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Monday, September 14, 2009

So what do tires and a tariff on Chinese tires have to do with health care?

The United States has moved to impose a tariff on imported tires from China.See here for WSJ article.

With the stock market swoon of 2008 and dire predictions of another great depression blaring from just about every "news" source and while I watched some significant percent of my retirement assets drop, I morbidly began to try and educate myself about the great depression. One thing I learned was that tariffs are not a good thing from an economic point of view.

While admittedly much ( but not all ) of what I read was more to the Austrian and Monetarist economic sides of the aisle there seemed to be agreement about at least two factors that took a severe recession and made it great; monetary actions of the Federal Reserve in reducing the money supply and the Smoot-Hawley tariff.

As best I can tell, economists of almost every stripe agree that free trade is a good thing and tariffs are not. A tariff is a tax on imports. The following is a quote from a text book on Macroeconomics by Paul Krugman and Robin Wells. Dr. Krugman has made it very clear than he is not of the Austrian School of economics and seems to be more in agreement with at least some of what Keynes said.

[A tariff] raises the domestic price above the world price,leading to a fall in trade and domestic consumption and an increase in domestic production. Domestic producers and the government gain , but domestic consumer loses more than offset the gain leading to a dead weight loss. ("Dead weight loss" is a term of art in economic circles and you can read about here without a graph or here replete with a graph and cogent comments by a real economist-Dr.Mark Perry of University Of Michigan- who discusses the issue in the context of the recently imposed tariff.)

Since the President has access to a number of highly educated and intelligent economists who would, if asked, would be likely to tell him that from an economic of view a tariff is not a good thing to impose,it seems unlikely his actions are being done in a belief that it will the economy. Perhaps political motivations are more likely.What could that be?

The United Steelworkers union supports the action. Could the tariff move be another gift to the unions from which the Obama administration might reasonably expect support for their health care reconstruction plans, particularly in regard to putting pressure on the Blue Dog Democrats who may have reason to worry about reelection and whose vote may be crucial to the health care bill passage.


Anonymous said...

When 1,400 physicians were polled by LocumTenens.com about future health care reform, more than 20% said they'd stop practicing medicine if health care reform is implemented. Out of those 20% a vast majority were anesthesiologists, surgeons or radiologists. These specialists are already in short supply in many areas of the country so research shows there will be greater shortages if government-run universal health insurance is implemented.


Anonymous said...

From the perspective of a government program fewer surgeons and anethesiologists = fewer surgeries which logiclly leads to savings [at least upfront].

Sort of does the rationing work for the G men. No need to deny services that cant be delivered.

Keep in mind as a general rule for sick unit patients, death is the cheapest diagnosis and the quicker the death the cheaper it is.