President Trump’s waiver of the Jones Act for Puerto Rico puts a spotlight on an absurd law. It should not be necessary for presidents to issue ad hoc waivers on occasions when there are natural disasters. Instead, the Jones Act should be repealed outright.
I have written about the Jones Act before. The NPR program Planet Money, which is often quite good even though it is on NPR, told the following story about the Jones Act. From my 2014 post:
Here’s the story told in the episode. The state of New Jersey ran out of rock salt to melt ice and snow — which was a problem, because they were in the middle of a giant winter storm. But all was well: Maine had a mountain of rock salt. Even better, there was a giant ship in Maine that could easily transport 40,000 tons of rock salt in a single trip. Best of all, the ship was already on its way to Newark.
Problem solved, right?
Wrong. You see, using that particular ship was illegal.
Was the ship not seaworthy? Had the captain neglected to file necessary paperwork? Had the company that owned the ship failed to pay taxes?
No, none of that was the problem. The problem was: the ship was not made in America and did not fly an American flag. And under a law passed decades ago called the Jones Act (aka the Merchant Marine Act of 1920), any ship that carries material from one U.S. port to another must be made in America, staffed by an American crew, and must fly an American flag.
The law was passed, as laws like this often are, to protect American businessmen who couldn’t hack it in the marketplace. We wanted to keep a strong marine industry, so we hurt the consumer by passing protections for business. Thing is, it didn’t work out so well. The U.S. doesn’t build that many ships any more. (We barely build anything anymore.)
So it’s not like an equally capacious American-built ship was standing by to haul the rock salt to Newark.
No, instead everyone waited for a little barge to come to the dock. It was filled with rock salt to melt the New Jersey snow and ice. The barge then took off with its load of salt — leaving a mountain of it sitting on the dock. Because, you see, the 40,000 tons could not begin to fit on the small barge. So the barge took some salt down to Newark, dropped it off, went back to Maine, got another “fraction” of the mountain of salt, and went back to Jersey.
The reporter does not say how many trips were required to transport the whole load, but it’s clear it would be at least three.
Apparently President Obama did not “waive” the Jones Act then. Does a president have authority to do so? The New York Times says yes, in certain specified situations.
A waiver can be granted only if it is in the interest of national defense and only if there are enough United States vessels available to meet national defense needs. Shipping costs or humanitarian needs cannot be considered, officials say.
Previous waivers were granted during Irma and Harvey, and before that during Sandy, according to The Times.
Regardless of the legality of any one particular waiver, the Jones Act is just silly and deserves to be repealed in its entirety. As I explained in 2014, the inefficiencies happen all the time — not just during natural disasters:
This rock salt example is just one of many examples of inefficiencies and expense created by the Jones Act. If you miss your cruise ship in a U.S. port, you’ll have to pay a giant fee to catch it in another port. A cattle rancher in Hawaii seeking to avoid the extra expense of using American-made ships has gotten his cows to the U.S. mainland in two ways. Formerly, he shipped them to Canada so they could travel over the border to the U.S. Now, he sends the cows by plane when they are younger and weigh less.
Absurd, right? You bet. Economists hate the law. Yet the chances of repeal appear to be zero.
Government interventionism is, as a rule, a bad thing for the economy and for society. Unintended consequences invariably result from well-intentioned policies. Allowing the free market to work is the best solution — whether you’re talking about health care, shipping, food, electronics, or anything else.
People in Congress either don’t know this or don’t care. But the consequences are very real.