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Volume CXXXIII, Number 19 |
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A fit of pique
GREG DeCOSTER
FACULTY CONTRIBUTOR
In early March, President Bush chose to impose tariffs (i.e. taxes) of
up to 30% on steel imports.
Dear President Bush (and Lawrence Lindsey, Class of 1976, since you are
far more likely to see this):
As an economist with strong libertarian instincts, I find the social
conservative component of the Republican Party appalling. Yet, I have
provided my vote (and a bit of money) exclusively to the Republican Party
since 1984. Many loyal Republicans would be comfortable making a similar
statement.
Why do people with libertarian instincts support the Republican Party?
Because of its, generally, pro-market orientation. It's a trade-off. Given
the low probability that truly oppressive social policy will ever be politically
successful, the enormous welfare benefits associated with market based
economic policies easily outweigh the costs imposed by the social conservatism
of the Party. But, at times, it can be a close call.
So what does your administration choose to do? Protect the steel industry.
An economic policy decision that is astoundingly stupid, from an economic
perspective. To quote the Economist, "This steel-tariff plan,
it is important to remember, lies well outside the ordinary run of bad
economic policy: it is so wrong it makes other kinds of wealth-destroying
intervention feel inadequate." This simply isn't the least bit ambiguous.
Perhaps (although probably not) a few steel industry jobs may be saved
at a number of companies; at a cost of millions of dollars per job? Of
course, your tariffs will cost the economy far more jobs than are saved.
All the industries that use steel have effectively had their taxes raised
by your low tax administration. Result: job loss. Consumers will now have
to pay more for cars, washing machines, etc., and have, thus, effectively
had their taxes raised. This will necessitate reduced purchases across
a broad array of goods. Result: job loss. Most perversely, there will
be more jobs lost at the many relatively efficient steel producers, whose
business involves producing finished steel products using IMPORTED steel
which must now be purchased at a higher price thanks to you, than will
be saved by your tariffs. And now we learn that rather than being flooded
by cheap imports, the U.S. actually is facing a troubling shortage of
steel.
If all this isn't enough, consider the impact of your tariff decision
on the worldwide movement toward free trade. You purport to understand
the enormous benefits of the free trade. But you choose to provide every
protectionist in the world with a ready excuse for resisting the lowering
of trade barriers. Does this make any sense?
Have you noticed that economic growth in the U.S. is no longer based
on low skill manufacturing, but rather on growth in knowledge based industries?
I feel certain your economic advisors explained that such industries rely
on large markets and would benefit immensely from expanded trade. Did
you listen? I wonder if your wise political advisor(s) pointed out that
most of those libertarian types who hold their noses and vote Republican
are employed in the knowledge based industries that will suffer from the
negative trade consequences of your tariffs? I suspect not.
Your decision has cost this country significant economic growth. You have
made us all poorer.
And why?
To help the steel workers, that is, to show your compassion? Please.
It would be far cheaper to write checks of a size sufficient to permit
each of those who would lose their jobs absent tariffs to retire. How
about the argument that "unfair" trade can't be permitted? Hmmm.
They sell us steel too cheap; this is a problem? Please. Okay, so what's
left? Much to my chagrin, all I can find is some votes in the rust belt.
Many of us were unhappy to have a president who seemed to make policy
based on crass political calculation. However, even crass, calculating
President Clinton couldn't stomach steel tariffs.
So let's see. I vote Republican because of the Party's market orientation.
My Republican president adopts anti-market policies-policies a President
Gore would never have chosen. So I now have the worst of all possible
worlds: repugnant social conservatism and anti-market economic policy.
Much appreciated.
My advice? Contemplate the prospects of a politician abandoned by the
thinking component of his political base.
Gore '04!