“Some work has to be done. It’s little. So we have to do it.” Here are three of my favorite lines from them yes prime minister A British comedy series about politics. Most politicians who face problems feel that “something must be done.” Unfortunately, they tend to reach the same conclusion that the advisor reached Yes, Prime Minister episode
But in the U.S. economy, where government taxes, spends, and regulates as much as they do at three levels, there is another way to deal with problems that doesn’t involve taxes, spending, and more regulation. That is the way reduce Taxes, Expenditures, and Regulations. In short, some things have to happen predicament.
There is a long list of things that should be undone and that will help improve rather than exacerbate some of the problems we face. I would settle for five: regulation of home food production, the Jones Act, protectionist trade policies, restrictive immigration policies, and occupational licensing. In each case, I’ll show a specific problem that undoing these policies would improve
These are the first three paragraphs of my recent article for Hoover, “Don’t Just Stand There: Undo Something,” Defined conceptsMay 5, 2022.
One of the best sources for information on the impact of protectionism is the Peterson Institute for International Economics (PIIE). In a study published in March, Gary Clyde Hufbauer, a senior fellow at PIIE, and Megan Hogan and Eileen Wang, research analysts at PIIE, advocated trade liberalization as a way to reduce inflation and raise real incomes for American households. They estimate that eliminating Trump’s trade war tariffs and ending his 25 percent tariff on steel would achieve the equivalent of a 2-percentage-point reduction in tariffs. Based on this, they estimate, the Consumer Price Index (CPI) will be 1.3 percentage points lower than otherwise. So, for example, if these measures were taken this year, and assuming importers could adjust quickly, the CPI for 2022 would be 1.3 percentage points lower than otherwise. This would not be a permanent reduction in inflation, but it would mean that the CPI would be permanently 1.3 percentage points lower than that. Huffbauer etc Also assume that the relaxation of Buy America rules will lead to another one-time 0.6-percentage-point drop in inflation.
What would that mean for the average American family? A lot. The authors note that the average American household spent $61,334 on goods and services in 2020. A 1.3 percentage point drop in the CPI, due to Trump’s tariff repeal, would save that average household $797. And the savings will be 1.3 percent of the cost per year. And a 1.9-percentage-point drop in the CPI, which would occur if Trump’s tariffs were lifted and Buy America rules were relaxed, would save the average household $1,165 a year.
Read the whole thing.