New Cato Paper Warns of the Consequences of Restrictions on Chinese Tires

Despite the controversy that seems to color all portrayals of U.S. trade with China, the bilateral relationship has held up remarkably well, to the benefit of both countries. But, as I explain in this hot-off-the-presses Free Trade Bulletin, things could go south quickly if President Obama grants the wish of the United Steelworkers union to impose import restrictions on Chinese-produced passenger tires.

Under a special U.S. statute that applies only to China, the president can authorize import restrictions in cases where a domestic industry is found to be suffering from “market disruption” on account of increased imports from China. The U.S. International Trade Commission already rendered that conclusion in the tires case and recommended that the president impose duties of 55 percent. Though duties might benefit the USW, which represents fewer than half of all U.S. tire production workers, the restrictions would be immensely costly to almost every other interest in the tire supply chain, including distributors, wholesalers, retailers, downstream industrial users, and consumers — especially lower income consumers.  Such a decision would amount to a crystal clear U.S. disavowal of its pledge to the G-20 to avoid new invocations of protectionism, just one week ahead of the G-20 summit in Pittsburgh.

The stakes are particularly high in the tires case because the president has the discretion to reject the tariff recommendations altogether, which is exactly what President Bush did on all four occasions when the ITC recommended restrictions under this statute during his administration. Unlike antidumping and countervailing duty restrictions, which run on statutory autopilot without requiring the president’s attention or consent, Section 421 explicitly requires the attention and participation of the U.S. president. The Chinese will view restrictions in this case, then, as a personal directive of President Obama, and the consequences for bilateral relations could be severe.

Please read the paper and circulate liberally.

New Senate Agriculture Committee Head Received Farm Subsidies

In his blog post yesterday — appropriately entitled “Congressional Conflict of Interest“ — my colleague Chris Edwards questioned the selection of Sen. Blanche Lincoln (D-Ark.) to head the Senate Agriculture Committee:

Lincoln has been “a tireless advocate for the Arkansas rice industry’ and a ‘champion for agriculture.” You can see what 20 or so other agriculture lobby groups say about Lincoln here. These are very laudatory remarks, but what about the taxpayers? What do taxpayers think about her support for the $20 billion or so in annual giveaways to farmers?

I wonder what taxpayers think about the fact that Senator Lincoln and her family have received hundreds of thousands of dollars in farm subsidies?

From a 2007 USA Today article:

Members of Congress must report sources of income totaling more than $200, but most get payments through partnerships or other entities, so it can be difficult to learn which ones receive the subsidies. Recipients are searchable by name on, but, for example, payments to Sen. Blanche Lincoln, D-Ark., are listed under her maiden name, Lambert, at a Virginia address near Washington.  Records show Lincoln and her family members collected $715,000 from 1995-2005, the most recent year complete data are available. She said she personally received less than $10,000 a year, and the subsidies ended in 2005 when her land was sold.

Let’s say I force a stranger under threat of imprisonment or violence to part with part of his or her paycheck, and proceed to give that money to a friend.  I would rightly be labeled a thief or worse.  Suppose I not only gave the money to my friend, but kept a cut for me and my family.  That would be even worse.

But when politicians do it we call them “public servants”?

Education Tax Credits Much More Popular Than Vouchers

A recent poll from Education Next deserves a spotlight.

Specifically, it shows once again that there is solid, widespread support for education tax credits. And it once again shows greater support for tax credits than for vouchers.

Unfortunately, the poll does not ask parallel voucher and credit questions; there are no strict apples-to-apples comparisons. So I’ve compared the voucher and credit questions that receive the highest levels of support.

The result: tax credits blow vouchers out of the water.

The graph below shows the percent increase/decrease in support/opposition for tax credits as compared with vouchers.


In the nationally representative sample, support for credits is about 50 percent higher than for vouchers. And opposition to credits is more than 50 percent lower. And among public school teachers, support for credits is almost 120 percent higher than support for vouchers.

As I noted earlier today, an astonishing 57 percent of public school teachers support education tax credits. Only 26 percent support vouchers.

Let this graph burn into your brain a little, and then explain to me why vouchers are ever the first choice when pursuing private school choice.

A Consumer’s Look at Health Care

Michael Tanner and Michael Cannon have been doing an excellent job exposing the fallacies and misconceptions of Obama’s proposal to further expand government intervention in the health-care sector.  One of their challenges is explaining to people that many of the problems that currently exist are the fault of government.

For instance, I went for my annual checkup today (though “annual” is a slight exaggeration since I went 35 years without a checkup and this is just my second visit in the past 3.5 years).  As I dealt with a blizzard of paperwork at the doctor’s office, I realized that this was just the beginning of a tedious process. At some point in the next few weeks, I’ll receive incomprehensible statements from my insurance company, followed by similarly indecipherable bills from the doctor. And since I also went down the hall to a different office for my blood test, I suspect I’ll have two statements and two bills — neither of which I’ll have the energy to figure out (though I shouldn’t complain too much since I once went to a local clinic after spraining my ankle playing basketball and somehow had to deal with three separate bills).

I’m guessing that this type of experience is one of the reasons why Americans express some degree of unhappiness with our current system — especially when they wind up having to write a check and suspect that their insurance company is squeezing them in some unknown way.

But how many people realize that this bureaucratic process is the result of government interference? For all intents and purposes, social engineering in the tax code created this mess. Specifically, most of us get some of our compensation in the form of health insurance policies from our employers. And because that type of income is exempt from taxation, this encourages so-called Cadillac health plans.  This seems great, at least on the surface, but now let’s consider the unintended consequences.

We have replaced (or at least augmented) insurance with pre-paid health care. Insurance is supposed to be for unforeseen major expenses, such as a heart attack. But our gold-plated health plans now mean we use insurance for routine medical costs. This means, of course, we have the paperwork issues discussed above, but that’s just a small part of the problem.

Even more problematic, our pre-paid health care system is somewhat akin to going to an all-you-can-eat restaurant. We have an incentive to over-consume since we’ve already paid. Except this analogy is insufficient. When we go to all-you-can-eat restaurants, at least we know we’re paying a certain amount of money for an unlimited amount of food. Many Americans, by contrast, have no idea how much of their compensation is being diverted to purchase health plans.

We need to consider how this messed-up approach causes inefficiency and higher costs. We consumers don’t feel any need to be careful shoppers since we perceive that our health care is being paid by someone else. Should we be surprised, then, that normal market forces don’t seem to be working? (It is worth noting that costs keep falling and quality keeps rising in the few areas — such as laser-eye surgery and cosmetic surgery — that are not covered by insurance.)

Imagine if auto insurance worked this way, or homeowner’s insurance. Would it make sense to file insurance forms to get an oil change? Or to buy a new couch? That sounds crazy. The system would be needlessly bureaucratic, and costs would rise because we would act like we were spending other people’s money.  But that’s what would probably happen if government intervened in the same way it does in the health-care sector.

So what does all of this mean? We have a problem caused by government. (This little rant of mine doesn’t even touch on other problems caused by government, such as Medicare and Medicaid.) People are unhappy because they have to deal with the unintended consequences of government intervention. Clever politicians then say the only way to make people happy is to have even more government. I’d like to try to explain why this makes sense, but I have to fill out some forms.

Politicians Standing in the Way of Data Destruction

There is no better security for data than not collecting it in the first place. And when data is no longer needed, the best security for it is to destroy it.

That’s why I was surprised to see a request from the chairman and ranking member of the House Homeland Security Committee asking the Transportation Security Administration to preserve data that is scheduled for destruction.

Chairman Bennie Thompson (D-MS) attended and spoke at the first meeting of the DHS Privacy Committee four years ago. I have regarded him as a champion of privacy since then. But he and Rep. Peter King (R-NY) want biometric data collected for the defunct Registered Traveler program preserved on the chance that Registered Traveler is revived. This is an inappropriate request.

Anyone who submits data to the government should recognize the risk that it will be preserved longer than promised and put to new uses. There were merits to the Clear system within Registered Traveler. I wrote about them in my book and testified about them in 2005. One of the serious demerits is that Registered Traveler created stores of biometric data that politicians are now trying to control.

The Coast Guard Kerfuffle: Normalcy Breeds Overreaction

Terrorists are weak actors who use violence to induce overreaction on the part of their stronger victims. That lesson was on display today when someone overhearing radio traffic from a routine Potomac River Coast Guard exercise misinterpreted it and alerted the media. Among the results was a 20-minute grounding of planes at Reagan Airport.

The good news is that the country is relatively safe. Americans and the national security establishment are tuned to the threat of terrorism. No attack to rival 9/11 ever occurred, and it’s unlikely that one ever will.

But the 9/11 attacks had a dastardly effect. To match the results of those attacks, we imagined that terrorists had outsized technical skills, support networks, and insights. Vigilance and continued antiterror efforts will ensure that they never do.

The bad news is that the government has never issued any reassuring signals. American society remains on edge and predisposed to overreact when something happens and — in this case — when nothing happened. The “scare” produced by the Coast Guard exercise illustrates how sensitive the country remains to terror fears.

Despite improved rhetoric and the promise of sensible, strategic counterterrorism, the Obama administration has yet to give the country confidence in its security. It has not articulated its counterterrorism plan and it has not created or implemented a terrorism communications plan. Unlike health care and education, these are responsibilities of the federal chief executive.

Without a strategy and communications plan in place, the administration will be at a loss to keep the nation on an even keel if and when any real terror incident occurs. The Obama administration must plan, and must be seen as having planned, if it is to prevent any future terrorism event from needlessly harming the country with panicky overreaction.

Based on what I’ve read, I see no fault in what the Coast Guard did, and I hope their review of the incident produces no changes in their procedures other than perhaps better preparation to quell overreaction.

Weekend Links

  • The hard truth about end-of-life care in America.
  • If current trends continue, the U.S. government will soon spend a greater portion of GDP on Medicare and Medicaid than Canada now spends on its entire single-payer government-run system. Here’s a way to fix that.