We hear writers, commentators and forecasters discussing inflation and aiming all their darts at the Federal Reserve. How about an easy step to curb inflation? Repeal the Jones Act.
On the one hand, we could reduce inflationary pressures in shipping, remove some problems and bottlenecks in supply chains, and help improve infrastructure by using our waterways more efficiently. All of these things can happen, and the Federal Reserve would have nothing to do with it.
What does the Jones Act accomplish? Actually, not much use. Rather the opposite. A recent article from the CATO Institute explains the case:
âFor nearly 100 years, a federal law known as the Jones Act restricted the movement of goods by sea between US ports to US-owned, US-crewed, US-registered and US-built ships. -United. Justified on national security grounds as a way to bolster the US shipping industry, the unsurprising result of this law has been to impose significant costs on the US economy while delivering few of the promised benefits. “(“The Jones Act: A Burden America Can No Longer Take”.)
It’s as simple as that. A law passed for protectionism one hundred years ago creates obstacles that hamper supply chains that are now under pressure from the COVID shock; and so archaic law amplifies inflation today. The point is, there is no reason the Jones Act should still be in effect except that very few politicians, Republicans and Democrats, have banded together to practice protectionism at the expense of all of us.
What authors Colin Grabow, Inu Manak, and Daniel J. Ikenson did in the CATO Institute report is probe the story of how we got to this mess; and, believe me, it’s a mess. There are simple ways to improve the situation and identify congressional officials, senators, and special interests who are trying to impose higher costs on 335 million Americans because of the unnecessary inefficiencies the Jones Act imposes. since a long time.
We are not going to repeat everything in the wonderful discussion provided by the CATO Institute document. Instead, we’ll warmly recommend that readers take the time to read the article (bit.ly/3AF5AhZ). I would especially like to thank Danielle DiMartino Booth of Quill Intelligence (quillintelligence.com) for recommending the CATO Institute article to their June 13 IQ Reading List.
If financial writers, commentators, economists, fund managers and forecasters explain the history and ramifications of the Jones Act to their constituents, we may have an opportunity to change that law.
On the other hand, given the way our system works (or doesn’t) these days, I’m not sure we can change anything. But political dysfunction aside, this author says inflation isn’t just about monetary policy; and if you want to get inflation under control, get rid of the Jones Act first.
David Kotok is Chairman of the Board and Chief Investment Officer of Cumberland Advisors in Sarasota.