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Tariffs as Tokens

September 14, 2009

Protectionism is back! On Friday evening, the Obama administration put in place a 33% tariff on Chinese tires. Here at ATN, we’re well versed in the problem of democratic failure – how special interests co-opt reform, and how being right simply isn’t enough to get proper policies passed. But this policy is such a gaping vacuum of stupid that it requires more thorough analysis.

At first glance, this would seem like your classic special-interest driven policy. The logic of collective action demonstrates that small groups have a far easier time organizing and acting in their collective interests than do large groups. Clearly, domestic tire producers are a small group, that would stand to gain significantly by the passage of this policy, while taxpayers are a large, dispersed group, who will bear a large, but dispersed cost.

But the interesting thing about this policy is – the tire producers didn’t even want it. Really! They didn’t put any pressure on the Obama administration to put this tariff in place. The tariff was requested by the United Steelworkers, a group that really doesn’t have a financial interest at stake in the matter at all. And yet, because the USW was behind the policy, the Obama administration fell in line.

Obama giving the USW this tariff is the equivalent of a husband giving to flowers to his wife – it’s just a token, a symbol of the power that USW still has to influence policy, and the “love” that the Obama administration has for unions. And it just goes to show how little political pain there is in imposing a small cost on a very large group of people – that the Obama administration could afford to do it just to take a symbolic stand with a union.

(HT: Shadow Government)


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