Mr. Trump, Who Really Pays for This Wall?

Mar 6, 2016

To a successful businessman, words must mean what they mean, especially when they are describing complex financial and numerical matters. That’s why Mr. Trump’s endlessly-repeated assertion, “… and Mexico will pay for the wall,” deserves examination.  

Just how would Mr. Trump make Mexico pay? His suggestions run the gamut, including:

  • The implausible – Mexico writes us a check (wildly implausible, if you go by the colorful responses from current and past Mexican leaders)
  • The impractical – impounding remittances (i.e., money that immigrants send back to their home countries) derived from illegal wages
  • The trivial – reducing U.S. foreign aid to Mexico (about $500MM annually, compared to a wall cost of $15B or more plus annual upkeep), increasing visa and entrance card fees.

The most realistic tools left – assuming they get past NAFTA and our legislative and policymaking processes – are tariffs, duties, and other costs imposed on goods imported from Mexico. That being the case, here are the scenarios Mr. Trump would leave us with:

  1. We continue to buy from Mexico, in spite of the tariffs/duties. As always happens with these tactics, producers pass those costs on to the buyers. So Uncle Sam is paying for the wall, while U.S. buyers are reimbursing Mexican producers for most or all of the tariffs Uncle Sam collects.
  2. We buy from U.S. producers instead. U.S. consumers pay more for the goods, to producers who were higher-cost providers until the tariffs were imposed. So we’re paying for the wall, and the additional amount U.S. buyers pay is a sort of tax in order to “buy American.”
  3. We buy from other foreign producers instead. Same as (2) above, except the higher-cost producers we buy from are Chinese, or German, or you name it. So we’re paying for the wall, and U.S. buyers pay a tax in order to “not buy Mexican.”

So any way you slice it, Mexico isn’t paying for the wall – WE are, plus a little extra.

I’m not expressing an opinion on the wall itself. However, we are a sovereign nation, responsible for our own security and borders. So if we do choose to build a wall, why make an issue out of who pays for it?

As Yogi Berra might have said, it sounds good on paper. But I’ll ask again: Who’s really paying for this wall? Am I missing something?

“Painting with Numbers” is my effort to get people to focus on making numbers understandable.  I welcome your feedback and your favorite examples.  Follow me on twitter at @RandallBolten.

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