I may be biased because I’m a public finance economist, but I’ve always viewed America’s convoluted tax code as the major source of political corruption in Washington.
And lobbyists are the intermediaries that grease the wheels of this sleazy system
But I may have to reassess my views because Trump’s protectionism is creating a feeding frenzy for Washington insiders. I’ll start by sharing the most accurate – but also easiest – prediction ever made.
Why was this a safe and easy prediction?
Because David probably is aware of what’s happened in the past. For instance, consider these excerpts from Judge Glock’s article in the Free Press.
Since tariffs can be a life-or-death matter for many companies, lobbying around them takes on a life-or-death quality. Companies impacted by tariffs can lobby for “exclusions” that allow them to import at reduced cost. The Commerce Department keeps a handy list of over 425,000 company requests just for steel and aluminum tariff exclusions in the last five years. More than 200,000 such exclusions have been granted. It is not surprising that political favoritism can creep into tariff exclusions. One study found that donations to the president’s party made a company significantly more likely to get an exclusion. Those donations paid off because companies that won exclusions together gained billions of dollars in market value. …“For an administration that claims to be ‘draining the swamp,’ it’s certainly been a bonanza for trade lawyers and lobbyists,” Clark Packard at the R Street Institute, a right-leaning think tank, told the Journal.
Also ponder these passages from Fareed Zakaria’s column in the Washington Post.
…tariff negotiations will inevitably result in a cascade of corruption. The American economy is being transformed from the leading free market in the world to the leading example of crony capitalism. …The more complicated the taxes, rules and regulations, the greater the inefficiency — as studies show in country after country… But more significant, the greater the complexity, the greater the corruption. With tariffs come tariff waivers, often granted by the hundreds to specific industries, companies, even products. …politicians’ instincts usually favor their contributors, which then encourages pervasive corruption. …As Timothy Carney from the conservative think tank AEI notes, “Trump’s first election created a trade lobbying boom” — from 921 lobbying clients with lobbyists working on trade to an apex of 1,419 by 2019.With the highest tariffs in the industrialized world, the American bazaar is now open. Countries and companies will descend on Washington to cut deals and gain carve-outs, exemptions and special terms.
Here’s some of what Dominic Pino wrote for National Review.
…lobbying isn’t an unfortunate side effect of protectionism. It’s an integral part. And sure enough, the new “golden age” of protectionism that the Trump administration wants to inaugurate has spawned new lobbyists to take advantage of it. “In the first quarter of 2025, 162 new lobbying registrations were filed that listed trade or tariffs among their concerns,” Tim Carney writes at the Washington Examiner. “That’s more than twice as much as last year and a 48% increase over former President Joe Biden’s first year.” …Protectionism is a full-employment program for Washington trade attorneys… Lobbying is one of the ways businesses waste money under protectionism. The firm with a competitive advantage is no longer the firm that makes the best products and markets them most effectively. It’s the firm that’s best connected to government.
Tim Carney was quoted in the two previous articles, so let’s look at some excerpts from what he wrote for the American Enterprise Institute.
If President Donald Trump’s goal was to stimulate the economy of Washington, D.C., or to maximize the number of CEOs, lobbyists, and foreign leaders who come begging for his favor, he could hardly have done better than creating a massive tariff regime. Trump’s “reciprocal” tariffs on every country were made to be negotiated. The president can change them in an instant with a single flick of his pen. …Trump’s tariffs increased his leverage to extract favors from businesses, rich people, or foreign leaders. …By imposing tariffs and threatening to increase them, Trump has forced major corporations to hire his friends, who are also his fundraisers. …Raising taxes, increasing government aid, and making everything more complex might not sound like conservatism. However, it is the optimal course if your goal is to increase the president’s importance and thus incentivize the rich and powerful to come knocking on the White House’s door.
Next, here are some passages from Joel Griffith’s column in the Washington Examiner.
Although President Donald Trump popularized calls to “drain the swamp,” his favorite policy tool, tariffs, has actually enlarged it and generated a massive financial windfall for K Street lobbyists while hardworking American families pick up the tab. …With a government as intrusively meddlesome as ours, policies and rules out of Washington, rather than the people through a free market, often determine winners and losers across the country. …this opaque complexity is a boon for Washington’s many lobbying shops. Remember, trade lobbyists swelled by more than 50% during Trump’s first term. With even larger and more arbitrary tariffs in play for Trump’s second term, K Street will likely load up on even more lobbyists to secure its own tariff exemptions from the administration while hoping its competitors are caught in the net. …Special treatment enriches a select few at the expense of other businesses and American families.
I’ll close with a tweet from Jonathan Chait that summarizes some compelling research.
The bottom line is that big government is a recipe for big corruption and Trump’s protectionism is a godsend for the swamp.
Yes, I’m an economist and I like to focus on the economic damage of protectionism, but I can’t overlook the moral damage and blatant unfairness of a system that allows big companies and campaign contributors to avoid tariffs while small businesses and consumers get pillaged.
Dan Mitchell is co-founder of the Center for Freedom and Prosperity and Chairman of the Board. He is an expert in international tax competition and supply-side tax policy.
