Friday, September 18, 2009

The Return of Jimmy Carter

It did not work out for the Chinese Navy Long ago. They built a nice modern Navy. They sent it out to sea and burned it only to escape into a self imposed world of protectionism and isolationism. Jimmy Carter tried it too. He did it a little more figuratively. He tried price controls and punitive budgets. He tried windfall profits taxes and budgets that punished a generation. He tried lousy taxation policy which led to double digit inflation. He is a smart man. He meant well. He was an educated man. Yet, he had no basic concept of economics. He had insufficient understanding of supply and demand and equilibrium. Surprising for someone who had a clear understanding of Nuclear physics and peanut farming. The basic concept is if you force the price lower than the market demands, supplies dwindle. Just as if there excess supplies, prices drop. The item, whatever it is, is yesterday's news. It's human nature. Get over it. But it was beyond his grasp. It seems we are at the the there we go again, phase to paraphrase a certain B movie actor, who seemed to grasp certain concepts better than others.

Now, in an effort to pander to steel workers, a 35% wholesale tariff (a tax) is being imposed on tires being imported from China. This supposed to give US tire companies an advantage by encouraging the purchasing of US made steel, produced by US steel workers. Who does this help? Who does this hurt? China will retaliate with their own tariffs on items we wish to sell them, such as food. Plus, we need their products and their money. Generally, poor to middle class people are purchasing Chinese made tires, so it clearly hurts them. Not to mention, by punishing China does anyone actually believe this makes US Steel more competitive than any other place in the global workplace? Global or US based tire companies will simply source from India or other countries with lower labor rates, so the tarriff will not restore or create any jobs on idled plants, perhaps at best - shift them from China. The only option would be reduce the labor rate and the operational costs of doing business within this country. That would be taxes, labor cost, and insurance. Tariffs, protectionism, and isolationism can only lead to bad things. More. The short term advantage of courting union support for election purposes is short sighted and bad for this country. It took China 500 years to recover from such mistakes and they are just now rebuilding that burned down Navy.

Ironically - though President Obama seems to have no issue subsidizing GM, which does direct business with China in terms of manufacturing and parts sourcing. Yet - I keep coming back to NASA and Constellation. He cannot afford that and the American jobs and American contractors associated with the program - or the tires.

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