December 04, 2003

Why Oh Why Can't We Have a Better Press Corps? Part CCCCLXXVIII

The New York Times's Richard Stevenson writes about the Bush administration's imminent abandonment of its steel tariffs:

Bush Set to Lift Tariffs on Steel: The Bush administration plans to announce on Thursday that it will rescind tariffs it imposed last year on imported steel, saying the temporary trade protection allowed American steel makers to get themselves in shape to survive against intense global competition, administration and industry officials said on Wednesday.

Details of the announcement were still being worked out on Wednesday evening, and one administration official said the timing could still change. President Bush will not make a formal public appearance to announce the decision, officials said, though he may answer questions from reporters about it during the day. Instead, he will send members of his cabinet, including Commerce Secretary Donald L. Evans, to confirm the shift in policy, which the White House has been signaling is likely to come this week.

Although the decision to drop the tariffs represents a rare turnabout in policy by the Bush White House, and could give the president's re-election campaign trouble in crucial states like Ohio, West Virginia and Pennsylvania, the administration plans to make a case that the tariffs are being lifted because they have accomplished their goal.

The change came after the World Trade Organization ruled against the United States over the matter last month and authorized retaliatory tariffs by European, Asian and South American nations against American exports. It also followed a lobbying campaign by domestic consumers of steel, many of them manufacturers in Midwestern states also vital to Mr. Bush's political fortunes, asserting that higher steel prices were hurting the economy more than the tariffs were helping steel makers...

Is it too hard for Mr. Stevenson to note that even a month ago nobody in the administration thought that the steel tariffs had "accomplished their goal"? Is it too hard for Mr. Stevenson to remember that the steel tariff imposition was driven by Karl Rove for purely "political" reasons--over the opposition of all the Bush economic policy advisors save Evans and the wishy-washy Zoellick? Is it too hard for Richard Stevenson to say that it's not just steel consumers, it's almost every economist who hasn't been bought-and-paid-for by the administration or the steel industry who thinks that the tariff was not just bad economics but bad mercantilism--did more harm to steel-using industries than it did good to steel-making industries?

By failing to put the issue in context, Mr. Stevenson does his readers a substantial disservice. His readers deserve to learn or be reminded that the substantive rationale for lifting the tariff is a last-minute invention, that informed opinion is overwhelmingly on the side that the original imposition of the tariff was a mistake, and that the original rationale for the tariff was overwhelmingly short-term political--as Karl Rove said at Larry Lindsey's farewell party, Larry knows more than he does about every economic policy issue save steel.

Posted by DeLong at December 4, 2003 12:53 AM | TrackBack

Comments

Some are reporters. Some are stenographers.

Posted by: bakho on December 3, 2003 09:38 PM

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I think the idiocy of the whole thing is readily apparent from reading the article since anyone will notice that the tariffs conveniently have become unnecessary now that the US is facing retaliatory sanctions. As ususal with your complaints about the media, the simple answer is that media outlets don't want to call the administration a bunch of politics-before-all-else hacks. Even though it's clearly true in this case, the paper would catch flack for saying so directly in a news article. That's just how it is.

Posted by: Dimmy Karras on December 3, 2003 10:09 PM

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I would also have liked it if Richard Stevenson had mentioned that at least three of the Democratic presidential candidates -- Kucinich, Edwards, and Gephardt -- supported the tariffs (Dean never officially voiced an opinion as far as I can tell, but given his advocacy of the "tough enforcement" of anti-dumping laws, it seems likely he would have been for them), and that only Lieberman came out unequivocally against them. It would also have helped put things in context to mention that Kucinich and Gephardt attacked Bush for lifting the tariffs, with Kucinich arguing that the U.S. should not be ceding its sovereignty to the WTO (an interesting argument coming from someone whose entire foreign policy appears to be based on working through the U.N.). Stevenson might also have mentioned that if one had surveyed the Democratic members of Congress at the time the tariffs were imposed, a hefty majority would undoubtedly have supported them.

In all seriousness, only free traders should be critcizing Bush for his steel policy. (Obviously, Brad qualifies.) Saying that the problem with the policy was that it was politically motivated won't fly: Bush never pretended to be a true-blue free trader, and during the 2000 campaign he promised voters in steel states that he'd do something about foreign steel. I think imposing the tariffs was one of the worst economic decisions the administration has made (which is saying a lot). But it was also, in a weird way, one of the least cynical things Bush has done (the arguments used to justify the tariffs were, of course, nonsense, but they were just standard protectionist boilerplate, straight out of a Gephardt speech). In imposing the tariffs, he was actually keeping a promise, not breaking one.

Posted by: James Surowiecki on December 3, 2003 11:06 PM

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er.. woo hoo, W. kept a promise?

hey, after the Dean/Clark administration promulgates its first stupid-ass tariff in 2005, I'll be first in line to heap opprobrium on it. 'til then, I'll focus on the idiots in charge.

they're so bad, I'm not sure Akerlof is wrong about 'em -- and describing anything as "worst ever" is almost guaranteed to be wrong.

Posted by: wcw on December 3, 2003 11:42 PM

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My dear Surowiecki, could one think but that the point of your post was to denigrate the various Democratic candidates?

Posted by: bad Jim on December 4, 2003 12:40 AM

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Objectively (I think), a straight news piece could make all the points Brad would like except the one about Rove overruling administration economists. Rove overruling the experts isn't straight news. It is almost certainly true, but there is nobody to confirm it. Nobody in the room would be willing to say "yeah, that political hack got the economics wrong, and apparently got the politics wrong, too."

Posted by: K Harris on December 4, 2003 05:47 AM

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bad Jim,

I can't speak for your dear Surowiecki, but I think the point of his post was that one needn't be a curiosity-challenged Republican dynast to be a protectionism-monger.

That said, though I'm confident that a Gephardt or Kucinich (or for that matter a Buchanan) would be perfectly capable of this sort of nonsense, the fact remains that it was one particular c.-c. R. d. what done this.

Posted by: Mrs Tilton on December 4, 2003 06:09 AM

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Actually, the point wasn't to denigrate them, but to criticize them. Bad policy is bad policy, regardless of whose idea it is. And the Democratic nomination is still up for grabs. Getting the Dems to nominate a candidate with good economic policies -- good for the U.S., good for the world -- seems like a valid goal. The Dem candidates have been getting a pass on their opposition to free trade, and it's emboldening the party's protectionist wing.
Why should you wait until someone actually enacts the bad policies he supports to tell him the policies are bad?

Posted by: James Surowiecki on December 4, 2003 06:11 AM

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It is easy for candidates to favor tariffs or other non-sense because they don't have to deal with the fallout of the policy if it goes wrong. Mr. Bush implemented a very bad steel tariff policy. He made up his mind on steel tariffs during the 2000 election and once made up, his mind does not change easily. Things have to go terribly wrong for him to change. Steel tariffs are favored by Mr. Bush because:
1) He does not hear or listen to those that disagree.
2) He preferes unilateral action to negotiation.
3) He did not consider helping steel workers by means other than tariffs.

So in spite of his lip service to free trade a "man of action" like Mr. Bush ends up slapping tariffs on steel.

Would a person with more protectionist leanings but more committed to negotiated solutions be more likely to use the threat of tariffs to drive a hard bargain?? Would a Gephardt or Dean faced with the opportunity to help the steel industry choose tariffs over government help with retirement and health benefits or other options not considered by Mr Bush??

If the choice is only between steel tariffs and no steel tariffs, the Democrats mostly favor the tariffs. However, if the steel tariffs are but one of numerous policy options on the table, then the action that a Democrat president would have taken becomes less predictable. A Democrat president might have chosen an option not even considered by Mr. Bush. Mr. Bush does not consider those alternatives because they conflict with his professed ideological belief in "small government".

Posted by: bakho on December 4, 2003 06:27 AM

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"In all seriousness, only free traders should be critcizing Bush for his steel policy."

Gosh, Jim Surowiecki seems to believe in free trade without free expression. And that anytime one talks about an incoherent Bush policy one has to mention that Democrats are really bad people because they don't follow the economics teachings of his own New Yorker column. Please. Even the use of the word boilerplate makes the blood boil.

Posted by: david on December 4, 2003 07:12 AM

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Can we start calling tariffs "taxes?" Because, in effect, that's what they are.

As in, "Gephardt wants to raise your taxes."

As for whether the steel tariff decision was "cynical"...what was cynical was doing little to mitigate the real social costs of the restructuring. So Wilbur Ross could come in and start buying up bankrupt firms while people got shoved off their pensions and health plans...

Posted by: praktike on December 4, 2003 07:42 AM

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Bush's steel policy was not incoherent. He promised steel workers and steel company execs that he would act to limit foreign imports, and he did. And everyone should express freely. Just don't, in order to score political points, attack people for adopting policies that you yourself support.

I'm with Praktike on the taxes thing.

Having said all this, I have to say that I'm a dumbass. I hadn't read Stevenson's piece, just Brad's excerpt, when I so cleverly attacked Stevenson for not mentioning the Dems who support the steel tariff. Of course, having now read the piece, I see that there, in the last graf, is a line about how Bush's decision to lift the tariffs will earn him the "condemnation" of the "Democratic presidential candidates," which is pretty much what I was looking for. As Roseanne Roseanna Danna used to say: "Never mind." I'm going to go stand in the corner for a while.

Posted by: James Surowiecki on December 4, 2003 08:38 AM

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James,

You made some good points in your first two posts. I especially appreciate your humility in the last post; it is especially rare in political commentary and discussion.

If any Democratic candidates are free traders,
a comment from one of them would have added to the piece.

Posted by: Dan Murphy on December 4, 2003 09:39 AM

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why are tarriffs taxes? aren't they "costs" as in "I"m going to raise your cost-of-doing buisness?" or "I'm going to raise the ultimate cost of this product to you by putting tarriffs on its base component?" In what sense are they "taxes?" I'm curious.

Kate Gilbert

Posted by: Kate Gilbert on December 4, 2003 09:58 AM

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Tariffs are literal taxes in the sense that they are levied by the government and paid to it.

Posted by: James Surowiecki on December 4, 2003 10:17 AM

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FYI, Dean did come out against removing the tariffs.

Despite my strong support of Dean I posted why this was wrong at Economists for Dean.

http://econ4dean.typepad.com/econ4dean/2003/12/dean_is_wrong_o.html

Also note this criticism of Richard Stevenson (in a discussion with me about NYT columnist David Leonhardt) by DHinMI over at Kos:

http://www.dailykos.com/comments/2003/11/2/14444/9759/34#34

"If you've been following Leonhardt I'd like to know your thoughts on the guy. I think Uchitille is very good, but Richard Stevenson is one of the most gullible saps in American journalism. I think Karl Rove calls him up and says something like "we're going to make a serious effort to appeal to black voters" and three days later there's a NYT headline telling us "Republicans to Make Strong Push for Black Votes; Could Cut Into Democrats Core Support." In fact, the Repubs have no interest in fighting for black votes when they know they will never get more than 10%, but if white voters think Repubs are appealing to black voters it might temper the suspicion that the Repubs are anti-minority.

Stevenson has written a slew of these stupid articles over the last year or so, and Uchitille seems to be getting fewer pieces printed, so I'd like to know your thoughts about Leonhardt."

by DHinMI on Sun Nov 2nd, 2003 at 18:50:10 UTC
[ Parent | Reply to This | ]

Posted by: lerxst on December 4, 2003 10:36 AM

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James Surowieki,

Thanks for the clarification. Are they levied on foreign actors (sellers) or on the object itself and its American buyers? If only on foreign manufacturers as they try to bring stuff into this country, are they "the same" as regular taxes, or somehow different? How does calling them taxes help our understanding of them, or does it only kind of shift them into a negative semantic space along with all other now discredited terms like "public" and "democratic?"

Posted by: Kate Gilbert on December 4, 2003 10:42 AM

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James,

By the way, I cited your article referring to "Stron reciprocity" (Bowles and Gintis) in a post at economists for Dean entitled Executive Pay, NASCAR Dads and Strong Reciprocity"

http://econ4dean.typepad.com/econ4dean/2003/10/executive_pay_n.html

Posted by: lerxst on December 4, 2003 10:42 AM

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The answer:

Bush needed support from some congressmen from steel producing states. so he gave them the steel tarriffs, which would take two years for the WTO to nix. In return, they gave him the votes to reenstate either the line item veto or the ability to negotiate trade deals unilaterally. i can't remember which. But you can stop blogging. that's the answer.

JS

Posted by: Sunderland on December 4, 2003 11:13 AM

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Blah blah blah. There is no Democratic candidate who would not have a far superior economic policy to George Bush, regardless of a position here or there on trade. We have Republican economic policy now that is a long term disaster in the making. We need change. I wish change, and I benefit splendidly from the tax breaks.

Posted by: jd on December 4, 2003 11:14 AM

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hey just saw this in the journal today :D cheers!

http://online.wsj.com/article/0,,SB107048942752099300,00.html

---
CAPITAL
By DAVID WESSEL

Economy Online:
Where to Read
The Tea Leaves

The Internet makes it easy to get the latest data, latest headlines and latest blather about the economy. But also lurking on the Web, if you know where to look, is some trenchant commentary on the most puzzling features of the modern economy.

So here are some sites that one gray-bearded economics reporter checks frequently for thought-provoking takes on what's happening in today's economy and what's shaping tomorrow's. Three are blogs, the electronic musings of those who can't bear to keep their thoughts to themselves. Two are sites where the writers regularly post brief essays. All are free. All the writers are opinionated; that's what makes them worth reading.

Brad DeLong

http://econ161.berkeley.edu/movable_type/

An economic historian at the University of California at Berkeley who worked with noted economist (and now Harvard University president) Lawrence Summers both at Harvard and at the U.S. Treasury, Brad DeLong is at his best when putting recent developments in historical context. One particularly sharp posting asked how the U.S. could blow the prospects for a long economic boom and then noted that mid-19th century Britain lost its technological edge by failing to build schools for children of workers migrating to factory towns from the countryside. "By end of the 19th century the lack of a well-schooled work force meant that the post-steam-engine technologies of electricity, metallurgy and chemistry found themselves much more at home in late 19th century Germany -- where investments in schools had been made," he wrote.

Mr. DeLong, who sprinkles his site with trivia about his kids as well as links to whatever he has read recently, is a loyal Clintonite -- except when it comes to the former first lady. "Hillary Rodham Clinton needs to be kept very far away from the White House for the rest of her life," he has written, citing his close encounter with her during development of the Clinton health plan. His writings on President Bush's economic policies are often shrill, usually entertaining. A running feature on his site is called "Why Oh Why Are We Ruled by These Fools?" He is up to part CCCXXVII.

Mr. DeLong, who says he tries to spend no more than an hour a day on his site, says he sees blogging as "a way to win the contest for intellectual influence."

[...]

Brad DeLong's Semi-Daily Journal
www.j-bradford-delong.net/movable_type/
BRIEF DESCRIPTION: A classic blog by an economic historian at the University of California
BEST FEATURE(S): Putting today's economy in historical context and posting fresh material almost every day.
QUIRKS: Unusually wide-ranging from commentary on press coverage of Bush administration and latest work of academics to trivia about his children and his classes at Berkeley. Sometimes takes a long time to load.

Posted by: drk on December 4, 2003 11:25 AM

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James, i have to admit, i don't remember Bush promising relief for steel, but that doesn't mean it didn't happen.

But i do remember Bush pretending that he favored free trade, and so at best we're dealing with the typical Bush problem of his being so shallow and ill-informed that he honestly doesn't know when he's contradicting himself.

It's sort of like the wonderful story that surfaced in The Hill, where Rep. Feeney told Bush that he wouldn't vote for the Medicare bill because he came to Washington to cut entitlements. "Me too, pal," Bush is said to have responded, a piece of cognitive disonance that literally defies my ability to describe better, but i digress....

Posted by: howard on December 4, 2003 11:31 AM

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>>Rove overruling the experts isn't straight news. It is almost certainly true, but there is nobody to confirm it. Nobody in the room would be willing to say "yeah, that political hack got the economics wrong, and apparently got the politics wrong, too." <<

The _National Journal_ had a report on Larry Lindsey's farewell party in which Karl Rove said that he took Lindsey's advice on every economic question except steel tariffs. That's confirmation.

Posted by: Brad DeLong on December 4, 2003 11:35 AM

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Howard --

I don't want to make it sound as if Bush has tried to come up with a coherent trade policy, because he hasn't. But certainly the combination of voicing support for "free trade" and also supporting "anti-dumping" measures is a familiar one in Washington, and one that most politicians would not describe as a contradiction (because they would say that "dumping" is not really trade at all). Obviously, I think this is bogus, but it's certainly a common position.

Having said that, some of the quotes about free trade from the Bush camp are priceless, like Zoellick saying of Clinton and Gore: "For the last six years, they've talked and not walked," a truly remarkable thing to say about a president who was trying to do the right thing over the opposition of most of his own party's congressmen.

The truth is that I've never really believed that the Bushies were really interested in free markets. I've always thought they were much more pro-business than pro-market, and naturally inclined to think economically more in terms of handouts, insider arrangements, and special deals than in terms of the open and competitive nature of real markets.

Posted by: James Surowiecki on December 4, 2003 12:17 PM

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Hey, Lerxst --

Thanks for doing that. I think Bowles' and Gintis' work on strong reciprocity is really great, fascinating stuff.


Posted by: James Surowiecki on December 4, 2003 12:29 PM

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James, I agree: this is a crony capitalist administration, not a conservative one. I keep waiting for honorable conservatives to notice this, but there hardly appear to be any of them left.

Posted by: howard on December 4, 2003 12:34 PM

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I believe we just saw the test version of Bush's Iraq policy today. He promised, he delivered for a bit, then, when forced to back off, he declared victory and pulled out.

Most of the press gave a 5 second synopsis instead of a real analysis today. When they reimpose tariffs next October, they'll forget today, as well.

It's my understanding that the Asian economic doldrums in 97-98 created the steel crisis and the fix put in last year did almost nothing to resolve the problem. Thus, it was all for political gain.

Likewise, most of the Dems will milk it because the unions are an essential support base. They may err in doing so, but knowing that the economy will be picking up by then, it's a moot point. They exploit the issue for the primary run, which is what candidates do, but they oughta sit down with the union heads and hash out another approach that mollifies the displaced.

Posted by: Cowboy Kahlil on December 4, 2003 02:08 PM

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Kate, tariffs are paid by whoever sends/brings the object into the country, which I think most of the time means the foreign manufacturer. I'm not sure what "regular taxes" really means. They are not like income taxes, but they are quite a bit like sales taxes. (And they are, in one sense, the most regular taxes of all since tariffs were the first taxes levied by the federal government.) You can see them personally at work if you go to, say, Italy and buy a nice suit or dress. When you come back to the U.S. -- assuming you're honest and declare your purchases -- you have to pay a duty (tariff) on those clothes, and if I remember correctly the rate is determined by the type of clothing (and perhaps even the type of fabric). That's certainly as much a tax as the 8 1/2% you pay when you go shopping in New York. If you buy Italian clothes in the U.S., that duty is built into the price you pay, but I think it's fair to say that you're still paying the tax.

To me, what's useful about calling them taxes is that it reminds people of what is too easily forgotten, which is that we pay a literal price when we impose tariffs, which benefit a few select industries and a small number of workers at the expense of most Americans. But I'm not sure I understand the last part of your question. Are you worried that tariffs will be discredited by being associated with taxes, or the other way around? I'm obviously happy to shift tariffs into a "discredited semantic space," because they deserve to be discredited. I'm not happy to see "democratic" or "public" in such a space.

Posted by: James Surowiecki on December 4, 2003 02:18 PM

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I'm with James...the way I would express Bush admin policies is econo-terms that they generally operate to maximize private rather than social net benefits...and only then for some private actors at the expense of others.

Posted by: praktike on December 4, 2003 02:29 PM

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why are tarriffs taxes? aren't they "costs" as in "I"m going to raise your cost-of-doing buisness?" or "I'm going to raise the ultimate cost of this product to you by putting tarriffs on its base component?" In what sense are they "taxes?" I'm curious.

Kate Gilbert

Posted by: Kate Gilbert on December 4, 2003 09:58 AM

Kate, James answered your question but I'll elaborate on his definition a little. When tariffs are charged on goods entering a country, they appear to only be charged to the foreign seller. They are partially paid by the foreign seller through lower sales and poorer returns, but a good portion is imposed on the buyer of the goods through higher prices. The buyer pays all of the tariffs that are paid into the government coffers. In that way they are a "paid" tax.

I believe that James' definition is too narrow though. Taxes are really any levies imposed by government. When a country's central bank prints a lot of money, this action is almost universally known as the inflation tax. The reason is that those holding debts and cash equivalents denominated in that particular government's currency lose value at the rate of increase in inflation caused by the massive printing action.

Calling only those levies paid to the Treasury "taxes" misses a very large portion (if not the vast majority) of the levies imposed by government. Singleminded focus on only the levies paid to the Treasury leads to very warped policy outcomes. Instead of minimizing taxes, politicians are likely to minimize acknowledged taxes while hidden taxes such as inflation and other costs on society soar.

Posted by: Stan on December 4, 2003 02:31 PM

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Thanks to everyone for clearing up my confusion--can you tell that when I took Ec10, I took the marxist section? But look, here's another question (that you don't have to answer): it seems to me that tarriffs (whether you think of them as a good idea, or a bad idea) can't be collapsed into "taxes" when you are explaining them to the populace because they *don't* exactly, necessarily, get levied and though the money for the tarriffs might end up in the pockets of the government, there may be little or no money paid if the trade itself is surpressed. Isn't the idea of tarriffs to make the imported good so expensive that the buyers shift to local goods in their place? If that happens, its true that your costs as a local buyer(why I went for the word costs in the first place) might go up, but there is no transfer of money to the federal government. The local good is not, in fact, taxed and the local consumer of the local good is not, in fact, taxed (though their costs might go up). So tarriffs and taxes do different things, and the money involved may end up in different places. Is that wrong, technically? wrong logically? or just wrong in fact (because local demand does not shift?)

Kate Gilbert

Posted by: Kate Gilbert on December 4, 2003 04:17 PM

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Back on the Bushies, per Surowiecki's comments... half are pro-business, half are pro-free trade with different camps like any administration.

My understanding is that the steel tariffs were a political play to get Fast Track Trade Authority and some union votes. GW got his Fast Track and the union votes he wanted are rallying behind Gephardt, so time to ditch the tariffs. Politics is a cynical sport.

It's not GW's style, and everyone knows it. If this was his typical m.o., he'd be an FDR or a Nixon, but he's not. This is a little sloppy for his administration, and they've learned their lesson. Now, they talk down the dollar, discretely hawk US bonds, and keep rates low, while France, Germany and OPEC feel the pain.

This administration will be remembered as a textbook example of shrewd macroeconomic power plays except for the steel tariffs.

Posted by: Robert E. Bailey on December 4, 2003 08:54 PM

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"This administration will be remembered as a textbook example of shrewd macroeconomic power plays except for the steel tariffs."

Which textbook will that be in? Certainly not in any economics textbook.

Granted, if he wins reelection, for a few years everything will be redefined through that prism and the conv wisdom will forget about how his tax cuts mortgaged the country as a sop to the wealthy...until interest rates eventually skyrocket and some other leader is tuck with the bill.

If he loses, then EVERYTHING will be seen as the disaster it really is, from his unrelenting tax cuts with little real stimulus until three years into the recession, to the turnaround from a projected $5 trillion surplus to a $5 trillion debt.

If he is remembered for "shrewd macroeconomic power plays" it'll be in the same spirit as Nixon is remembered

Posted by: lerxst on December 4, 2003 09:32 PM

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Brad, one journalist got it right...

http://seattletimes.nwsource.com/html/businesstechnology/2001808056_steel05.html

(from LA Times)

Close-up
The big meltdown: Why steel tariffs were a no-win for president

By Warren Vieth
Los Angeles Times

CLEVELAND The Bush administration's bold foray into steel protectionism ended prematurely yesterday, the apparent victim of two major miscalculations: a worse-than-anticipated backlash by steel consumers, and a faster-than-expected retaliation by the rest of the world.

When President Bush imposed tariffs on steel imports 21 months ago, his advisers saw them as a way to assist an industry in need, shore up support for Republicans in the Steel Belt and advance America's trade agenda, all at the same time. He ended the tariffs yesterday, 15 months before their scheduled expiration.

In the end, they made hardly anybody happy.

As many jobs were lost in industries that buy steel as were saved in mill towns such as Cleveland, analysts say. The administration undercut its own credibility in the broader push for free trade while alienating other nations.

Posted by: Robert Taylor on December 5, 2003 01:09 AM

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