Obama’s Trade Hypocrisy

Joseph Stiglitz, in Globalization and Its Discontents, was definitely on to something when he criticized developed countries for preaching liberalization of trade and then hypocritically sheltering themselves behinds walls of protectionism. Developed countries subsidize certain goods – think of agricultural subsidies in America – to crowd out foreign competition, or they can enact tariffs that make foreign goods more expensive and have the foreign goods effectively lose their comparative advantage.

President Obama recently practiced such hypocrisy by enacting a 35% tariff on low-grade Chinese car tires. As The Economist points out,

The number of jobs affected is barely a rounding error in measurements of the mighty American workforce…But in geopolitical terms, it is a whopper.

I shant go into much obvious detail about the actual net job gains from free trade, so I’ll elaborate on the second point of The Economist’s point: the political consequences.

The infamous Smoot-Hawley Tariff Act was passed in the midst of the Great Depression in an attempt to revive the American workforce. Accepted economic wisdom regarding Smoot is that it not only didn’t solve unemployment, it made it worse. The same situation could occur with this tariff on tires. China could start a trade war and impose tariffs on American goods. Suddenly, one retaliation leads to another and the walls of inefficient protectionism begin to grow larger.

The possible trade war is also accompanied by the increasingly hypocritical reputation of America in terms of trade liberalization. Why would anyone listen to American recommendations for free trade when they don’t practice it themselves? Whatever happened to Obama’s cry of restoring America’s credibility around the world?

Several news sources have pointed to political pressure from the United Steelworkers Union in order to get support for healthcare reform, but I haven’t seen any concrete evidence for that so I won’t believe it just yet.

Obama should be calling on all countries to lower trade barriers. But he’s got to practice what he preaches.

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Obama and the Patriot Act

According to the Justice Department, the Obama administration will throw its support behind a renewal of three key provisions of the Bush-era Patriot Act. The three provisions are roving wiretaps, monitoring of “lone wolf” terrorists, and access to business records – which includes the often-criticized access to personal library records.

This move by Obama particularly disappoints me. I thought that on the issue of civil liberties he’d be better than Bush.

I want any social democrat/progressive out there to apply the same scrutiny to Obama as you would to Bush on matters like this. If/when Bush did this, people would be/were up in arms.

 

Public Option

An Upset Patterns reader writes in:

In all your politicalness, I don’t hear you talking much about healthcare.

True.

A cookie-cutter libertarian answer to the problem of soaring cost in health care is similar to any issue: deregulate the industry, stop giving away goodies like medicare and medicaid, and don’t give tax-breaks to company-provided health care. All of these things distort the spontaneous order of the market for health care. Regulations drive up costs more than they benefit consumers. Freebies like medicare and medicaid mean that when people are buying healthcare, they aren’t using their own money, which means they’re more likely to buy more than they otherwise would. Tax-breaks to company-provided health care mean that companies are less responsible in buying the insurance, self-employed people are crowded out, etc.

All of this make sense to me. If one is to look at a graph showing the rising cost of health care over time, there are two major “blips” in the general trend: new tax policy related to employer-provided health care after world war II and the introduction of medicare. America, by having government currently spending 50 cents of every healthcare dollar, seems to have a tragic mix of socialized and capitalist medicine.

But maybe the “get the government out” answer is too simple. Do adverse selection problems in insurance mean that making everyone buy health insurance – even those who do not need it or want it – will lower costs and expand affordability? Is there a moral concern to provide health insurance to everyone, regardless of its effect on increasing the deficit? Are insurance companies actually – as people seem to believe – screwing people out of coverage?

Obama’s proposed “public option” is a relevant issue worth discussing. What needs to be considered:

• Is this actually not going to raise the deficit? What makes it a public option if it’s not subsidized?
• Obama himself said that “UPS and FedEx are doing just fine. It’s the Post Office that’s always having problems.” Why will a government-run system be more efficient than private ones?
• This is a huge liability for the future. Programs like this one don’t go away. If costs of it get out of control in the future, as has happened with social security and medicare, it’ll be a gigantic strain on the budget.
• The number of uninsured Americans is commonly said to be about 45 million. Well, of that number, a third make over $75,000. Those are people that could afford it but don’t buy it. Is making them be covered when they choose not to be really a good answer?
• What about for people who decide, since they will get free health care no matter what, that they will start smoking, become obese, and become a crack addict? Should healthy people pay for them?

A last thought from The New Atlantic:

I’m a Democrat, and have long been concerned about America’s lack of a health safety net. But based on my own work experience, I also believe that unless we fix the problems at the foundation of our health system—largely problems of incentives—our reforms won’t do much good, and may do harm.