You Can't Fight Aluminum Tariffs with Price Controls

The road to Hell may be paved with good intentions, but so is the path toward socialism. Both routes are slick and steep, as each step further is a moral justification for the next. And by the time you realized you’ve lost your way, it is too late to turn back. Similarities between the two paths abound—perhaps because the destinations are actually one and the same.
Unfortunately, the road to socialism is one far too many nations have decided to travel, and the disastrous results speak for themselves. In pursuit of empty platitudes like “fairness” and “social justice,” countries like Venezuela have stripped their citizens of their rights, opportunity, and dignity. Their leaders, blinded by a quest for moral virtue, institute systems of government which impoverish the very people they are attempting to help.
More often than not, the descent toward socialism is initiated by one particularly insidious policy: price controls. Justified as a tool to protect the downtrodden from greedy industrialists, price controls gradually infiltrate free market systems. Steadily, the federal government garners more authority over the private sector, crippling it as a result. It’s a pattern as predictable as the tides. And that’s why it’s so harrowing to see that very pattern repeating itself within the United States.
For years, the American left has pushed for price controls on everything from commodities, to rent, to healthcare. But Republicans have largely worked to obstruct that effort, recognizing the disastrous consequences those policies have wrought. At least, that was the case until recently. Now, misguided by their good intentions, many so-called conservative lawmakers have turned coat, embracing price control legislation as a moral imperative.
For proof, look no further than Republican support for the APEX Act.
The Aluminum Pricing Examination (APEX) Act, introduced by Democrat Al Lawson (D-FL), is a seemingly innocuous bill with the ostensibly virtuous goal of preventing market manipulation within the aluminum industry. It boasts some conservative support, with 21 Republican cosponsors. The legislation is short, straightforward, and clearly supported with the best of intentions. Yet, as this Oct. 22 coalition letter issued by 17 free-market groups, including Frontiers of Freedom, the Competitive Enterprise Institute (CEI), and the American Consumer Institute, points out, enacting the APEX Act would have catastrophic consequences.
As it is currently written, the APEX Act would provide the U.S. Commodity Futures Trading Commission (CFTC) with sole jurisdiction to set the reference prices for aluminum. The bill eliminates market price signals and supplants them with federally-mandated price-setting. It allows the government to manage the entire aluminum market through across-the-board price controls.
If that sounds to you like bald-faced socialism, that’s because it is.

Companies that provide unbiased, transparent, private-sector assessments of aluminum pricing trends would be replaced by unelected bureaucrats. Bureaucrats whose motivation for setting aluminum prices are subject to lobbying, political pressure, and a variety of other external factors. Naturally, the legislation would establish a substantially less-reliable aluminum pricing metric, leading to greater inefficiency within the market, and further weakening a vital American industry.

But why would a handful of Republicans embrace such a policy? It seems to have everything to the administration’s current aluminum tariffs, rising prices, and the perceived repercussions of inaction.

Free marketeers are no fans of the administration’s aluminum tariffs, which have caused prices to increase. For many Republicans who face potential backlash due to the higher rates, the temptation to act via government intervention is too great. They support price controls in order to “do something” about the high aluminum costs, not fully realizing their actions will have long-term, long-lasting, unintended consequences.

As is so often the case, the passage of the APEX Act would only justify additional government intervention. If the CFTC gains the authority to manipulate reference prices for aluminum, what’s stopping it from doing the same to other commodities as well?

This is the road to socialism, and it won’t end well.

Limited government advocates that seek to fight tariffs with price controls is the equivalent of Congress implementing a universal basic income to make corporate bailouts fairer. Doing so will breed a whole new set of complications while eroding the free market even further.

The only free market way to eliminate the effects of the president’s aluminum is to eliminate them entirely. For our part here at Frontiers of Freedom, we led a March 2018 letter to the president urging him to do just that.

As Americans, we are obligated to protect the very liberties socialism would erode—and that starts by rejecting the APEX Act. The bill’s price controls will both destabilize an entire sector of the United States economy and encourage the same occurrence in other industries. Our elected representatives must resist the allure of collectivism and the mirage of moral virtue it promises. As the history of socialism has taught us, good intentions do not make good policy.