Maybe Clinton Will Be the One to Deal With Those Costly Sacred Cows

If it was only Richard Nixon who could go to China, perhaps only Bill Clinton can bite a similarly tough domestic bullet.

I have in mind the new President dealing with the types of business and labor “protection” that raise the cost of producing goods and services in the United States and reduce American competitiveness in an increasingly global marketplace. Even though some Presidents have on rare occasion tried to deal with one or another of these sacred cows, the Congress has refused to go along. Perhaps this aspect of governmental gridlock in Washington can be reduced by incoming President Clinton.

Take the Jones Act, for example. It requires that all shipments made from one U.S. port to another be made on U.S.-flag vessels. Sounds like a way of saving jobs in the U.S. merchant marine, doesn’t it?

In practice, the effect is not that benign, as can be seen in the case of lumber produced in the Pacific Northwest. Those heavy items are ideal to move by water to a major market, Southern California. But on many occasions, Canadian lumber companies in British Columbia undersold their U.S. competitors because they could use cheaper, foreign-flag vessels.

Ironically, in such circumstances, the Jones Act was a lose-lose proposition for Americans. The winners were foreign shipping companies and foreign lumber companies. Neither the U.S. merchant marine nor the U.S. lumber industry received any benefit. Common sense requires the elimination of the Jones Act.

Another example is the multibillion-dollar program of farm price supports, which keeps the prices of American farm products artificially high--higher than world market prices. How do we overcome this barrier to U.S. competitiveness? One answer, of course, is for the United States to sell overseas at lower, subsidized prices.

As would be expected, this leads to criticism at home and abroad. American consumers gripe that they pay more for food raised in this country than do people in other nations. The producers of agricultural products in those other countries complain that we are “dumping” our products in their markets (selling below domestic prices). Dumping is something we constantly raise a world-class fuss about when others do it to us. And that’s not the end of it. The U.S. Treasury pays out billions of dollars each year in the form of food stamps to help poor people who can’t buy the food they need at the inflated prices that prevail in the United States. The entire farm price support program should be phased out. That will also cut the cost of the food stamp program.

For another area of overdue reform, take the subject of our great dependence on foreign-produced energy. Imports of petroleum are the major element in this nation’s continuing international trade deficit. Moreover, the use of most types of energy, whether imported or domestic, tends to generate environmental problems. Thus, it is time to deal with many of the government programs that encourage greater use of energy by keeping prices artificially low. That’s more complicated than the farm situation and takes a little explanation.

Municipally owned enterprises typically sell electricity at lower prices than privately owned utilities. Is it because they are more efficient producers? Hardly. The answer in large measure is that they pay lower taxes. Government-owned activities are exempt from property taxes and from the special sales taxes frequently imposed on the sale of electricity by investor-owned companies.

In addition, government-owned enterprises can pay lower interest rates on the bonds they issue because the interest on state and local government bonds is generally tax-exempt. To add insult to injury, the taxpayer-supported Department of the Interior sells the electric power it produces to municipally owned utilities at lower prices than to privately owned utilities.

It is foolish to subsidize the use of government-operated energy facilities at a time when concern with trade deficits and environmental factors is rising. Reforming energy policy would help reduce budget deficits and trade deficits simultaneously.

No comprehensive analysis of wasteful and counterproductive government activities can ignore the subject of the environment. At the risk of being attacked as “green-eyeshade” types who do not care about the environment (economists do breathe the same air as real people), we must raise the subject of acid rain.

In 1990, the federally funded National Acid Precipitation Assessment Program completed a 10-year, $600-million study that concluded that acid rain has caused no discernible damage to forests, lakes or crops. Nevertheless, Congress responded by approving a multibillion-dollar program to fight acid rain. (Virtually all of those costs will show up in higher product prices.) It is not too late to reverse this triumph of ideology over common sense.

There is another useful but modest reform Congress can make in environmental statutes. At least 22 different ecological laws provide for the federal government paying attorneys’ fees for the private plaintiffs in environmental suits--even when the defendants win. Eliminating this blatant statutory encouragement to excessive lawyering would simultaneously reduce costs in the public as well as the private sector.

These are just a few examples of the unintended consequences of many existing government programs. No legislator meant to encourage consumers to use more electricity, or to discourage purchases of food, or to shift business from the United States to foreign resource and shipping companies, or to waste scarce budgetary funds. Nevertheless, this is precisely the result of ill-considered legislation.

In any event, the time is ripe for a new look at these and the many other statutes that erode U.S. competitiveness by raising the cost of doing business in the United States. Surely we can’t blame other nations for these self-inflicted wounds.

Former President Nixon did succeed in opening relations with China. Perhaps President Clinton can succeed in slaughtering a few domestic sacred cows.