Obama’s Prosperity-Killing Protectionism
I often disagree with Matthew Yglesias, but I found myself cheering when I read parts of his Slate column on President Obama’s State of the Union Speech.
The president’s stated wish to protect domestic jobs by hindering trade is, Yglesias writes, “a strikingly retrograde, self-contradictory, and confused agenda of reviving American prosperity through mercantilism.” Moreover, Yglesias supports his harsh verdict with lucid reasoning:
Think of it this way. One idea for putting Americans back to work would be to raise the gasoline tax and use the proceeds to buy manufactured goods that we then dump into the middle of the Atlantic Ocean. This would, I promise you, work perfectly well. The previously unemployed folks with the new factory jobs would thank us for our trouble. But it would be a curiously prosperity-destroying way of bolstering the economy. When Obama brags that “over 1,000 Americans are working today because we stopped a surge in Chinese tires,” he’s implementing a small-scale version of a similar idea. Blocking an influx of cheap Chinese tires does, indeed, preserve jobs for tire-makers. But tire-buyers pay higher prices and presumably curtail their purchases of some other goods or services in exchange. Meanwhile, Chinese tire-makers have lost jobs and are now less likely to buy American soybeans or DVDs of our movies....
[Obama’s] line of thinking swiftly stumbles into self-contradiction. After lambasting companies that “ship jobs overseas,” Obama launched into a feel-good anecdote about how “Siemens opened a gas turbine factory in Charlotte and formed a partnership with Central Piedmont Community College.” Is a politician in Germany giving a speech lambasting Siemens for shipping jobs to the U.S. and complaining, as Obama did, that it’s “not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized,” perhaps through partnerships with community colleges[?]
Were they alive today, Frederic Bastiat and Henry Hazlitt would surely be delighted—delighted, that is, to see that their arguments against protectionism are still in use. But surely they would be disheartened to see that it is still necessary to use them.