Economic stupidity

Posted: May 01, 2003 12:00 AM

Imagine that you and I are in a rowboat. I commit the stupid act of shooting a hole in my end of the boat. Would it be intelligent for you to respond by shooting a hole in your end of the boat?

Or, imagine I were a politician and told you that the Russian, Chinese, Korean, Brazilian and German governments were ripping off their citizens by, on the one hand, taxing them to provide subsidies to their domestic steel industries and, on the other, erecting tariff barriers forcing them to pay higher prices for products made with or containing steel. Would you deem it responsible or intelligent of me to propose retaliatory tariff policy, whereby Americans are ripped off until Russia, China, Korea, Brazilian and German governments stop ripping off their citizens?

Both of these scenarios are applicable to the Bush administration's 30 percent steel tariffs imposed last year. Those tariffs caused the domestic price for some steel products, such as hot-rolled steel, to rise by as much as 40 percent. The clear beneficiaries of the Bush steel tariffs were steel industry executives, stockholders and the approximately 1,700 steelworker jobs that were saved.

Tariff policy beneficiaries are always visible, but its victims are mostly invisible. Politicians love this. The reason is simple: The beneficiaries know for whom to cast their ballots, and the victims don't know whom to blame for their calamity.

According to a study by the Institute for International Economics, saving those 1,700 jobs in the steel industry cost American consumers $800,000 in the form of higher prices for each steelworker job saved. That's just the monetary side of the picture. According to a study commissioned by the Consuming Industries Trade Action Association, higher steel prices have caused at least 4,500 job losses in no fewer than 16 states -- over 19,000 jobs in California, 16,000 in Texas, and 10,000 in Ohio, Michigan and Illinois. In other words, industries that use steel are forced to pay higher prices, the products they produce become less competitive and they must lay off workers.

The average hourly wage of steelworkers ranges between $15 and $20 plus fringe benefits, so we might be talking about an annual wage package averaging $50,000 to $55,000. Here's my question to you: How much sense does it make for American consumers to have to pay $800,000 in higher prices to save a $50,000- to $55,000-a-year job?

It'd make better economic sense for Congress to pass an Aid to Dependent Steelworkers Act, whereby we'd tax ourselves so as to give each of those 1,700 steelworkers, whose jobs were saved, $100,000 year so they might take off and live in a nice beachfront condo in Florida or Bermuda. While less costly to Americans than President Bush's steel tariffs, it has no political future. The handout would make the protectionist policies apparent and hence repulsive to most Americans.

Article I, Section 8 of the U.S. Constitution says Congress has the authority "To regulate commerce with foreign nations, and among the several states, and with the Indian tribes." It wasn't the Framers' intent to give one group of Americans, such as those in the steel industry, the power to use Congress tax other Americans.

When Congress creates a special advantage for some Americans, it must of necessity come at the expense of other Americans. Those Americans who're harmed, such as steel-using industries, descend on Congress, asking for some kind of relief for themselves. It all reminds me of a passage from Marcus Connelly Cook's play "Green Pastures," wherein God laments to the Angel Gabriel, "Every time Ah passes a miracle, Ah has to pass fo' or five mo' to ketch up wid it."

I think Congress ought to get out of the miracle business.