Category Archives: Public Choice

Restoring Separation of Powers and Improving Resilience with the USA Act

Separation of powers is a core principle of American government. But things haven’t gone quite as planned. Congress, the first branch, has increasingly taken a back seat to the second branch, headed by the president. This is not a partisan problem, but a systemic one.

The Framers designed a system of checks and balances in the belief that the different branches of government would compete against each other. They were mistaken. It turned out that it is parties, not branches, that compete against each other. This institution-level problem requires an institution-level fix.

To that end, Rep. Cathy McMorris Rodgers (R-WA) recently reintroduced the Unauthorized Spending Accountability (USA) Act, which seeks to rebalance a tilted scale by reasserting Congress’ power of the purse. It would reengage Congress in policy making, regardless of who runs which branch at any given time.

Only Congress has the power of the purse, yet a long list of unauthorized executive branch programs continue to operate—971 in all as of 2019, at a cost of more than $306 billion. That is roughly a quarter of discretionary federal spending.

The USA Act would automatically cut an unauthorized program’s budget to 90 percent of its previously authorized level in its first unauthorized year, and to 85 percent in the second unauthorized year. Programs would sunset altogether after a third unauthorized year.

The Trump administration displayed less respect for the limits on its power than any previous administration, including the “pen-and-phone” Obama administration. President Biden is unlikely to suddenly show a restraint that no one in his office has in decades. That bodes poorly for the COVID-19 recovery effort, which cannot be planned from Washington, let alone from one individual’s office. Congress needs to reassert itself as a check and a balance on the executive.

The USA Act would require Congress to own up to its budgeting responsibilities, while simultaneously making the executive branch more accountable. The reform is much needed.

As it stands now, there are programs currently operating that Congress has not authorized since the 95th Congress, which was in session from 1977 to 1979. In fact, when Rep. McMorris Rodgers introduced the first version of the USA Act in 2016, entire cabinet-level departments, such as the State Department, had not been congressionally authorized since 2003. The Justice Department was last authorized by Congress in 2009. Other agencies, such as the Bureau of Land Management, have operated for roughly 25 years without congressional authorization.

There is more. The USA Act’s automatic budget cuts and sunsets apply only to programs classified as discretionary spending. Roughly three quarters of federal spending is classified as mandatory, including major programs such as Social Security and Medicare. While Congress has the power to change these programs at any time, they do not require congressional reauthorization, and can continue indefinitely on autopilot.

To address mandatory spending, the USA Act would create a Spending Accountability Commission to examine mandatory spending programs and make them more accountable to Congress. It is especially crucial to make those programs more efficient and fairer, given the coming entitlement crunch. The Commission would also assist Congress in creating a schedule for sunsetting unauthorized programs.

Restoring a proper separation of powers is a tall order. The USA Act is no panacea, but it would mark an important step in crucial area of reform. With a difficult recovery from both COVID-19 and a recession ahead, the time to act is now.

Abraham Lincoln on the Separation of Campaigning and Legislating

Abraham Lincoln, when he was a member of the House of Representatives from the Whig party, supported Zachary Taylor’s 1848 presidential candidacy. This was in part because he thought Taylor would be a weak executive. As David Herbert Donald writes on p. 127 of his 1994 biography Lincoln:

The proper Whig policy ought to be one of “making Presidential elections, and the legislation of the country, distinct matters; so that the people can elect whom they please, and afterwards, legislate just as they please, without any hindrance [from the Chief Executive], save only so much as may guard against infractions of the Constitution, undue haste, and want of consideration.”

Lincoln would change his tune when he became president himself. There is also more to successful executive restraint than this. And there is need for stricter legislative restraints, too. But on the whole, this is a healthier vision of executive power and the president’s proper role than what we have endured over the last few decades.

New President, Same Bad Policies

The Trump administration’s trade war gave economics teachers countless real-world examples of bad policy they can use in the classroom. A new open letter encourages President Biden to provide a similar service by becoming the “climate president.” Signees include prominent business leaders and activists such as Jeff Bezos, Leonardo DiCaprio, and Bill Ford.

Here are a few basic lessons of economics and politics they should have considered before signing on:

  • Green policies are Trump’s trade war in fancier packaging. This is an important, but overlooked, theme in the new administration. The climate doesn’t care if new technologies or business models come from America, Europe, Asia, or Africa. But politicians and their donors sure do. This is why President Biden is continuing President Trump’s “Buy American” policies. The main difference is that Biden is adding a green label to the nationalist branding. Businesses see climate legislation as a weapon against foreign competitors, the same as Trump’s tariffs. Politicians see ways to do favors for these companies, harm enemies, and appeal to voters’ patriotism, all at the same time. But this would raise consumer prices and leave supply networks less resilient—not a good idea during a pandemic and amidst a still-reeling economy.
  • Rent-seeking is a thing. Rent-seeking is the technical term for getting special favors from government. Political connections are often less risky and more profitable than gambling on a new technology. Solyndra was not an isolated incident. When Washington puts millions of dollars up for grabs, many companies will compete in Washington rather than in the marketplace. This leaves fewer resources available for developing new technologies. It also shifts priorities toward what Washington wants, rather than what might actually work.
  • Policy is made by the government we have, not the government we want. It is naïve to believe that Congress, with people like Mitch McConnell and Josh Hawley on one side, and Charles Schumer and Nancy Pelosi on the other, would actually pass climate legislation with the public interest as their top priority. That’s not the way real-world politics works. They’re going to jam in climate-unrelated pork and special interest giveaways. They will lock in today’s technologies so innovators who are less politically connected don’t displace them, as nearly happened with CFL light bulbs and LEDs. In Washington, even the best-meaning policies—especially the best-meaning policies—will not pass in anything resembling their intended form.
  • Green jobs aren’t new jobs on net. They replace other jobs. Putting a million dollars into one project means taking away a million dollars from somewhere else, as Frédéric Bastiat’s broken window parable points out. Calling a project green does not change this. Some green projects are worthwhile. Some are not. But Congress and the president are in a poor position to be able to determine which ones are which—not all the way from Washington, and not without prices and supply and demand giving them feedback. Nor do legislators have any incentive to listen to these signals, with 2022 and 2024 election preparations already underway.
  • There are better ways to address the issue. Even without a carbon tax and a Green New Deal, pre-COVID carbon emissions in the U.S. had been declining for several years. This is because entrepreneurs, wherever they are allowed to, are figuring out how to do more with less. New farming technologies are reducing the need for farmland, leaving more left over for wildlife. Smartphones and tablets are replacing music players, paper maps, VCRs, cameras, newspapers, compasses, metronomes, and more. This dematerialization is reducing demand for metals, plastics, paper, and other resource-intensive materials. As a result, the economy has already passed “peak stuff” for many resources, as Andrew McAfee points out in his recent book More from Less. As CEI founder Fred Smith likes to say, you don’t have to teach grass to grow, but you do have to take the rocks off of it. Congress and President Biden will achieve more of their environmental goals by removing regulatory rocks than with top-down planning, taxes, and subsidies.

The open letter signers’ hearts are in the right place. But no president can do what they ask. Our political structures cannot deliver those things. The letters’ signees would be better off putting their talents and resources to use exploring bottom-up solutions than in a top-down political system that is structurally unable to deliver on its promises. Bottom-up processes are messy, and filled with trial, error, and failures. They also don’t look as good at press conferences. As we’ve already seen with America’s declining carbon emissions and dematerialization, it works. But it will only continue if Washington lets it.

James Madison on Why Politics Ruins Everything

Politics has a way of ruining everything. Even kind and intelligent people go through an instant metamorphosis when the conversation changes to politics. Their body language tenses up. Their word choices include more intensifiers. They say horrible things about strangers they would never say in a different context. Their mental processes change to in-group-vs.-out-group mode, as though we were hunter-gatherers again.

And this sudden intensity can turn on and off almost instantly, like a light switch, as the conversation veers from topic to topic. It’s certainly unpleasant, and possibly unhealthy.

This very human foible may be what inspired James Madison to write in Federalist No. 55, “Had every Athenian citizen been a Socrates, every Athenian assembly would still have been a mob.”

The median voter is not a wise person, at least about politics. But even if he was, the effects partisan politics has on the brain can shut down rational thought in even the best and brightest.

Happy Election Day, everyone.

Observations from the Tech Antitrust Hearing

This post collects some observations from yesterday’s lengthy House Judiciary Committee Subcommittee on Antitrust, Commercial, and Administrative Law hearing with the chief executives of Amazon, Apple, Facebook, and Google.

  • The parties had different conversations, as they often do. The Republicans mostly talked about political bias. Democrats mostly talked about concentrated power. Despite the different charges, their verdict was the same: guilty.
  • On net, the hearing likely hurt any future antitrust case. For example, as Mike Masnick pointed out, Rep. David Cicilline (D-RI) demanded that Facebook take down certain content—minutes after Rep. Matt Gaetz (R-FL) demanded that the same content be kept up. Judges tend not to look kindly on such incoherence.
  • The hearing had limited fact-finding value. The CEOs’ answers to questions were often interrupted after just a few seconds. The committee members appeared more interested in getting tough questions on camera than in building a case. Alternatively, since many antitrust cases tend not to survive careful scrutiny, perhaps the members knew a proper dialogue would not be in their interest, and avoided one intentionally. Neither possibility reflects well on the legislators.
  • Republicans have forgotten a basic rule of politics: Never give yourself powers you don’t want the other side to have. Reps. Jim Jordan (R-OH), Matt Gaetz (R-FL), and Greg Steube (R-FL) all argued for the federal government to regulate political speech in their party’s favor. If they succeed, Democrats will almost inevitably use that same power in their party’s favor when they are in power. The GOP’s Trump wing’s shortsightedness is quietly making some of their opponents very happy. As the saying goes, never interrupt your opponent when he is making a mistake.
  • There were no gaffes on the level of an 83-year old Sen. Ted Stevens’ (R-AK) 2006 description of the Internet as “a series of tubes” or Mark Zuckerberg’s “Senator, we run ads” response in 2018 to former Sen. Orrin Hatch (R-UT), then 84, on how Facebook makes money despite not charging its users.
  • In fact, yesterday’s oldest member, 77-year old Rep. Jim Sensenbrenner (R-WI), who is retiring after this term, came off comparatively well. He briefly defended the consumer welfare standard in his opening remarks, stated his belief that current antitrust laws do not need to be changed, then mostly stayed out of the fray.
  • The lack of meme-worthy gaffes does not mean the committee members are well versed in technology. The Committee’s average Democrat is age 57, the average Republican is 52, and frankly, it shows. For example, Rep. Lucy McBath (D-MD), 60, seemed to not know how cookies work. On at least one occasion, an angry Republican confused Twitter and Facebook, requiring Zuckerberg to point out the difference.
  • Members, who typically spend most of their careers in government, apparently know little about how retail works. Amazon came under fire for selling self-branded products at cheaper prices than name-brand equivalents, and placing them prominently in searches. Nearly every grocery store and retail chain in the country does the same thing. House brands with low prices and guaranteed shelf space have been standard practice in groceries and retail since the pre-World War II heyday of A&P—which was itself the target of dubious antitrust cases.
  • There was little, if any, discussion of regulatory capture or rent-seeking. This is an important unintended consequence of antitrust enforcement. Many established companies would be happy to comply with adverse antitrust judgments if it meant putting up barriers to entry against competitors. In the long run, cartels can only survive with government help.
  • My colleague Jessica Melugin writes, “Surely, politicians can find a better use of their time than harassing the companies that have helped so many Americans make 2020 a little more bearable.” Antitrust enforcement requires proof of consumer harm, yet this was rarely discussed at the hearing. Search engines make it easier to keep up with the latest news about the virus. Social networks help people stay in touch. Online retail and delivery services help keep people fed and supplied while social distancing. Other tech companies provide entertainment, access to medical care, and make it easier to work or learn from home. We will likely never know how many lives have been saved by these services, many of which are free of charge.
  • A running theme of the hearing was that the current big tech companies have enough market power to squash competitors—and then presumably raise their prices. But Zoom, which was not represented at the hearing, shows that the tech industry is still engaging in creative destruction. Six months ago, almost nobody had heard of it. Now, giants such as Microsoft-owned Skype are already essentially legacy services. The Committee’s own technical troubles with its older video conferencing software, which required the Committee to take a recess, underlined the point. Other tech companies are well aware of creative destruction. Facebook’s once-hip user base now has an average age of 46. More than two thirds of TikTok users, by contrast, are between ages 13 and 25.
  • Language matters. And some congressmen are slippery with it. For example, Rep. Cicilline stated that Amazon controls 70 percent of “online marketplaces.” This is a non-standard term that Rep. Cicilline did not define. It almost certainly has a much narrower definition than most people would assume when thinking of a company’s market share. Cicilline’s 70 percent of “online marketplaces” is equivalent to about 4 or 5 percent of retail sales. If people were not listening carefully to Rep. Cicilline’s boutique phrasing, they would get the impression that Amazon has a larger share of its relevant market than it actually holds—by more than an order of magnitude. Does Rep. Cicilline’s terminology include Amazon’s major competitors, such as Walmart, Target, grocery stores, electronics stores, book stores, and more? For more on this type of error, see Patrick Hedger’s recent post and my earlier one on the relevant market fallacy.
  • Rep. Cicilline argued that Google controls 85 percent of Internet searches. This is also misleading. Google does not power many common Internet searches people perform daily. Netflix famously hosted an open competition for developers to design a new search algorithm for its searches that would deliver results tailored to each viewer’s likes and dislikes. Other streaming services also use their own search technology, not Google’s. Amazon product searches use an in-house algorithm. Internet dating sites use proprietary search algorithms as selling points. Internal searches in Word documents or PDF files do not use Google. Were these included in Rep. Cicilline’s statistic? Or is this another example of the relevant market fallacy?
  • Though the hearing lasted for six hours, members missed some opportunities to score valid points. For example, Rep. Mary Scanlon (D-PA) briefly discussed price gouging. She did not bring up, as I recently did, that Amazon’s support of federal price gouging legislation has a potential anti-competitive rent-seeking component. The extensive tax breaks Amazon is receiving for its new second headquarters are another example of anti-competitive corporate welfare. Of course, the blame for these is on politicians as well as companies. This may be why they were downplayed.
  • Facebook CEO Mark Zuckerberg’s public support for heavier regulations for his company has a similar rent-seeking dynamic. Regulations often favor incumbents and lock out potential competitors. Facebook can afford expensive content moderation and privacy regulations; its startup competitors often cannot, or would be discouraged from even trying. Regulations, which Facebook would likely help to write, would likely lock in its leading position in a way that consumers would never allow.
  • Google’s sometimes-accommodating behavior to the Chinese government’s censorship and human rights policies is questionable. At the very least, the company should do more to stand up against illiberal governments. This, however, is not an antitrust issue.

In short, committee members addressed a lot of things they shouldn’t have, and did not address some things they perhaps should have. If this hearing has a part seven (yesterday was actually part six), it should have fewer threats to regulate political speech and fewer common analytical mistakes. And it should focus on how tech companies affect consumers, for both good and bad, and on likely consequences of antitrust enforcement, such as regulatory capture.

For a broader view of antitrust regulation, see Wayne Crews’s and my paper. A new #NeverNeeded paper on tech regulation during COVID-19 by my colleagues Jessica Melugin, Patrick Hedger, Michelle Minton, and John Berlau is here. Jessica’s thoughts on the hearing are here. More resources are at antitrust.cei.org.

Vlad Tarko – Elinor Ostrom: An Intellectual Biography

Vlad Tarko – Elinor Ostrom: An Intellectual Biography 

Tarko is quickly establishing himself as a top-notch economist. In this, his first book, he offers the best available introduction to Nobel Laureate Elinor Ostrom’s work and the concept of polycentrism. Ostrom was the first, and so far the only, woman to win the economics Nobel [Update: I wrote this review before Esther Duflo co-won the 2019 prize in October]. She and her husband Vincent, also an accomplished economist and political scientist, ran a famous Workshop at Indiana University where they paid less attention to disciplinary boundaries than they did to solid theoretical and empirical research.

Elinor Ostrom also popularized the concept of polycentrism. It’s essentially a more finely graded version of federalism. The United States’ federal system has three main levels of government—federal, state, and local, plus a few in-between grades, most commonly counties. But not all services, Ostrom argues, fit cleanly into one of those categories. Services such as parks, police, and schools, have nothing to do with each other. They may also have different optimum characteristics. So why are they often provided at the same fixed level of government? What if a school district’s optimum size extends beyond a city’s boundaries? What if a park district would be better run as multiple, hyperlocal districts? Moreover, these optimum sizes will vary from place to place. A further complication is that these optimum sizes and structures are constantly changing and evolving as culture, technology, and demographics change. Nothing else stays the same, so why should the sizes of government “firms?”

From this polycentric framework, Ostrom teases out some ground rules for institutional design. One is that smaller is usually better. Most federal issues can be more effectively handled at the state level. Many state-level issues can be handled at smaller gradients, whether regional water or irrigation authorities, transportation authorities, or neighborhood-based policing, a term which now means nearly the opposite of what it did when Ostrom began using the term. Two, because times change, institutions need to be designed with flexibility in mind. They need to be able to grow, shrink, merge, separate, and evolve as circumstances dictate. The goal is the service, not this or that corporate structure, so make change easy.

Ostrom was much more than a theorist. She placed a far greater emphasis on field research than most scholars. This empirical backing greatly improved not just her own work, but that of her many students and collaborators. Tarko shares pictures, stories, and the research she conducted across the country and abroad over her long career. For an introduction to her thought and her broader approach, Tarko is an excellent place to start.

Antitrust Basics: Corruption and Rent-Seeking

This is the sixth entry in the “Antitrust Basics” series. See below for previous posts.

Rent-seeking is economics jargon for chasing after unfair special favors from government. Businesses and individuals have a large menu of rent-seeking options to choose from, and antitrust regulations are one of the items. Licensing regulations and other restrictions can make it harder for startups to enter a market, favoring incumbent businesses. Bailouts, such as General Motors and several large financial firms have received in recent years, are another form of rent-seeking. Cash subsidies, such as many green energy producers receive, are rent-seeking examples. Special financing, as through agencies like the Export-Import Bank or the Overseas Private Investment Bank, enable rent-seeking by Boeing and many farm and construction equipment manufacturers such as John Deere and General Electric.

All told, it is a minor miracle that corporate welfare is only about a $100 billion problem. Standard economic theory predicts that it should be much larger. Competitive Enterprise Institute founder Fred Smith and I wrote a paper arguing that virtue is an important limiting factor, though incomplete. Antitrust regulation provides another temptation to seek unfair rents, and would not improve the business world’s moral climate.

Neo-Brandeisians and other progressives rightfully oppose rent-seeking, but err when they propose increased antitrust policies as a solution.Tim Wu, a prominent neo-Brandeisian analyst, correctly points out how numerous companies game government policies to reduce competition, but then goes on to advocate for more government power as the solution. Even now, in a relatively restrained antitrust environment, roughly 95 percent of antitrust lawsuits are brought privately by competitors, not by the Justice Department or Federal Trade Commission. Repealing antitrust regulation would not eliminate rent-seeking—there are many other avenues rent-seekers can take—but it would reduce it.

Neo-Brandeisians advocating antitrust regulation as a way to promote virtue have a common misunderstanding of how governments work in practice. Government employees do not operate with only the public interest in mind. They are human beings, with the same incentives, flaws, and self-interested tendencies as other human beings.

Agency employees want to increase their budgets and power, and often enjoy the publicity that accompanies big cases. Regulators are also vulnerable to what is known as a Baptist-and-bootlegger dynamic. In Clemson University economist Bruce Yandle’s classic example, a moralizing Baptist and a profit-seeking bootlegger will both favor a law requiring liquor stores to close on Sundays, though for different reasons. A morally-motivated Baptist does not want people drinking on Sundays and a bootlegger would gain a lucrative monopoly every Sunday. They may find themselves strange bedfellows, and bootleggers may even hide themselves in Baptist clothing.

Applying this dynamic to antitrust regulation, a true-believing “Baptist” in Congress or at the Justice Department or the FTC would be inclined to listen seriously to the entreaties of corporate “bootleggers” who can come up with virtuous-sounding reasons for why regulators should give their businesses special favorable treatment.

Oracle, one of Microsoft’s rivals, ran its own independent Microsoft investigation during that company’s antitrust case, for what it alleged were Baptist-style reasons. “All we did is try to take information that was hidden and bring it to light,” said Oracle CEO Larry Ellison. “I don’t think that was arrogance. I think it was a public service.” Former Sen. Orrin Hatch (R-UT), who counted Oracle among his constituents, was one of the loudest anti-Microsoft voices in Congress. Around that time, he also received $17,500 donations from executives at Netscape, AOL, and Sun Microsystems.

Perhaps heeding Hatch’s admonition that, “If you want to get involved in business, you should get involved in politics,” Microsoft expanded its presence in Washington from a small outpost at a Bethesda, Maryland, sales office to a large downtown Washington office with a full-time staff, plus multiple outside lobbyists. Microsoft quickly went from a virtual non-entity in Washington to the 10th largest corporate soft money campaign donor by the 1997-1998 election cycle. Sen. Hatch’s campaign was among the beneficiaries.

The lines between Baptist and bootlegger can be blurry, and some actors play both parts. But such ethical dynamics are an integral part of antitrust regulation in practice.

The best way to reduce rent-seeking and regulatory capture is to have a system of government with few rents that can be sought, and fewer regulations that can be captured. Neo-Brandeisians, just like the rest of us, have to deal with the government we have, rather than an idealized abstraction. A more aggressive antitrust policy would increase rent-seeking, and should not be put forward as a solution to the problem.

For more, see Wayne Crews’ and my paper, “The Case against Antitrust Law: Ten Areas Where Antitrust Policy Can Move on from the Smokestack Era.” Further resources are at antitrust.cei.org.

Previous blog posts in the Antitrust Basics series:

Randall G. Holcombe – Political Capitalism: How Political Influence Is Made and Maintained

Randall G. Holcombe – Political Capitalism: How Political Influence Is Made and Maintained

Excellent, though probably a difficult read for a layman. Most people have a two-axis view of politics—most countries are some blend of capitalism and socialism. Holcombe argues that there is a distinct third system, which he calls political capitalism. It has characteristics of market capitalism, such as private property and usually democratic political institutions. But political capitalism also features heavy control by elites. Because votes count for very little in any decent-sized election and because voters typically have low information, it is naturally easier for elites to control public policies with relatively little public accountability.

An underappreciated key point, first made by Mancur Olson, is that small groups have lower transaction costs than larger groups. A small group is easier to form, and it is easier to monitor members so they don’t shirk on the rest of the group.

Another point is that principled legislators have almost no chance of being influential under political capitalism. If a politician is known for sticking to their principles, other legislators will not bother trying to win their vote on bills. If they support a bill, they’ll vote for it no matter what. If they oppose it, their support cannot be bought, so it’s not worth spending resources on.

That means principled legislators aren’t offered choice committee assignments, fundraising assistance, or get introduced to powerful social connections. Principled legislators are doomed to ineffectiveness.

It is well known that political office naturally attracts certain undesirable personality types. Holcombe demonstrates that institutional structures actually reward them, so there is a natural selection process to put the worst on top.

Holcombe also makes several valuable contributions to the theory of rent-seeking. I wish I had known about these when Fred Smith and I were working on our 2015 rent-seeking paper, which would have greatly benefited from his insights. I will definitely be citing this book in the future.

Boeing Pushes 100 Percent Tariffs on Airbus

Boeing, fresh off a victory in restoring the Export-Import Bank’s full lending authority, is floating the idea of a 100 percent tariff on Airbus aircraft and parts. Airbus is Boeing’s largest competitor. There are four factors in play here. The first three are public relations, the opportunity costs of cronyism, and how best to pursue a level playing field in the global economy. The fourth is the likely retaliation such a move would spark.

From a PR standpoint, Boeing wants to move public attention away from its safety issues with the Boeing 737 MAX aircraft. Most of the press Boeing gets for Ex-Im and Airbus tariffs will be negative, and the company knows this. It would still likely prefer that people be upset about those than about its safety problems, which are an existential threat to more than just airline passengers.

To that point, Boeing arguing for an Airbus tariff right now is almost perfect news cycle timing. The China trade dispute and NAFTA/USMCA are hot stories. Just today, President Trump announced a six-month delay on a possible European auto tariff, which will both keep that story alive for a while and give Boeing time to fold an Airbus tariff into a possible action.

Boeing also has a Baptists-and-bootleggers story at the ready. The World Trade Organization ruled, correctly, that Airbus received unfair government subsidies when it launched its A350 and A380 aircraft. Under WTO rules, the U.S. is entitled to retaliate. But just because it can, doesn’t mean it should. An Airbus tariff is highly unlikely to spur needed reform.

This ties into the opportunity costs of cronyism. Boeing puts significant resources into lobbying for Export-Import Bank support, Airbus tariffs, and other preferential policies. All of those resources are not being used to address the 737 MAX safety issues. This might improve a decimal point somewhere in a quarterly earnings report in the short term. But Boeing’s misplaced priorities could cause long-term harm to both aviation safety and Boeing’s own competitiveness. Competing in Washington is not the same thing as competing in the marketplace. Boeing’s investors should be upset at the company’s behavior.

Companies that engage in heavy rent-seeking are less profitable than more market-oriented companies. Even in Boeing’s case, the most profitable years in company history happened when Ex-Im was unable to offer its usual financing.

Which brings up the third point: It is not enough to have a level playing field. That level must be raised, not lowered. Boeing is right that Airbus’ massive government subsidies are unfair. But the way to address the problem is not to copy Europe’s policy mistakes. Don’t sink down to their level, raise them up to ours—though, admittedly, our own level of cronyism has much room for improvement. But reformers must start somewhere.

If anything, Boeing might have an interest in further tying up Airbus in webs of subsidies and favorable regulations—though I would strongly disagree with this strategy. Government protection tends to cause sclerosis in its beneficiaries, and Boeing should be pleased at the long-term implications of Airbus’ comfort. I am not a fan of this zero-sum thinking, but Boeing might be. Even from their self-interested perspective, an Airbus tariff is a bad idea.

Finally, as I pointed out yesterday, tariffs are nearly always met with retaliation, not cooperation. The European Union almost certainly will not change its tune on Airbus subsidies in response to a U.S. tariff—especially in a global market with many non-U.S. customers. Europe will harden its stance, likely at Boeing’s expense.

Given how tense global trade relations currently are, even if Boeing is just blowing PR smoke, this is a bad time to do it. Better for the company to refocus on making safe, innovative products than spending its resources on a political game with no winners.

See also relevant CEI scholarship on trade, the Ex-Im Bank, and the ethics of rent-seeking.

Institutional Economics in a Nutshell

Long-term structures matter more for policy outcomes than electing a preferred candidate.

Or as Geoffrey Brennan and James Buchanan put it in the closing paragraph of The Reason of Rules: Constitutional Political Economy, p. 167:

Good games depends on good rules more than they depend on good players.