This Is Why Freaking Republicans Drive Me Crazy
A little-noticed provision in a bill passed by the House this month calls for relying more on U.S.-flagged ships to deliver food aid to foreign countries—a change backed by labor groups and criticized by the White House.
The measure, tucked into a Coast Guard and maritime bill, would increase the proportion of food aid transported abroad on private ships flying the U.S. flag, which are required to employ primarily American mariners.
The Obama administration opposes boosting the requirement to 75% of food aid, in tons, from the current 50%, saying it would raise shipping costs by about $75 million a year—siphoning off funds that otherwise could be used to send food aid overseas.
Jeez, when President Obama of all people has to lecture you that protectionism and kowtowing to labor groups is costly, you have gone off the rails. The Jones Act is one of the stupidest pieces of interventionist legislation on the books and the House should be working on its repeal to sort out the oil transport mess. Instead, here are the Republicans in the House doubling down on it. With so-called friends of capitalism doing this garbage, who needs enemies? At least Progressives trash the economy without pretending that they are pro free market.
By the way, here is a bit from the Cato article on the Jones Act and oil and gas prices
First, the Jones Act - a 94-year-old law that requires all domestic seaborne trade to be shipped on U.S.-crewed, -owned, flagged and manufactured vessels – prevents cost-effective intrastate shipping of crude oil or refined products. According to Bloomberg, there are only 13 ships that can legally move oil between U.S. ports, and these ships are “booked solid.” As a result, abundant oil supplies in the Gulf Coast region cannot be shipped to other U.S. states with spare refinery capacity. And, even when such vessels are available, the Jones Act makes intrastate crude shipping artificially expensive. According to a 2012 report by the Financial Times, shipping U.S. crude from Texas to Philadelphia cost more than three times as much as shipping the same product on a foreign-flagged vessel to a Canadian refinery, even though the latter route is longer.
It doesn’t take an energy economist to see how the Jones Act’s byzantine protectionism leads to higher prices at the pump for American drivers. According to one recent estimate, revoking the Jones Act would reduce U.S. gasoline prices by as much as 15 cents per gallon “by increasing the supply of ships able to shuttle the fuel between U.S. ports.”
Some of these costs could potentially be mitigated if it weren’t for the second U.S. trade policy inflating gas prices: restrictions on crude oil exports. As I wrote for Cato last year, current U.S. law – implemented in the 1970s during a bygone era of energy scarcity and dependence – effectively bans the exportation of U.S. crude oil to any country other than Canada. Because U.S. and Canadian refinery capacity is finite, America’s newfound energy abundance has led to a glut of domestic oil and caused domestic crude oil prices (West Texas Intermediate and Louisiana Light Sweet) to drop well below their global (Brent) counterpart. One might think that this price divergence would mean lower U.S. gas prices, but such thinking fails to understand that U.S. gasoline exports may be freely exported, and that gasoline prices are set on global markets based on Brent crude prices. As a result, several recent analyses – including ones byCitigroup [$], Resources for the Future and the American Petroleum Institute - have found that liberalization of U.S. crude oil exports would lower, not raise, gas prices by as much as 7 cents per gallon.
jmod46:
It's almost as though Republicans are money-grubbing, hypocritical politicians like the Democrats. Tears on my pillow tonight. Let's repeal these legislative nightmares. While we're at it, let's get rid of the sugar subsidy and all other forms of corporate welfare.
April 25, 2014, 4:04 amVypuero:
So why are the prices of US Transport so much higher? It seems we could also do something to be more cost competitive. I very much doubt it is just because US Labor is that much more. It must have more to do with taxes and regulations. Why not start there and give a boost to the US Economy both ways?
April 25, 2014, 6:46 amJess1:
According to gpo, this section is courtesy of Mr. Rahall. Hardly a "republican". I would also note that the WSJ author failed to understand that the bill seeks to expand, not contract, domestic shipping.
April 25, 2014, 8:03 amOh, and "ships"? You once worked w/what is now XOM, and should know that "ships" are seldom used for intrastate bulk goods - we use barges.
rst1317:
Labor makes a big difference in the case of shipping via the seas because of the amount of time involved and little difference in productivity for the smaller ships that would be carrying these goods.
April 25, 2014, 8:48 amMingoV:
An item not discussed is why are US sailors almost always on foreign ships? Because we make it too danged expensive for ships to be owned and operated by US companies. When entering US ports, there's an advantage to being US flagged, which is why so many oil tankers do so. We have fugged up maritime policies for more than a century.
April 25, 2014, 2:35 pmmahtso:
The blogger does not provide a citation for the bill at issue and I also did not see one in the WSJ piece, so I do not have benefit of complete information. But a couple of points: although this may be protectionism, I see no proof that the Republicans were kowtowing to unions. It also appears that this bill was designed to undo a change that was made about 2 years ago. I also get the impression that the bill included substantially more than this one item. As such, it may be that there was no realistic way to pass the bill without the quid pro quos that are a hallmark of law making (and, sausage making too).
Ironic that the blogger routinely cries coke and pepsi, but when a real example comes along he slams only the Republicans.
April 26, 2014, 7:15 ammarque2:
There is no sugar subsidy. It is a sugar price support program. Government has elaborate equations to restrict planting in the US and to restrict imports to 40% of the total supply - this causes the price tonrise through normal "supply and demand"
It is still obnoxious and should be repealed - but it is not a subsidy.
April 26, 2014, 8:03 amjmod46:
Oops. I misspoke. And I even knew better. Thanks for clarifying.
April 26, 2014, 8:53 amRudy:
If these 13 ships are "booked solid", why doesn't the market respond with more US flagged ships?
April 26, 2014, 10:29 amherdgadfly:
From Wiki, it would appear that government price supports constitute a subsidy.
A subsidy is a form of financial or in kind support extended to an economic sector . . . The most common forms of subsidies are those to the producer or the consumer. Producer/Production subsidies ensure producers are better off by either supplying market price support, direct support, or payments to factors of production.
When US sugar farmers are paid more than the world commodity market, they are being subsidized and when combined with past farm programs affecting corn, elevated high fructose corn syrup prices get paid to producers such as ADM. for both HFCS and ethanol production. The final straw on the camels back is the prohibition tariff that will not allow the import of Brazilian cane for use in making ethanol.
April 27, 2014, 1:10 amherdgadfly:
Hmmm - , barges like the Mobro 4000 in tow by tugboats like the Break of Dawn- maybe using the Caloosahatchee -Okeechobee waterway across Florida and the Atlantic Inter-coastal waterway along the east coast. Brilliant!
April 27, 2014, 1:35 ammarque2:
Your definition does not support your case. If cash is given to someone it is a direct or indirect subsidy. EG giving ethanol producers 45 cents per gallon is an indirect subsidy for the corn growers.
For sugar no money trades hands - government policy restricts growth and imports. These have never been considered a subsidy - it is a price support program. No doubt even experts can get confused between the difference.
Note though that one is more nefarious than the other. Subsidies increase supply so at least folks have more food. Price supports decrease supply so we are left with less.
I should also note that there are combined programs where the government will actually pay for a farmer not to grow food. I believe Reagan got rid of these on the US. And another type where the government guarantees a minimum payment, if the price goes below a certain level subsidies kick in, which is a subsidy but seems like a price support program.
Note that the sugar program is none of these. If the price drops a certain level - there are no extra payments. Government doesn't pay you to leave land fallow - they just make it illegal to sell your sugar without permit and they don't give a direct subsidy either.
April 27, 2014, 7:52 amJess1:
Mob owned and operated garbage scows are relative to this exactly how?
April 28, 2014, 6:21 amJess1:
Because there are more than 13. This entire article = ARRRGH.
From USMA 2011 report:
Tankers: 56
http://www.marad.dot.gov/us-flag_fleet_10000_dwt_and_above.xls
April 28, 2014, 6:31 am