Dave, can you help us unpack how we got there?

Yeah, absolutely.

So I think it really all started back in early 2025 when the current administration, you know, stepped into the White House and really started kind of pushing the thread on, you know, tariffs around the world.

So everyone came in thinking, you know, okay, you know, China is going to be the target of the first tariffs.

And that's just not true.

The first tariffs that President Trump imposed under IEPA were actually against Canada and Mexico.

two of our largest trading partners, two of our closest friends, right? And the crime was apparently letting fentanyl in.

And so kind of, I mean, this is crazy, right?

What is to be done about the mandated? Because Congress has in the past put that word in there so we couldn't solve the problem.

Right.

So the US Congress has a very complicated budget process, not, again, unlike a household, right? We budget our expenses every year and check it every now and then.

The problem with the federal government's budget is that there's a distinction between mandatory spending and discretionary spending.

Discretionary spending is, as the name implies, spending that can only be done once Congress decides to do it, you know, every year.

Mandatory spending is spending that happens all the time.

It happens unless Congress acts to not spend the money.

But Social Security, and they won't do it, David.

Is Canada ready to play that card?

You know, John, it, it really seems like Canada is becoming more and more ready to play that card.

Now, look, Prime Minister Carney's approval ratings, despite the fact that he's standing up to President Trump, and despite the fact that doing so is actually going to harm the livelihoods of Canadians.

Because here's the deal: Canada does trade a lot with the United States, and to reduce that trade flow will make them poorer.

And so here's the interesting thing: Mark Carney's approval ratings in Canada are going up, despite the fact that he's standing up to Trump and impoverishing, to an extent, his citizens.

President Trump's approval ratings are going down, despite all the rhetoric that's coming out.

So what that tells me, John, is that pride and respect are worth something.

Does Canada anticipate this enmity will continue, or that it will disappear that day like the fog over melting snow?

More of this tonight.

You know, John, it, it really seems like Canada is becoming more and more ready to play that card.

Now, look, Prime Minister Carney's approval ratings, despite the fact that he's standing up to President Trump, and despite the fact that doing so is actually going to harm the livelihoods of Canadians.

Because here's the deal: Canada does trade a lot with the United States, and to reduce that trade flow will make them poorer.

And so here's the interesting thing: Mark Carney's approval ratings in Canada are going up, despite the fact that he's standing up to Trump and impoverishing, to an extent, his citizens.

President Trump's approval ratings are going down, despite all the rhetoric that's coming out.

So what that tells me, John, is that pride and respect are worth something, and-

More of this tonight.

Yeah, so tariffs and other excise taxes and duties were the primary source of revenue for the federal government basically up until the rise of the income tax.

And the reason for this is not because tariffs are effect- ef- par- particularly effective at this, it's simply because it was the only real means that the federal government at the time had available to actually raise revenue.

They didn't have the manpower to send people around to survey incomes or sales, so income taxes, while also con- unconstitutional at the time, would have been prohibitively expensive to actually enforce.

They didn't have the manpower to run around and, and collect sales data, so a sales tax would have been difficult.

Now, we did see some evidence of, you know, them hiring tax collectors, but these people were historically a little bit less than honest, and so a newly formed nation trying to build up its reputation on both the domestic and world stage couldn't afford to be seen as dishonest or have dishonest people collecting revenues.

And so this is where tariffs come in.

But as you're reading of the, your colleagues these days, are they reading the history of Reagan in the ver- or is that ancient history to them?

So I think it's ancient history to them, and, and frankly, I think they're engaged in a campaign of trying to redefine what it is that Reagan did.

You know, the truth of the matter is quite simple.

Reagan believed in the American worker in a way that no president since ever has.

Reagan believed that if we lowered the barriers to trade and made it easier for us to export to the rest of the world, that the entire world would benefit from the greatness that is the American worker, which even today, is still the envy of the world.

We are the single most productive nation, pound for pound, on the planet.

There is no one that c- can hold a candle to us.Trump, by contrast, seems to think that the American worker is incapable of keeping up with the rest of the world unless he protects them from the ne'er-do-wells in other countries.

Dave, is that something that's talked about, that Ronald Reagan here today would not recognize the Republican Party?

What is to be done with that? Is there a practical way to answer it?

Sure.

So Adam Smith's warning is, I think, very prescient for today.

He's really saying that if you're not going to be able to secure the lowering of trade barriers through these retaliatory measures, then you should pursue something else.

Now, in the case of Canada and Mexico, whose economies are very dependent on U.S. imports and exports, Tariffs and the threat of trade restrictions can, and as we've seen, have worked to some extent.

There is long-run potential harm here.

Against a country or an organization like the EU, which has a much more diversified set of international trade partners than Canada and Mexico do, tariff policies are much less likely to work.

Please continue.

Did it work, charging tariffs on goods coming into the U.S.?

Yeah, so if we view tariffs as sort of a sales tax, if you will, and in that they are not targeted toward anything, they're relatively low, they can raise revenue.

But what's important to note is that every time we hear this story from pro-tariff proponents, They'll point out that up until about 1913, the U.S. relied very heavily on revenues from tariffs.

What they'll always neglect to point out, though, is that the U.S. government, up until about 1913, did remarkably few things.

So, Social Security, the Department of Education, Medicare, Medicaid, these were all decades after the income tax.

So, They're right that the U.S. government did rely on tariff revenue.

But when their spending was so low, was such a small component of GDP, it's remarkably easy to fund a government that does remarkably few things.

How does it do that, David?