May 2, 2002

FORGET OIL, CAN YOU IMAGINE A STEEL EMBARGO? :

The Anatomy of a Lousy Decision (Lawrence Henry, 5/1/02, American Prowler)
President Bush's decision in March to impose a 30 percent tariff on imported steel has drawn wide-ranging criticism, some of it notably fierce. "Bush's
Folly," headlined the March 7 edition of "The Times" of the UK. Certainly, the decision seemed to contradict Bush's championing of free trade as a matter of policy. Most commentators have criticized Bush for the fundamental error of imposing a tariff--protecting 160,000 steelworkers while raising costs for 12 million workers in steel consuming industries, for example--just to win votes in steel-producing states.

The decision may indeed have been a bad one. But making it may not have been the one-dimensional political calculation virtually all critics have described. Bush may instead have found himself squeezed between easily explainable costs--the tariff--and nearly impossible-to-explain measures to contain future costs, namely the pensions and retiree health-care benefits of the workers in a dying industry. These are the so-called "legacy costs" of the steel companies. And given the tendency in the press (and in Democrat political rhetoric) to go for the easy jugular, Bush may have decided to take the short-term hit, and deny his political enemies a big target.


Mr. Henry goes on to argue that the specter of having the federal government assume liability for a failed steel industry's pension plans may have influenced Mr. Bush's decision and might even justify it. I wonder if there may not also be some national security justification for preserving a domestic steel industry. To the extent that our military armaments depend on steel for their manufacture, it would seem necessary to insure that we have domestically produced steel available for at least these limited purposes. It may on the other hand be the case that we could ramp up new plants in a fairly short time should our supplies ever be threatened, in which case this concern would not justify the government in propping up a dying industry. Meanwhile, I don't mean to suggest that these considerations entered into Mr. Bush's decision, merely that they may be worthwhile considering in the future. Posted by Orrin Judd at May 2, 2002 9:07 AM
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