Juliette Sellgren talks with the great trade economist Douglas Irwin.
The Biden administration’s recent decision to block Nippon Steel’s acquisition of U.S. Steel (which the Trump administration seems reluctant to reverse) is the latest chapter in the long, dysfunctional relationship between the American steel industry and the federal government. This move puts political theater ahead of sound economic policy like so many before. What is different this time is that the government seems to be at odds with steel industry executives.
For decades, the American steel industry and the federal government have been locked in an unhealthy marriage defined by cronyism and a cycle of protectionism. Beneath the surface of supposed “national security” concerns and promises of job preservation, we find an industry that has been fighting off foreign competition with protectionism for centuries, whether it came from European exporters of horseshoes in the 19th century, more technologically advanced foreign competitors in the 1970s, or the emergence of mini mills in the 80s. Far from preserving jobs, the special treatment and political favors have inflated costs, discouraged innovation, and perpetuated a system in which political clout, not market performance, determines winners and losers.
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For centuries, the U.S. steel industry has used its relationship with the government to obtain protection, invoking national security or protection from unfair foreign competition as justifications. Yet that protection has come at a steep cost. Consumers have shouldered the economic costs of protectionism and borne the economic damage from retaliatory tariffs. Meanwhile, the cozy and morally problematic relationship between steel executives and policymakers perpetuates a system in which political pull routinely trumps market discipline.
It’s time for the steel industry and the government to get a divorce.
Progressives have the presidency they have long desired but a president they abhor. James Madison warned them: “Enlightened statesmen will not always be at the helm” (Federalist No. 10).
Theodore Roosevelt’s “stewardship” theory of the presidency was that presidents may do anything they are not explicitly forbidden to do. Woodrow Wilson considered the separation of powers a dangerous anachronism impeding enlightened presidents (e.g., him). He postulated a presidential duty of “interpretation”: discovering what the masses would want if they were sensible, like him. Wilson’s former assistant secretary of the Navy, Franklin D. Roosevelt, used radio to enable the presidency to mold opinion. Lyndon B. Johnson, who became an FDR loyalist in Congress in 1937, commanded a large and obedient congressional majority (1965-1966) as no subsequent president has.
Donald Trump’s rampant (for the moment) presidency is an institutional consequence of progressivism. Progressives, who spent recent years trying to delegitimize the Supreme Court and other federal courts, suddenly understand that courts stand between Trump and the fulfillment of his least lawful whims. Including his disobeying Congress’s unfortunate, but detailed and lawful, ban of TikTok.
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And about the Consumer Financial Protection Bureau, without which America prospered during its first 235 years: Is it really wrong to favor extinction of this anti-constitutional contraption that can “declare,” without congressional guidance, what business practices are “abusive”? Unlike any entity created by Congress since 1789, the CFPB is untethered from oversight: Its funding, determined unilaterally by its director, comes not from Congress but from the Federal Reserve.
Does President Trump understand money? Not money as in cash, but the supply of money, the price of money as measured by interest rates, and their impact on inflation? The answer would appear to be no after Mr. Trump called for lower interest rates on Wednesday—the same day the Labor Department reported an increase in inflation for the third straight month.
“Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!” Mr. Trump posted on his social-media site. The layers of intellectual confusion here are hard to parse, especially since higher tariffs will mean higher prices on the affected goods. But perhaps the President wants the public to look elsewhere when assigning blame for rising prices.
Mike Munger is correct: “free association fuels free enterprise.”
