Poor, Tired, and Stupid

In case you have not been following the headlines, here is a recap:

Obama to impose tariffs on Chinese tires: Obama imposes tariffs on China tires for 3 years, a decision that could anger Asian powerhouse

China Strikes Back on Trade: Beijing Threatens U.S. Chicken, Car Parts After Washington Slaps Stiff Tariffs on Tires

Stocks head lower on US-China trade concerns: Major indexes fall in early dealings amid concerns about US-China trade dispute

via Greg Mankiw’s Blog: A Coming Trade War?.

On the face of it, this is really stupid.As Brad DeLong explains:

Let’s see… 250 million cars in America… need 4 tires per car… need new tires every 2.5 years. 400 million tires a year… $1.4 billion dollars a year… 10,000 worker jobs saved… $140,000 dollars per worker-job per year.

Looks like we could (a) let the Chinese sell us tires, (b) tax each tire by $2.50, (c) pay each tire worker who loses his or her job $100K a year, and we come out ahead: American households have more money to spend on other things, China has more jobs to help what is still a very poor country grow, and tire workers have higher incomes and more leisure as well.

But, you say, it would be stupid to impose a $2 a tire tax and use the money to pay each laid-off tire worker $100K a year.

That’s the point: when the policy you are adopting is worse for everybody than a policy you agree is stupid, the policy you are adopting is best characterized as really stupid.

Don Boudreaux, in a letter to an Associated Press reporter, correctly describes the situation:

In your report today published at Money.AOL.com under the headline “US penalizes Chinese tires, infuriating Beijing” you write about “President Barack Obama’s decision to impose trade penalties on Chinese tires.”  Both the headline and your report miss what’s going on.

Tires are not sentient creatures; they cannot be penalized.  And although Chinese government officials are displeased with this protectionist move by the White House, the ultimate parties who are penalized by these higher tariffs are American consumers.  American consumers choose to buy increasingly large numbers of tires from China; the fuel that powers the rise in U.S. market share of Chinese-made tires is voluntary spending by American consumers; and so American consumers will suffer by being forced to pay a hefty tax simply to do what they’ve been doing now for years.

Uncle Sam’s tariffs and other trade restraints pick the pockets of Americans; they penalize each and every American for having the audacity to spend his or her money in ways that he or she – rather than industry groups and politicians – believe his or her money is best spent.

Your headline would have been far more accurate had it read “US penalizes American consumers, pleasing special-interest groups.”

The Chinese tire tariff is a particularly repugnant move by Team Obama. Victor Claar points out one moral dimension to the issue. For me, the bigger issue is that Chinese tires (read cheap tires) are probably mostly purchased by people who don’t have the money for the “premium brands”. When your income is minimal, all it takes is one surprise emergency expense to knock you down hard. People talk about unexpected medical expenses having this effect, but I bet unexpected car expenses are much more common. Confronted with an unplanned need for tires, the working poor can face some dire choices. Team Obama is taking some of the better choices away from the poor.

Don Boudreaux sums it up nicely:

No delusions should remain that the most recent presidential election has “transformed” Washington into anything grander than what it has always been: a ’spoils exchange’ where A and B shamelessly conspire to rob C and then swap the plundered proceeds with D for D’s commitment to help A and B retain their seats on this exchange.

Cats do not, and will never, bark.  They do, and always will, (rent-)seek out and devour weak prey.

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