Vitter, Boustany choose poorly on Jones Act support
Sen. David Vitter’s ability to graft conservatism onto Louisiana’s populist political culture has made him a force in the state’s politics and an early favorite to win the governor’s race next year. That doesn’t always translate into the best policy, with him and a fellow member of the state’s Congressional delegation running afoul of this error recently.
With new power as a committee chairman, Sen. John McCain has pledged to increase pressure to eliminate requirements of the Merchant Marine Act of 1920, better known as the Jones Act. Passed in the heady, protectionist-oriented days after World War I, this law prohibits foreign-built, foreign-registered vessels with foreign crews and without substantial domestic ownership from journeys transporting cargo from one U.S. port to another directly. Both Vitter and Rep. Charles Boustany, whose constituencies contain a significant minority of shipbuilding activity in the country, have voiced opposition to their fellow Republican’s idea. Not surprisingly, generally supporters in Congress come from the majority of states that have no intracoastal shipping interests, while the opponents cluster from coastal states.
McCain, with considerable evidence backing him, says the much higher building and operating costs of these vessels cheat American consumers, for the overpricing get shoved down the supply chain and ultimately down the throats of the buyers of the shipped products. While Boustany, Vitter, and others argue that this prevents foreign competition, whose pricing can be a third or even quarter of what gets paid in America for building and staffing, from eliminating a large number of jobs, they conveniently forget the jobs being cost to the country as a whole by redistributing economic wealth towards favored but less inefficient industries, depriving this input from activities that would use these kinds of resources more efficiently and thereby create greater wealth, more jobs, and better ones.
Worse, the Jones Act only serves to enable, rather than reform, counterproductive policies that artificially inflate the prices that get passed on to consumers. For example, minimum wage laws price labor above its actual contribution to the wealth creation process, and unionization that gives these combines wide latitude over wage demands drives labor’s prices up further. With extensive unionization in both building and operating ships, more than any other factor they contribute to the industry and its workers pocketing surplus wealth. Without the Jones Act, more supply pressure would push down wages to their natural and appropriate levels, with unionization becoming less important.
Understanding this demonstrates the red herring argument used also to support the existing law: that propping up the maritime industry serves a national defense interest, in the ability of America to have productive capability and operating capacity at hand in case of wartime emergency. But this confuses the symptom with the disease; if the problem is much of the industry would wither away without the law, it’s not because of the law’s absence, but of the underlying deliberate mispricing of labor that must be cured in order for this resource to exist at a sufficient level – lower-paying and less profitable but better able to eat into market share than if on the shoulders and backs of consumers.
And the ability of the Jones Act to address this sufficiency argument became severely questioned in the wake of the hurricane disasters of 2005. Even with it around for 85 years, the U.S. merchant fleet proved unable to meet the rescue and rebuilding demand from that catastrophe, leading former Pres. George W. Bush to waive the law under the legal authority given to him in it. And to demonstrate how it politicizes the issue, Pres. Barack Obama with the coast experiencing similar duress after the well explosion disaster of 2010 refused to waive it as a sop to the industry and his union constituency.
Unfortunately, the redistributionist nature of the law plays well into the fading but still potent populist paradigm in Louisiana. Substantial benefits from it concentrate in a few areas such as the state, while the costs become dispersed widely nationally therefore costing little on a per capita basis, making it hard to organize against it. Certainly the principled response becomes less appealing to Louisiana interests who get the relatively large benefits at others’ expenses.
Yet something being popular in an area doesn’t make it right for the country or even that constituency. The idea of others paying for something you get resonates in the populist worldview, and it may win Vitter more votes than it loses in Louisiana, but that doesn’t make it the optimal policy both for the country as a whole and in the sense that it does harm to individual freedom to all both nationally and in Louisiana by using government to extract property from them to give to others without reasonable justification. Both Vitter and Boustany and the remainder of the state’s delegation should support McCain’s effort.
Posted by Jeff Sadow at 10:20