My first thought when I read the headline I Support Trumps Tariffs but Need an Exemption was wow, McSweeneys Internet Tendency is really going to knock this one out of the park. I love good satire.
I half expected to look at the byline and see Orren Boyle, a steel executive and one of the villains of Ayn Rands Atlas Shrugged, listed as the author. Throughout Atlas Shrugged, Boyle enriches himself by pulling political strings and (successfully) seeking special privileges.
And thats exactly what Allegheny Technologies CEO Robert S. Wetherbee is asking for: special privileges. He wants one set of rules for everyone elseabiding by the Trump tariffs, which he says rescued one of his idled plantsbut a special set of rules for him and his company.
Economists and people who paid close attention in their classes understand the basic economics and politics of tariffs: they waste resources, and to infer, as Wetherbee does, that its an unalloyed good that domestic production has risen and companies have restarted idle mills is to ignore the unseen costs of the tariffs. Those resourcesthe labor, capital, and so on were using to produce steelare being wasted because they could be more advantageously deployed doing something else (with apologies to Billy Joel, heres an explanation of what it means to be a Tariff Man).
Theres a deeper point here in Wetherbees claim that his company needs an exemption. One of the (literal) textbook conditions for long-run economic growth is the rule of lawa dependable legal system that applies the same rules to everyone. Allowing carve-outs and exemptions via an especially opaque process does a few things.
First, it interferes with peoples expectations by adding additional uncertainty to the policy environment. Firms have to add more political calculations to their long-range strategic planning at the expense of commercial calculations. Instead of satisfying customers, they have to focus on satisfying and appeasing regulators and those in a position to grant or deny exemptions.
Second, it encourages firms to hire more lobbyists and lawyers. As Eric Boehm notes for Reason, the process of applying for and getting exemptions from tariffs is, unsurprisingly, a bureaucratic mess. Its a make-work program for lawyers and lobbyists who are helping their employers navigate the regulatory jungle when they could be doing something productive.
Third, opaque bureaucratic messes create opportunities for corruption. There are undoubtedly a lot of places where regulators and others could essentially extract bribes because they have veto power over the exemption requestand a lot of places where firms might move the paperwork along with a few well-placed donations.
Tariffs waste resources and, contra the Tariff Man in the White House, make Americans poorer, not richer. Robert S. Wetherbees special pleading in the Wall Street Journal illustrates yet another way in which interventionism can be the enemy of economic progress.
But lets not hate the player. Mr. Wetherbees op-ed is simply an illustration of a larger systemic problemafter all, hes not alone (see the caption on the picture that accompanies this.) Lets hate the game. Lets help executives like Mr. Wetherbee get back to running their companies productively instead of begging for special privileges. Instead of granting firms exemptions from the tariffs on a case-by-case basis, lets grant everyone an exemption and get rid of the tariffs altogether.