In diplomacy, carrots tend to be more effective than sticks. Yet, two consecutive administrations have used tariff threats to try to achieve their objectives. Former President Trump did four rounds of back-and-forth tariffs against China, and President Biden is trying it now to counter proposed digital taxes from six mostly European countries. The strategy has yet to work. Over at National Review, I take a look at a better way: Rather than threaten new tariffs, promise to remove old ones as a sweetener.
Why not scrap Trump’s steel and aluminum tariffs in exchange for scrapping proposed digital taxes? Carrots are often more effective than sticks.
The metal tariffs will also likely be an issue at this week’s United States–European Union summit. European leaders want a December 1 deadline for ending them. In return, they would end the retaliatory tariffs they immposed in response. A digital tax moratorium should also be part of the deal.
Here at home, the metal tariffs are slowing the COVID recovery by raising auto and housing prices, which were already at record highs. They are also causing needless diplomatic frictions with allies. Removing them is a win-win.
Even if the diplomatic goal fails—there are no guarantees in foreign policy—the lower tariff would still help the U.S. economy. Read the whole thing here.
Over at Inside Sources, I make the case that deregulation, freer trade, and continued vaccinations will do more to open up the economy than the trillions of dollars of politicized spending Congress is lining up:
Federal, state, and local regulators eased more than 800 regulations last year that were blocking access to telemedicine, medical supplies, and food and grocery deliveries, along with unneeded occupational licenses that were keeping people out of work. We’ve already seen the benefits. Now policymakers need to continue this important work as entrepreneurs look for ways to adapt to the new normal but find themselves blocked because they don’t have the right permit.
Steel and aluminum tariffs left over from the Trump administration are adding hundreds of dollars to car prices and thousands of dollars to construction costs, at a time when housing prices are becoming unaffordable for many buyers. Congress could get rid of them today if it wanted to. Congress should also stop Biden’s proposed doubling of Canadian lumber tariffs, which would further increase housing prices while alienating an ally with whom we just signed the USMCA trade agreement. He has also proposed an additional $2 billion in tariffs against six mostly allied countries with whom we will be negotiating trade agreements in the near future. These would come into effect in the middle of the holiday shopping season.
My colleague Wayne Crews has a good term for this type of proposal: a deregulatory stimulus. Read the whole thing here.
It isn’t just Washington that gets a fresh start in January. California gets one, too. One of the top items on the Golden State’s policy agenda should be getting rid of what’s left of Assembly Bill 5, the controversial gig-worker law. As I argue this morning in several California newspapers, including the Orange County Register:
California’s unemployment rate is at 9.3 percent, compared to 6.7 percent nationally. California voters helped by passing Proposition 22 in November, which exempts app-based rideshare and delivery companies like Uber, Lyft, and DoorDash from California’s Assembly Bill 5 “gig work” law. This comes months after the state legislature passed an “oops” bill to exempt thousands of other workers that AB5 accidentally threw out of work, from journalists to musicians. Now that AB5 no longer applies even to its primary ridesharing targets, the legislature should just get rid of AB5 altogether. Meanwhile, the rest of the country should learn from California’s experiment.
Read the whole piece here. For more on AB5, see other pieces by Ryan Radia, Sean Higgins, and me.
Neither presidential candidate has much interest in limited government. But over at National Review, I look at some neglected down-ballot victories from the 2020 election. A divided Congress will prevent one party from running everything, regardless of who wins the White House. There were also several state-level victories across the country.
California voters partially undid the AB5 gig-worker law that made unemployment even worse during the pandemic. They also voted against an expansion of rent control, which is one reason California’s housing prices are so high.
Not that legislators will listen, but Illinois voters sent them a message to address the state’s pension crisis by cutting spending rather than raising taxes:
The Illinois legislature had already passed a separate tax hike bill, conditional on voters approving the amendment. Voters disapproved by a 55-45 margin, and taxes will remain as they are.
Voters in Oregon and several other states also continued to deescalate the drug war:
In order for people to respect the law, they have to be able to respect it. That was a major cultural cost of alcohol prohibition in the 1920s, and of the drug war today. Drug legalization allows law enforcement to focus on real crimes and ease an avoidable source of antagonism between police officers and the communities they serve—especially in minority areas where drug laws are disproportionately enforced.
Washington state voters registered disapproval of a plastic bag tax. This is a victory for my colleague Angela Logomasini, who has written about the issue here and here.
A lot went wrong in the 2020 election, as is true every year. But some things also went right. Now let’s build on those victories and create some new ones.
Read the whole thing here. Ideas for the next free-market victories are at neverneeded.cei.org.
Getting rid of #NeverNeeded regulations is one of the most important policy responses to the COVID-19 pandemic. The short-term benefits are obvious. But the long-term benefits are arguably more important, for both long-term growth and resilience against the next crisis. My colleague Alex Reinauer and I have a short piece over at RealClearPolicy looking at just how much deregulation has happened in the wake of COVID. It’s actually very difficult to tell how much there is, due to a lack of transparency:
Transparency is important, especially during a crisis. Agencies need to do more than look like they are “doing something” in response to COVID. Congress and the president need to ensure agencies follow existing transparency requirements. Additional safeguards such as annual agency regulatory report cards will keep agencies more honest during this and future crises. Then policy makers and the public can judge for themselves what agencies are faring, and how they can do it better. It’s a lot more cost effective than another $1 trillion “stimulus.”
These transparency problems are a system-level problem that needs to be addressed. Agencies need to follow existing transparency guidelines. People need to know what they are doing, how much it costs, and what agencies are doing to improve their work. As we often say at CEI, institutions matter. It is not enough to reform this or that rule. The larger institutions that create those rules also need to be reformed.
Read the whole piece here. For more reform ideas, visit neverneeded.cei.org.
My colleague Jessica Melugin and I, along with our former colleague Patrick Hedger, have a new paper out today, “Repeal #NeverNeeded Antitrust Laws that Hinder COVID-19 Response: Smokestack-Era Laws Favor Established Interests and Do Not Encourage Competition.” The tech companies that regulators are targeting have made a difficult pandemic easier to endure. Antitrust lawsuits would not help the COVID-19 response. Since the real cost of antitrust policy is its chilling effect on new innovations, ramping up antitrust enforcement would leave the country less resilient against the next crisis.
Amazon has made it easy for people to get no-contact deliveries of household supplies and groceries—and spurred competitive responses from Walmart, Target, and other retailers. Facebook makes it easy for people to stay in touch while staying socially distant. Google makes it easy to find information about the virus and stay up to date. As the paper concludes:
Antitrust investigations at the federal and state level should be suspended during the COVID-19 crisis and, ideally, abandoned permanently. The unintended consequences of market distortion and chilled innovation are the last thing consumers and businesses need right now—or ever. This is no time for politicians and government lawyers to promote their own careers through the posturing of antitrust enforcement. Consumer benefit and business resiliency must be preserved and antitrust enforcement must not be prioritized or expanded.
Read the whole thing here. For more on antitrust, see Wayne Crews’s and my paper “The Case against Antitrust Law” and CEI’s dedicated antitrust site, antitrust.cei.org.
Massive shortages happened almost instantly when it became clear that the coronavirus would require a nationwide lockdown. Grocery stores almost instantly cleared out of frozen foods, non-perishables, hand sanitizer, and, bizarrely, toilet paper. Stores dealt with the shortages in different ways. But one of those ways, raising prices, is almost universally unpopular. In fact, 36 states have anti-price gouging legislation on the books. Both Commerce Secretary Wilbur Ross and an Amazon vice president have called for federal price gouging legislation.
In a new paper, I explain that price gouging legislation is a bad idea, regardless of one’s feelings about price gouging. The main reasons are:
- Private companies have their own anti-price gouging responses. Moreover, they can evolve in ways regulation cannot, and more quickly. For example, Amazon’s artificial intelligence (AI) algorithms for policing price gouging among its third-party sellers turned out to have unintended consequences. But unlike Congress, they don’t have to wait until the political winds blow just right before doing something about it. Part of trial is error, and that’s okay. Without mistakes, there is no learning.
- Price controls make shortages worse.
- Rent-seeking. Big companies such as Amazon have already invested in AI algorithms and other anti-price gouging measures to prevent their third-party sellers from price gouging. Their smaller competitors have not. Amazon’s call for federal legislation likely has a bit more than good PR behind it.
- Anti-price gouging measures don’t actually reduce prices. They reduce money prices at a tradeoff: non-money prices go up even more. These non-money price increases include worse shortages, longer searches, waiting lines, longer shipping times, lower quality, and in some cases, more black market activity.
- There is no objectively correct mix of money- and non-money prices during a crisis. Different people have different needs and different preferences. Legislation, by imposing one single standard, does no favors to people’s diverse situations.
The whole paper is here. I touched on a few other price gouging tradeoffs here. CEI’s #NeverNeeded website is here.
There are lots of good regulatory reform ideas out there. The ideas with the most staying power share a common theme. They don’t just treat this or that rule. They treat the larger rulemaking system that keeps churning out those harmful rules. With a tough economic recovery ahead once masks, prudence, and treatments defeat COVID-19, now is a good time to implement them.
In a recent paper, I outlined two institution-level reform ideas: an independent Regulatory Reduction Commission, and automatic sunsets for all new rules. For those who don’t have time for the paper-length version, there is now an op-ed version, courtesy of Inside Sources. It concludes:
Dealing with COVID-19’s health and economic effects are the two top political priorities right now. Nothing else even comes close. As policymakers find and eliminate never-needed regulations that are blocking recovery, they must also reform the system that made those rules possible in the first place.
If left untreated, that regulatory sludge will build back up, and stifle the next emergency response in ways no one can predict today. Repeal is not enough.
We also need resilience.
The whole piece is here. The original paper is here. For more regulatory reform resources, see neverneeded.cei.org.
Over at Inside Sources, Wayne Crews and I have a piece summarizing the main findings of Wayne’s new 2020 edition of Ten Thousand Commandments, plus some reforms that will help with the virus response and economic recovery:
The only thing in a typical family’s budget that costs more than regulation is housing—which itself is made more expensive by zoning ordinances, tariffs on steel and lumber, and arcane mortgage regulations….
Just as every gallon of milk has an expiration date, every new regulation should have an automatic sunset. That way, if a rule proves unworkable or goes obsolete, it will automatically go away. …
Congress should create an independent commission to go through large parts of the 185,000 pages of federal rules each year and send lawmakers a package of harmful or old rules to repeal with a single up-or-down vote.
Read the whole piece here. The 2020 edition of Ten Thousand Commandments is here. More resources are at CEI’s #NeverNeeded website.
California’s AB5 law was already backfiring before the COVID-19 pandemic hit. The legislation intends to reclassify many California-based independent contractors as formal employees in an attempt to raise their wages and benefits. It has instead cost thousands of jobs—many of which are home-based and quarantine-friendly.
California legislators have reportedly been mulling an “oops” bill that would offer exemptions from AB5 requirements. Over in the Orange County Register, I argue that exemptions are not enough. AB5 should be repealed outright:
While offering exemptions has the virtue of requiring politicians to admit their policies are hurting people, it has three significant problems.
One, exemptions take time to process. We don’t have that right now. …
Two, the officials who grant exemptions would gain great power. There is a risk some would use this power to enrich themselves. California legislators would also be tempted to bully companies for campaign contributions by dangling AB5 exemptions.
Three, exemptions would give favored businesses a government-granted advantage over competitors.
Read the whole piece here. I weighed in earlier on AB5 here. Ryan Radia’s CEI study on AB5 is here.