5.12.16

DONALD TRUMP'S INDUSTRIAL POLICY.

It might be the case that Mr Trump's recent deal with Carrier (which involves the kind of state tax incentives governors such as incoming vice president Mike Pence more frequently make with renegade sports teams) is of greater importance symbolically (the political class talks of the global economy and offers job training, the people who get the retraining lose ground) than substantively.

But in a public radio interview featuring former commerce secretary Don Evans and George Mason's Tyler "Marginal Revolution" Cowen, Arnold Kling sees a way to get people thinking about the limits of state action.  It might be that some people object to the Carrier accord because they want Mr Trump to fail.  There's not much one can do with that argument.  But there are several principled objections to the accord, including this.
They do not agree that keeping this plant in Indiana served a compelling and long-standing public purpose. They might even understand that we have an economy in which free trade ultimately is what serves the public purpose.
But where the public purpose comes by way of a mandate, you might get this, referring to what must be bundled in company insurance policies these days.
Progressives believe that contraception coverage is important. However, if you took a vote, I bet that more people would prioritize “keeping jobs in America” than having contraception coverage in health insurance. It seems to me that the “compelling and long-standing public purpose” argument would be a stretch.
Thus, freer trade in company health benefits, or in job contracts, such that Hobby Lobby might be able to compete for workers on different margins?
As a libertarian, I do not believe that “keeping plants in America” should be a goal for public policy. I believe instead in patterns of sustainable specialization and trade, which includes making efficient use of labor and other resources from other countries. I also believe that contraception coverage is something that should be negotiated between individual households and health insurance providers.
Politics, however, is not for purists, and John Cochrane sees a possible tempering of practicality with principle ahead.
Yes, presidential politics is not ivory tower economics, and occasionally Presidents have to do something abjectly wrong to garner support for a greater purpose. It's a delicate and dangerous act though -- if this is where we're going, early in an administration is the best time to do some hard things, set in motion policies that actually work, set a high bar against demands for cronyist payouts, and trust that four years of good policy will pay off.

The best hope in this direction is for the President to score some points, and for a loud chorus of serious policy people, from left and right, to denounce any more moves in this direction. This is exactly what has happened. Really, it gives one great hope that just about every commentator left and right says this is not the way to go.
Better, still, that the discussion of crony capitalism and industrial policy begins before the inauguration.

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