An Honest Politician

From page 427 of Douglas Irwin’s Clashing Over Commerce: A History of U.S. Trade Policy:

When asked why he had supported President Hoover’s bid for a flexible tariff provision but now opposed Roosevelt’s similar request, Harold Knutson (R-MN) replied: “Frankly, I know the purpose of this legislation is to lower rates. If I thought for a minute that it was proposed to raise rates to meet the present conditions, I would vote for this legislation and be glad of the opportunity to do so.”

Both sides have good points in the strategic debate over achieving short-term results vs. the long-term sanctity of process and procedure. I personally lean towards preserving process, even when it leads to defeats on policy issues. Never give yourself powers you wouldn’t want the other side to have, and all that. Kudos to Knutson for being the rare man in Washington who made plain where he stood, even if it’s opposite me.

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Last Chance for the 115th: Stop the President from Unilaterally Raising Tariffs

Note: this is my contribution to a series at CEI’s blog. Links to other posts by my colleagues below.

This June here at Open Market we’ll be looking at what the 115th Congress, which began January 3, 2017 and runs through January 3, 2019, has accomplished so far and what might still be achieved for limited government and free markets before it’s over. Read more about the Competitive Enterprise Institute’s recommendations for legislative reform here

Article I, section 8 of the U.S. Constitution gives Congress the exclusive power of the purse. Under no circumstances may the president unilaterally raise taxes. And yet, President Trump has done just that with new tariffs. So far, Trump has enacted 25 percent levies on steel and 10 percent levies on aluminum. He is also threatening to raise tariffs on foreign cars, among other measures. How is he getting away with it?

Our existing trade laws have loopholes. These are mostly related to national  security. Section 232 of the Trade Expansion Act of 1962 contains one such loophole; Sections 201 and 301 of the Trade Act of 1974 contain similar loopholes. The White House is exploiting them as best it can, causing both economic and diplomatic harm to the United States.

Even with an active imagination, it is difficult to imagine a German-made BMW 5 Series as a threat to national security. And even if the rest of the world were to completely cut us off from importing steel, the U.S. military uses less than a twentieth of existing domestic output. Every trade action Trump has taken or is considering is security-unrelated.

When Canadian Prime Minister Justin Trudeau confronted Trump about just what national security threat Canada posed that would justify the steel and aluminum tariffs, Trump was reduced to mumbling something about the War of 1812.

Congress’ job, then, is to prevent such abuses of executive power and reclaim the power of the purse. Two bills in the Senate would work in that direction; at least one of them deserves to pass.

Sen. Mike Lee (R-UT)’s Global Trade Accountability Act of 2017 would require congressional review of any attempted unilateral tariff increases. The president would still be able to lower tariffs unilaterally, which is both good economics and good foreign policy.

Sen. Bob Corker (R-TN), along with a slew of cosponsors in both parties including Sen. Lee, also introduced a bill to require congressional review of any unilateral tariff increase from the president invoking Section 232.

Right now, the Corker bill seems to have more momentum behind it, though the administration has already announced its opposition to the bill. We don’t know yet if the President would veto the bill or not, but the Senate should force his hand and make him explain himself if he does. The time to act is now, before President Trump commits another unforced economic and diplomatic error.

Read previous posts in the “Last Chance for the 115th” series:

On the Radio

On Monday, June 11, I was on Paul Molloy’s Freedom Works show to discuss tariffs.

I was also on the Alan Nathan Show to discuss tariffs. My segment starts at about three minutes in.

On Tuesday, June 12, I was on the David Webb show on Sirius/XM, with Kerry Picket guest-hosting. I couldn’t find audio, but maybe they’ll put it up here.

Good News for Young Lemonade Stand Entrepreneurs

Every summer there are news stories about local authorities shutting down children’s lemonade stands over lack of licenses, permits, a lack of restaurant-grade kitchen or cleaning facilities, a zoning violation…the list is long. I wrote about this outrage back in 2011 here, and Iain Murray and I wrote a Townhall column here. Regulators are still at it, though. But now, junior entrepreneurs have gained a powerful ally.

Country Time Lemonade has offered to help pay fines and permits for young lemonade stand entrepreneurs who incur regulators’ wrath. Its Legal-Ade program will pay up to $300 to help families fight back against absurd regulations. In fact, each time this tweet is retweeted, Country Time will donate a dollar to the Legal-Aide program, up to $500,000.

Is this is a cynical, profit-driven marketing ploy? Absolutely. But so what? It will do some real good, and that’s what counts. Results are what matter, not intentions. This is not a new idea. As Bernard Mandeville pointed out in “The Fable of the Bees” way back in 1732, selfish intentions can generate altruistic results. As with bees, so with lemons.

When regulators bust children for learning work and business skills while having fun outdoors, they teach children the wrong lesson. By helping to set matters right, Country Time is helping children learn that it’s okay to show initiative, and that it’s okay to stand up to authority when you’re right and they’re wrong. Even the most hardened anti-capitalist can get behind that.

Also deserving kudos: Domino’s Pizza, for filling in potholes on its delivery routes that lazy local governments let linger. Who will build the roads? Now we know.

Will Trump’s Tariffs Spell the End of Free Markets?

The short answer: no. But the new and upcoming tariffs certainly don’t help matters, here or abroad. I tackle that question in a piece for Inside Sources:

The president’s threats must be fought, but the good news is America’s fundamental institutions will withstand Trumpian bluster. For one thing, our economy remains a powerhouse. America’s $19 trillion economy already withstands an annual $1.9 trillion in annual regulatory costs from Washington. On top of that, Trump’s tariffs will cost “only” a few billion dollars. In short, the economy is dragging along a big, deadweight burden, but it can still get the job done…

Even in trade, where the Trump administration poses the greatest threat to free enterprise, America has been liberalizing for more than 75 years. The Smoot-Hawley tariff bill of 1930 raised America’s average tariff to more than 60 percent and worsened the Great Depression. But today tariffs are closer to 5 percent (source: Douglas Irwin, “Clashing Over Commerce: A History of U.S. Trade Policy,” p. 8), and Trump’s targeted tariffs likely won’t raise that figure more than a decimal point. Trump is reversing a long history of openness, but so far it’s small potatoes. If economists, Congress, and the World Trade Organization all do their jobs, it will stay that way.

In the meantime, defenders of the classical liberal enlightenment traditions of international openness and free trade will be very busy standing up to the administration’s latest populist outburst. Read the whole thing here.

For more CEI tariff coverage, see here by Iain Murray and here by me. For more on Trump’s threat to the values that made America great, see Steven Pinker’s book “Enlightenment Now: The Case for Reason, Science, Humanism, and Progress.”

This Week in Ridiculous Regulations

The week’s big headlines were about the G7 meeting and our allies’ efforts to avoid a trade war, and the meeting with North Korea in Singapore. But behind the scenes, agencies issued 46 proposed regulations and 80 final regulations, ranging from milk handling to microneedles.

On to the data:

  • Last week, 80 new final regulations were published in the Federal Register, after 58 the previous week.
  • That’s the equivalent of a new regulation every two hours and 6 minutes.
  • Federal agencies have issued 1,437 final regulations in 2018. At that pace, there will be 3,201 new final regulations. Last year’s total was 3,236 regulations.
  • Last week, 1,286 new pages were added to the Federal Register, after 1,144 pages the previous week.
  • The 2018 Federal Register totals 27,115 pages. It is on pace for 61,070 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Two such rules have been published this year, none in the last week.
  • The running compliance cost tally for 2016’s economically significant regulations is $215 million.
  • Agencies have published 48 final rules meeting the broader definition of “significant” so far this year.
  • In 2018, 248 new rules affect small businesses; 13 of them are classified as significant.

Highlights from selected final rules published last week:

For more data, see “Ten Thousand Commandments” and follow @10KC and @RegoftheDay on Twitter.

Media Appearances

Trade and regulation have both been hot issues lately. Since those are two of the main issues on my beat, I’ve been pretty busy lately:

  • Inside Sources is syndicating an op-ed arguing that America’s classical liberal institutions are stronger than Trump’s passing populist fancy.
  • CEI press release on President Trump’s steel and aluminum tariffs.
  • Which was quoted in an Investor’s Business Daily editorial.
  • And in City AM, a daily newspaper in London (see p. 3, cont’d from a story on p. 1).My recent post about Trump economic adviser Peter Navarro was quoted on CNN. Don’t know what day or which program, but one of my colleagues sent along the following transcript:

[00:25:07] To put it another way, it cost about $400,000 per job saved in the steel industry. OK, and the outcome this time doesn’t look much better. According to the Competitive Enterprise Institute, the levies could save as many as 33,000 jobs in the steel and aluminum industries, this comes at a great cost. Downstream industries that use steel and aluminum such as automobiles, construction (inaudible) will face higher costs, passed on to consumers with higher prices, could cost those other industries 179,000 jobs.

I’ll post more as they come.