March 6, 2002
President Bush has yielded to the US steel industry and unions and imposed 30% tariffs on imported steel. Left out of the Bush plan are subsidies for steel companies' "legacy costs," retirees' pension and health care plans, but protections for these former industry workers are expected from bills now before Congress. Unions are applauding the tariffs, saying jobs will be protected.
Commentators on both ends of the political spectrum have criticized the welfare for steel. On the right, accusations from doctrinaire "Free Trade" advocates, eg., Sen. Charles Grassley from non-steel-producing Iowa, claim the President is undercutting the international push for opening markets. Others predict a trade war, with European Union nations, South Korea and Russia imposing compensatory tariffs and hurting US exports. US products containing steel will be more expensive and non-competitive. Additional commentary is avilable online:NY Times, March 6, 2002, Steel Tariffs Weaken Bush's Global Hand, By RICHARD W. STEVENSON
Certainly Bush's subsidies are only partly out of concern for jobs, and for political implications in Pennsylvania and West Virginia and elsewhere; the welfare of shareholders is never far out of mind in today's White House.
However, the Bush protections are ironic in light of recent widely publicized statements by Federal Reserve Chairman Alan Greenspan and other economic fundamentalists such as Amity Schlays. Economic fundamentalism celebrated Greenspan and Schlays claim that the US economy is stronger than the European Union, in large part because the EU has protected its workers from layoffs and damage to their lives caused by loss of jobs. Greenspan and Schlays praise the US model, saying it allows companies to quickly downsize and fire workers in periods of recession. They claim such flexibility encourages companies to create jobs, when they might otherwise hesitate.
The irony is that, had the Bush Administration reacted to the steel industry crisis by providing generous unemployment compensation and retraining for workers, along the lines of the "socialist" EU model, steel workers and their families and communities would have been at least partly protected, their political retaliation mitigated, and the tariffs and dire consequences might have been avoided. Instead, the closing of the US market to imported steel gives the lie to the administration's "Free Market" rhetoric and the trumpeting of Greenspan and Schlays.
Factoring in Bush's concern to protect steel industry stockholders reveals the complexity and frequent self-contradiction of economic fundamentalism. Such contradiction calls to mind the description, applied in 1979 by then-candidate Geo. Bush senior to Ronald Reagan's supply-side theories: "voo-doo economics."