Wednesday, August 13, 2003

Rights and Reason: President Bush can undo his worst economic mistake

The Wall Street Journal has a good op-ed on the wrongheadedness of President Bush's steel tariffs.

The President has been quiet about his tariffs ever since he imposed them in March 2002, and with good reason. The evidence is that they've done far more economic harm than good, especially to American manufacturing. Designed to help only a single industry, the tariffs have instead punished the far more numerous industries that use steel.

In the wake of the tariffs, domestic steel prices have risen by 30% or more. The price of hot-rolled steel, a major industrial commodity, nearly doubled from late 2001 to July 2002. Shortages in specific products abound, as foreign steel makers have sent their steel to suppliers in other countries. Many steel consumers have struggled to find reliable, quality product at prices that keep them competitive with foreign manufacturers.

This has all cost American jobs. A study done this year for the Consuming Industries Trade Action Coalition found that higher steel prices cost some 200,000 American jobs and $4 billion in lost wages from last February to November. That compares to employment in the entire domestic steel industry of only 188,000. No fewer than 16 states lost at least 4,500 steel consuming jobs, including the key Presidential election states of Pennsylvania and Florida that each lost nearly twice that number. (Karl Rove, see Electoral College map.)

The specific job consequences were laid out in illuminating detail on the Senate floor last month by Tennessee's Lamar Alexander. The Republican noted his state is now home to 900 auto supply companies that employ 100,000 workers. When those companies couldn't raise prices to cover increased steel costs, they "suffered losses and began to lay off employees. In a few instances entire plants closed." Auto supplier ArvinMeritor closed a plant employing 317 in Gordonsville. A plant in Pulaski laid off 100 more.
Exactly. And as the Journal observes:

Rarely do American Presidents get such a clean chance to amend their economic blunders as Mr. Bush now has with steel. Lifting the tariffs would do more to help workers and create jobs than all of the media road shows and economic summits from here to Election Day.

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