Leaving aside the many other disastrous implications of the pork-laden “stimulus” bill, here are some thoughts about its impact on international trade. For all practical purposes there is no difference between the Smoot-Hawley tariff bill of 1930 and the “Buy American” provisions in the $819 billion spending bill that passed the House Wednesday.
Smoot-Hawley was the catalyst for a pandemic of tit-for-tat protectionism around the world, which helped deepen and prolong the global depression in the 1930s. “Buy American” provisions will no doubt inspire similar trade barriers abroad and will have the same effect of reducing global trade—and therefore prospects for economic recovery. It is not unreasonable to say that U.S. policymakers are on the verge of taking us down that same disastrous path.
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My timid support for this bill just shrank to zero. If I were in Congress, I would have voted against the stimulus based on this alone. Why do both of this country's political parties have to be filled with such ignorant hacks? Oh, yeah, because that's the nature of party politics. There has to be a better way to run a government--there just has to be.
Update:
Cato @ Liberty keeps at it:
Evidently, the once-and-for-always politically savvy U.S. steel industry has not lost its touch. Like profit-maximizing firms in any industry, America’s steel producers have devoted large chunks of their profits (which have been enormous and record-setting over the past five years, up until 4Q08) to their highest yielding input. For Big Steel, that input isn’t human capital or physical capital, but the far more productive enterprise of lobbying for taxpayer largesse. And this will be a pretty big payday for these modern-day robber barons.
But, it is absolutely stunning—even to those who have watched this industry impose its will over U.S. trade policy at great expense to other industries time and time again—that nobody in Congress has blown a whistle on this outrageous scheme. The incredibly profitable U.S. steel industry (which has fallen on harder times in the past several months like everyone else), consists of fewer than 100,000 workers. It is the ONLY beneficiary of this hair-brained provision that will undermine any incentive the industry has to remain efficient, and promises to spark reprisals and crush export sales for industries that employ millions of workers. That doesn’t strike me as a recipe for U.S. job growth.
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4 comments:
"Oh, yeah, because that's the nature of party politics."
By George, I think you may be onto something there old chap.
"Smoot-Hawley was the catalyst for a pandemic of tit-for-tat protectionism around the world, which helped deepen and prolong the global depression in the 1930s."
Out of curiosity: I'm sure you have heard the extensive discussion lately about FDR's New Deal, and whether in hindsight it actually served to end or prolong the Great Depression. What is your understanding? Do you, like Ikenson, believe government policy prolonged the era?
And which industries are most benefited by a free and open international trade environment ... ag, you say? And which industries could most be hurt by international retaliation? Ag, again?
So would Iowa be particularly screwed if this stimulus bill gets passed?
taco: Yes, what I've read about the New Deal has left me convinced that it lengthened rather than shortened the Great Depression. However, that was largely due to the erratic policy changes and bizarre meddling in all sorts of markets that FDR was engaging in. The make-work programs may have actually been good for the country in terms of boosting public confidence and staving off popular revolt even though they weren't economically efficient.
David: Sort of. I also favor dropping all American agricultural subsidies. Though I do think that would also be best for Iowa in the long-run, there are plenty of entrenched interests that would fight tooth and nail against such a proposal.
much like unions - better off without them, but they would fight tooth and nail to stay around. The UAW is the popular whipping boy, but the NEA is an even better example of a union that hurts, not helps, all parties.
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