There’s no longer any excuse for thinking that President Bush is a champion of free-enterprise capitalism. The week of March 4 sealed the question.
He began the week by imposing tariffs up to 30 percent on imported steel. True, he didn’t give the industry and the steelworkers all that they wanted. He exempted Canada and Mexico (there is a free-trade agreement among the three countries, after all) and he left out some developing countries.
But nevertheless, he ordered the tariffs on a host of steel products from other countries. Let’s begin with the obvious: Mr. Bush has now followed in his father’s footsteps. He promised not to raise taxes and he’s done so.
A tariff is a tax. Shame!
By forcing up the price of imported steel, Mr. Bush has made it more expensive for American manufacturers to make things that require steel: cars, appliances, homes, and more. Thank you very much, Mr. Bush. It goes without saying that low-income families will suffer more than those with higher incomes.
Note the lesson here: trade restrictions cannot help “America.” At best they can help one group of Americans at the expense of all other Americans. In this case, Mr. Bush has chosen to help a relatively small group. It has been estimated that 10 jobs will be sacrificed for every steel job allegedly saved.
Even the promised benefits, concentrated as they are, won’t be delivered. The steel industry has been sheltered from imports for decades, yet it continues to ask for more. Do you get the point? You don’t help an industry on its feet by shielding it from competition.
These dinosaur companies have been dying slowly. They have been bested in the marketplace not only by foreign companies but also by high-tech mini-mills right here at home. Imposing taxes in behalf of anachronistic firms is unjust and inefficient — even if it helps the companies to keep their pension promises. It is not the American people’s fault they made promises they cannot keep.
Mr. Bush ended his week of trashing capitalism by pandering on the Enron issue. The president has bought into the premise that what Enron did means we need more regulation. He’s even proposed a new bureaucracy to regulate accounting. But it was the regulatory environment, which induces a false sense of security, that made Enron’s offenses more likely to occur and go undetected. Mr. Bush is wrong to propose new regulations to do what the old ones could not. Fraud is already against the law.
Moreover, the market is not waiting for government to act. It’ll be difficult for a company to get away with what Enron apparently did, simply because people are now on the lookout for such activities and are prepared to shun the companies that engage in them. People don’t purposely take reckless risks with their money, and the smart ones aren’t looking to the government to protect them in the future. The marketplace is self-correcting — even when badly hampered by the state.
Then isn’t government regulation merely harmless duplication? No, for two reasons. As already suggested, regulations create a false sense of security. If you believe the government is watching over you, your own watchfulness will be less vigilant. Con men will always be able to get around rules. It’s harder to get around wary investors. “Buyer beware” isn’t just a slogan. It’s a recognition that nothing can substitute for self-interested caution.
Second, government regulation always has bad unintended consequences. The regulations that are now called inadequate were once enacted with great fanfare. One rule in particular caused investors to be harmed by Enron’s creative accounting. To combat so-called insider trading, the law prohibits a company’s investment-banking division from divulging information to its brokerage operation. As a result when Merrill Lynch learned of Enron’s off-the-books practices, it was barred from informing its customers who wished to buy Enron stock. The law “work[ed] to injure public investors, rather than benefit them,” said John C. Coffee Jr., a securities law expert at Columbia University.
The next time Mr. Bush praises free enterprise, remember how he sold it out for politics.