese from the start, the perfect means for jaw-dropping corruption.
I grew up in Chicago politics, where if you wanted anything done — a pothole fixed, a city contract —you usually needed “clout,” a Windy City word denoting political influence.
The storied “machine” of Mayor Richard J. Daley lasted from 1955 until his death in 1976 and was continued, in much less blatant form, by his son, Mayor Richard M. Daley, from 1989 to 2011. The Daley Machine, like Tammany Hall in New York and the federal spoils system that dominated national politics through much of the 19th Century, ran on patronage, which in turn was powered by loyalty and money. It “worked” only for those who bent the knee.
To this day, many state and local governments operate on an informal spoils system called “Pay to Play.” If you want access to lucrative government contracts, you have to pony up at election time.
And, of course, Capitol Hill and state legislatures have been dominated for generations by a system of legalized bribery. In the 1830s, Senator Daniel Webster, lionized as one of our greatest statesmen, was literally on the payroll of the Bank of the United States. Corruption eased some in the 20th and 21st centuries, but we still see legislators working with lobbyists (and their PACs) to fire unnoticed “rifle shots” into the fine print of 2,000-page tax bills to benefit specific special interests.
When reporting my book on Barack Obama’s tumultuous first year as president, 2009, I remember Senator Dick Durbin fuming over the rejection of a so-called “cram down” bill that would have forced banks to renegotiate mortgages with millions of distressed homeowners, as they did with distressed businesses. These were not speculators or irresponsible borrowers but honest middle-class people victimized by the subprime mortgages that helped cause the Great Recession. Had Durbin’s bill passed, the country might have been spared the festering bitterness that brought us Trump. “The banks own this place,” Durbin told me. The following year, the Supreme Court’s infamous Citizens United decision turbo-charged congressional corruption by opening the door to hard-to-trace dark money.
But for all of the corruption, the United States has mostly thrived through its history in large part because our administrative state stayed relatively clean. Ever since President Chester A. Arthur signed the Pendleton Civil Service Reform Act of 1883, the executive branch of the federal government has been run professionally, if not always efficiently. After the civil service was established and strengthened, presidents could only place loyalists in a small number of positions —mostly as postmasters — and the job security granted to federal employees eliminated (or greatly lessened) the opportunities for boodlers, grifters, and political hacks.
That’s changed in the last three months. Instead of tapping the Government Accountability Office's (GAO) expertise, which has identified hundreds of billions of dollars in genuine savings, Trump and Elon Musk have opted for smash-and-grab. Every day, we learn of new acts of vandalism by Musk Rats more interested in installing Trump loyalists and mindlessly screwing bureaucrats (and the cancer patients and starving children in Africa their programs help) than in rooting out real waste, fraud and abuse. The line between creative disruption in Silicon Valley and mindless destruction in Washington, D.C., has been obliterated.
And now, there’s a new arena for unfathomable levels of corruption, road-tested in Trump’s first term. It’s the tariff exemption process run out of the Commerce Department and Office of the U.S. Trade Representative, a process that a 2020 Wall Street Journal editorial called “a black box.”
According to an exhaustive academic study published in the Journal of Financial and Quantitative Analysis (which I read so you don’t have to), the new Chinese tariff exemption grant process of 2018 to 2020 employed “quid pro quos” and “was not subject to effective legislative or regulatory oversight.” Worse, lobbyists could apply for exemptions or tariff waivers to help individual companies and products, not just industries. Within weeks of the new tariffs, members of Congress from both parties lobbied USTR on behalf of businesses in their districts and states.
The study of 7,015 applications for exemptions from the steel and aluminum tariffs imposed on China in Trump’s first term found that 14.6 percent were approved and that “a supposedly arm’s length government adjudication process has been at least partly co-opted to reward supporters [and] punish…the opposition.”
The results were predictable: “Our findings indicate that political connections, in the form of campaign contributions and lobbying expenditures, have an impact on the likelihood of firms being approved for trade-tariff exemptions.”
Using data from OpenSecrets.org, the report concluded in dry but deadly fashion that “contributions to Republican politicians are positively related to the probability of exemption approval. In contrast, contributions to Democrat [sic] politicians are negatively related to the probability of exemption approval.”
Buried in the data was a shocking detail. Of those products made by companies that had contributed to Democrats, 94 were granted exemptions from tariffs that affected their imports from China. With the political factors stripped out and the applications measured just on their merits, the number would have gone to 928. Punishment indeed. Even what the article called “political hedging” — giving to both parties — offered no assurances of approval on the merits. That was five years ago. With MAGA retaliation ramped up under the new regime, it’s hard to imagine any companies (or their law firms) that fsvor Democrats winning tariff waivers.
The non-China tariff exemptions evaluated by the Commerce Department in Trump's first term were also problematic. In 2019, Carol Rice, the Assistant Inspector General for Audit and Evaluation, wrote a memo to then-Commerce Secretary Wilbur Ross laying out how the system had been compromised. She wrote that “Evidence of an unofficial appeals process exists” and “Off-record discussions between interested parties and Department officials are not documented.” In other words, the Commerce Department had become a safe space for influence-peddling and extortion.
And of course it’s worse now. Recall what Trump did just days after the Inauguration. He illegally fired inspectors general throughout the government, failing even to give them the 30-days notice required by a 2008 law. This lawlessness makes it clear that he wants the “black hole” on tariff exemptions (and other key decisions) to be as dark as possible as soon as possible.
Trump’s 90-day pause on implementing his “Liberation Day” tariffs was done on the spur of the moment. But that period of time seems perfect for negotiating not just tariff deals with scores of nations but clout deals with thousands of U.S. companies. These firms will soon join Tim Cook, Mark Zuckerberg, and Elon Musk in circuitously directing, in the aggregate, hundreds of millions of dark dollars into Republican super PACs and the pockets of Trump’s family and friends.
This shakedown scheme will make Trump’s outrageous meme coin corruption look penny ante by comparison. Fighting it begins with drawing a bright line between tariffs on products (ripe for scandal) and whole industries (necessary sometimes for national security), and with a commitment by Democrats and the press to review the thousands of applications for exemptions.
And if that fails? We become Hungary. We sink into crony capitalism, which hurts everyone except the strongman and his circle. And we maim the mightiest economy the world has ever seen.
Trump is inebriated by his enormous power as POTUS unchained. He’s using tariffs like chips in a poker game where the stakes couldn’t be higher.
How depressing. Thanks for this timely reporting. I hope it is widely spread. An economist on YouTube was asked if he was more concerned with the economic disruption or the political. (Sorry, can't remember who). He didn't hesitate to identify the later as the greater danger. Once authoritarianism becomes established it is almost never ripped out. That is the lesson of the 20th and 21st century. We have very few months and years left to right the ship of state.