More Corporate Welfare

Our leaders believe in free trade, except when the alternative is more politically expedient. What was it that GW said some weeks ago about tax increases? Something about "over my dead body?" Well, he just imposed taxes on steel imports of up to 30%. And you better believe that the cost of these tariffs will be passed on to American consumers. The expenses of all businesses which use steel products will increase, fueling inflation and impeding economic recovery. I read an estimate that this will cost the average family nearly $300 per year (more if a trade war ensues). Of course, this is a regressive tax increase, disproportionately burdening lower income households.

If some foreign nations have a steel subsidy, so that their taxpayers in effect buy steel for US consumers, that is great.


But if such a foreign scheme is unsustainable - which you would have to assume it would be - and this is foreseeable, then it would be irresponsible to allow American industry to evolve around "artificially low" steel prices.


In other words, if other countries choose to create artificial shocks in the steel supply chain, it can make sense to insert our own spring between ourselves and the shocks, so that we don't cycle from gluts to shortages when they do.


Though of course, assuming the next President will have the clout to get rid of the tariffs - or that such a mechanism can ever be reasonably managed by a political structure - well, that's anybody's guess.


Mind you, I have no idea if this is what it's actually all about, and no time to look it up just now, so maybe somebody else could look into it and post some links.


But so far as having a disproportionate effect on lower-income households, I suspect it will have even a more exaggerated effect on the young children of minority single parents, and the worst effect of all on the unborn children of teenage mothers - worse even than abortion, perhaps.


eLROY

In another post, in reference to my interleaving of insults with explanations, Mason stated,


"Many people will of course seize on the second point and wonder why you had the need to say it and just conclude that you are somewhat insecure, and thus not even confident in your first point."


And that is, of course, the fun. Because when you go explaining about how a steel tariff will convert gifts from their taxpayers to our steel consumers, into gifts from their taxpayers to our taxpayers - while our steel manufacturers compete on an even footing - a lot of people won't get it. Rather, they will have to rely on someone's reputation and credibility to decide if what he says is accurate.


To me, that is a disgrace. If someone doesn't know whether to believe something or not - because it is too complex for him to understand himself - I would much prefer to scare that person away, and have him not even think about the subject at all. An objective fact is not true or not based on whether or not I am mean, or insecure, or have an emotional hole, or whatever! And all too many people believe things simply because the person saying them seems nice.


So don't take my word for it, I am insecure and emotionally unstable, if not downright evil. And if that is all someone can pick up on and sort, then the truth will be forever off limits to him - at the same time as he will open himself up to a world of lies - regardless of what I do.


If I can throw someone off the truth by packaging it with an insult, as easily as someone else can throw him off the truth by packaging a lie with a smile, you have to admit, that is kind of funny!


It says something about people's abilities to overcome their emotions and think for themselves.


eLROY

Two interesting things i read today about this. The first is that the tariff is part of a behind the scenes deal with Congress which will grant Bush fast-track authority later this year in exchange for some favours to special interest groups. In other words, Bush is buying votes as part of a larger push for more trade liberalization.


The second view is that this is simply election politics. These tariffs are bound to be struck down by the WTO later on and so will never really have any effect, but this won't occur until the Congressional mid-term elections have passed. By then the issue will be forgotten and in the mean time, Bush buys some support in the all important mid-west industrial belt.

Ahh, the theory of the second best. A common refrain most often heard when among liberal economists. It's the idea that a policy that is generally considered wealth reducing (trade tariffs in this case), can actually be wealth enhancing when used in response to another bad policy (trade subsidies in this case). Sort of a two wrongs make less than one wrong argument.


I'm not buying it in the case of steel. I'm guessing that that foreign countries will continue to support steel production for at least the next 10 years. If and when these non-sustainable policies cease, the US capital markets are so robust that there I foresee very little problem ramping up domestic steel production as the market demands it. The present discounted value of a short period of higher steel prices 10 years down the road is miniscule compared to the NPV of 10 years of steel protectionism.

'These tariffs are bound to be struck down by the WTO later on '


its nice to point this out. think about this.


brad