I’ve Heard That Song Before

As the philosopher Yogi Berra once said, “It’s tough to make predictions, especially about the future.”

A year ago, I thought I knew with relative certainty what the most important topic in the American business community would be in 2025. Regardless of which party won the presidential election, it seemed obvious to me that, barring a nuclear holocaust, a global pandemic, a giant asteroid or an alien landing, the news would be dominated by the dramatic expansion of artificial intelligence.

I even wrote a column about it, in which I tried to make the point that many of us were taking a too narrow view of AI. By focusing on the more obvious functions that it could assume, and the resulting impact on employment, we were missing the forest for the trees.

If you’ve been in business a long time, like 40 years or more, you’ve seen the effect of the personal computer, the cell phone and the internet on commerce. All of those things increased productivity in ways that most of us could never have imagined.

Productivity is a two-edged sword. On the bright side, it allows companies to improve products and services, increase salaries and become more profitable. On the dark side, it often means the termination of employees.

I don’t know how the numbers have shaken out in your company, but I can tell you what the past decade has been like in magazine publishing. We have produced nearly twice as much content with a staff reduced by around 35 percent. That reduction was accomplished mostly by attrition, set against a job market that would absorb just about anybody.

Futurists and tech visionaries are in pretty broad agreement, however, that the advent of AI is more significant than all those other advancements combined. As I mentioned, looking at it in terms of employment alone is missing the point, but it’s hard to avoid. While computers reduced the number of employees in most disciplines, AI will eliminate many fields completely.

Somewhat ironically, one of the first groups to be affected might be the “coders,” or what we used to call computer programmers. Writing code happens to be a function at which AI systems are particularly well-suited, and they are already starting to take it over.

In terms of the broad spectrum of human job categories, the question is not whether AI will be able to handle a given profession, but when. Scientists are using the term “AGI,” or artificial generalized intelligence, to reference the point at which an “electronic brain” equals our own.

Of course, computers already far exceed us in things like memory capacity and processing speed, but they are about to match us in areas such as understanding, versatility and non-specific problem solving. Some experts think that AGI could be achieved as early as this year, but the consensus is more like two or three years. Either way, it’s pretty soon.

After that, the machines will just keep getting smarter, moving into a realm we are simply calling “super intelligence.” God knows what they’ll think of us.

In the meantime, you would think that the whole topic of AI would be driving the financial headlines, particularly given the fact that our largest tech companies are pouring hundreds of billions into the race to control key elements of it. Remarkably, though, it is not.

It wasn’t pushed off the front page by UFO sightings, although New Jersey gave it a good shot. Could it have been supplanted by some other scientific advancement such as quantum computing, nuclear fusion or a remedy for climate change? Don’t be silly.

Unlike most other earth-shaking events, the dominant topic for 2025 can easily be summed up in a single word: tariffs. Never before has one word, lodged in the head of one person, caused so much financial chaos around the world.

A number of years ago, I actually wrote a column about tariffs, or more precisely a column about taxation that touched on tariffs. People are often surprised when they discover that there were no income taxes prior to 1913, and mostly have no idea how the government was financed without them.

The answer is tariffs, which were the primary source of revenue for the federal government throughout the entire 19th century. The power to raise them was granted to Congress by the Constitution in 1789, resulting in the first legislation passed by Congress and signed into law by George Washington.

The purpose of the first tariffs was three-fold. First and foremost, the government needed cash for immediate operating expenses. Second, we had a substantial national debt to deal with because the Revolution had been fought with borrowed money.

The third reason is kind of surprising to me because I think of our original nation as an agrarian, self-reliant place that didn’t want to have anything to do with the old monarchies of Europe. In fact, the founders were concerned about the growth of American industrialism and saw tariffs as a means of keeping European manufacturers from dumping boatloads of cheap product in the United States. Sound familiar?

At any rate, the tariff system worked pretty well until the country ran into the enormous expense of fighting the Civil War. For the first time, the U.S. levied an income tax, but it was discontinued a few years after the war on the grounds that it was unconstitutional. Unlike tariffs, income taxes were not mentioned in our founding documents.

Here’s the thing. Reformers of the late 19th and early 20th centuries liked the income tax better because it was “progressive,” as people with higher income paid a higher percentage rate. Tariffs operate pretty much like a sales tax, under which the amount you pay is determined by how much stuff you buy, regardless of who you are.

By the time the 16th Amendment to the Constitution was passed by Congress, signed by the president and ratified by the states, decades had gone by and Americans did not start paying income taxes until 1913. It seems as though we have been arguing about them ever since.

Nobody asked me to weigh in on that debate, but I will anyway. It seems to me that the idea of financing the U.S. government largely through tariffs is an idea whose time has come and gone. For one thing, the government is way bigger (way, way bigger) than it was in 1789.

For another, international trade accounts for only about 15 percent of our economy. I don’t see how it can yield enough revenue to pay our bills, especially when you consider that taxing something generally means that you get less of it.

Some sort of broad-based consumption tax, similar to what most of Europe uses, would be fair, flexible and simple to operate. Or we could keep on arguing.