Once the government hands out a privilege, it becomes almost impossible to wrench it away – even if it is wreaking widespread havoc. That’s because of the economic theory of diffused costs and concentrated benefits: The public doesn’t notice the spread-out costs, but beneficiaries have an intense incentive to protect their special favor.
That concept is crucial in understanding the ongoing and malicious impact of the Jones Act (technically the Merchant Marine Act of 1920) – the century old law that requires ships that operate between U.S. ports be built in the United States, owned by U.S. companies and staffed with U.S. crews. That leaves the nation dependent on fewer than 100 ships for all domestic deliveries.
Instead of protecting American jobs and companies, the law actually obliterated the shipping industry. As the Wall Street Journal explained, its costly provisions pushed almost all U.S. shipping onto rail and highways “even though shipping on water should be far cheaper, more environmentally friend and less destructive of infrastructure.”
The arcane law has been a hot topic lately because its protectionist provisions drive up inflation and contribute to the supply chain bottlenecks that continue even after the COVID-19 restrictions have ceased. The Jones Act even keeps our nation more dependent on foreign oil because it limits oil shipments within the United States while not affect foreign deliveries.
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Yet even though President Joe Biden is trying desperately to tamp down rising prices and is trying to limit our use of Russian oil following the Ukraine invasion, his administration won’t reform the rules. Congressional Democrats are making the problems worse. The National Defense Authorization Act makes it tougher to gain a military related waiver, as Reason noted.
And U.S. Rep. John Garamendi, D-Calif., introduced the “Close Agency Loopholes to the Jones Act,” which would stamp out virtually every remaining loophole. Analysts believe this will raise oil and gas prices. This is an otherworldly approach in the midst of an inflation fight, but such is the power of domestic shippers and unions. They’re watching closely and the rest of us aren’t.