Tuesday, March 30, 2010

PC4D: The Spoils of Protectionist Politics

I've often opined that placating anti-traders is a fools errand for politicians.  That rule applies, however, only to supporters of open markets and free trade.  Indeed, as today's news shows us, such unscrupulous pandering can actually reap huge political dividends for our elected protectionist, ahem, "leaders."

First, protectionism can provide a campaigning politician with the perfect bogeyman from which he can "rescue" his now-frightened constituents.  Consider this recent stump speech by everyone's favorite China-hater and the loudest sponsor of the Currency Exchange Rate Oversight Reform Act of 2010 (S. 3134), Sen. Chuck Schumer (D-NY):
China isn't playing fair when it manipulates its currency and it's time to fight back, U.S. Sen. Charles Schumer said today.

Standing before the Crucible Industries gate, Schumer, D-NY, announced that he and 15 Senate colleagues, Democrat and Republican, are cosponsoring a bill that would impose tariffs on Chinese goods if the Chinese government continues to peg its yuan artificially low against the dollar.

The bill would help fight a practice that is unfairly making Chinese goods cost less than competing American products, costing thousands of American jobs and hindering U.S. job creation, he said.

"The point we're making to the Chinese right here in front of Crucible Steel -- you don't play by the rules, we're going to make you play by the rules," Schumer said as Syracuse Mayor Stephanie Miner, Solvay Mayor Kathleen Marinelli, Crucible plant and union leaders and other business and political officials looked on.

International agreements call for countries to let their currencies float in value in relation to other currencies, Schumer said. Doing so restores some balance in international trade, he said.

By keeping its currency artificially low, China in effect makes its exports to the United States cheaper compared with U.S. products, Schumer said. It also make U.S. exports more expensive compared with Chinese goods, he said, making it harder for American companies to compete in China and globally....

The only argument against the proposal is that it could hurt efforts to get China to join the United States in diplomatic activity such as a boycott of Iran, Schumer said.
"Nothing is more important than jobs in America. If we don't keep our jobs here, if we don't have good-paying jobs, all the rest goes by the wayside," Schumer said.

"I don't think on this one there is a very cogent other side other than you might get the Chinese mad," he said. "You know what I say? Too bad."
What a tough guy!  (Stop snickering.)

Now, leaving aside Sen. Schumer's gross factual misrepresentations about the China currency issue, his stump speech provides us with a classic case of another type of Protectionist Campaigning for Dummies: what I'll call the "fake white knight."  Here, Schumer (who, in case you missed it, is up for re-election this year) demonizes a voiceless opponent in China by claiming that its pernicious, "unfair" trade practices are destroying good ol' American jobs.  He then claims that his legislation will "get tough" with, and thus save his constituents from, the evil strawman (China) that he just created!  (All with no downside, of course.)  Thus, in one little speech, Schumer creates an enemy, creates a solution, and promises to resist the naysayers and use his legislative solution to vanquish an enemy that he alone constructed.

Our hero!

And because only Schumer, his staff and the few unions/manufacturers in attendance know the actual facts of the issue (thank you, Public Choice Theory), and because no one dares stick up for the Chinese (lest they be called a supporter of "shipping jobs overseas"), the good Senator can demagogue China with impunity.  It's the perfect crime (against US consumers).

And as Sen. Arlen Specter (DRD-PA) proved today, this is one crime that does pay.  Handsomely.

Salena Zito at the Pittsburgh Tribune reports that Sen. Specter's re-election bid today picked up the all-important endorsement of the Pennsylvania AFL-CIO and all of the state's other labor unions:
The Pennsylvania AFL-CIO today endorsed Sen. Arlen Specter in the May 18 Democratic primary election, marking the fourth time in Specter's five terms he earned the labor organization's support....

After spending 30 years as a Republican and switching party affiliations, Specter has earned all of the major labor union endorsements in his primary race against U.S. Rep. Joe Sestak of Delaware County....

"Both Sestak and Specter came in and gave presentations to our board," said Bill George, Pennsylvania AFL-CIO president. "They both received standing applauses, but it was Specter who won two-thirds of the vote of our 54-member board."

George said an endorsement from the labor organization, which represents 900,000 workers, is tough to earn.

"The candidate has to get two-thirds of the vote; there have been times over the years where we have not endorsed."
I can't say I've ever heard of a politician getting a standing ovation and less than one-third of the vote, but hey, congrats Joe Sestak.  And in Joe's defense, he didn't really stand a chance here because he's not a Senator yet and can't sponsor protectionist legislation that anti-traders like the AFL-CIO just eat up with a fork, knife and collectively-bargained spoon.  I mean, is there any doubt that Senator Specter's recent protectionist pandering, including his sponsorship of the Unfair Foreign Competition Act of 2010 (S. 3080) and his loud support for carbon tariffs in Senate climate change legislation, helped secure that critical campaign endorsement?  (Obvious answer: Nope.)

So nice work, Senator!  You're the best panderer ever! 

Well, you and Chuck Schumer.

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