Neo-mercantilism vs. direct handouts

Alex Tabarrok explains the recent "anti-outsourcing" act by the Indiana governor to intentionally pay $8.2 million more for a contract as essentially paying 50 new workers $162,000 a year from the Indiana tax revenues. Note, of course, that even assuming 50 new jobs are 'created' by the contract is optimistic to say the least. [via The Agitator]

The problem with this kind of political act and others like it (such as Bush's steel tariffs) is that, as Alex points out, the taxpayers are better off outsourcing and then just giving 50 (or so) random workers some discount on what it would cost to not outsource. Studies on the impacts of steel tariffs in the past have shown that 5 jobs are lost for every steel job saved (due to the impacts downstream of raising input prices to manufacturers), which would suggest that, again, instead of tariffs, the government would save money (and the economy in general) by simply paying the steelworkers' salaries and letting the steel mills go out of business.

I know its somewhat blasphemous for a libertarian to suggest direct welfare payments of any sort, but given the disruptive and distorting effects of tariffs and idiot grandstanding such as the Indiana case, its certainly the least bad option (and may actually have political traction, if presented properly).

Of course, the best option would be for private philanthropies to take on the burden of the direct payments to obsolescent industry workers, but baby steps, baby steps...

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You can sit down and say,

You can sit down and say, look guys, why don?t we just take all the steelworkers in America and close down the inefficient steel factories? We?ll teach them new businesses, we?ll give them $50,000 a year, and if we can?t teach them anything new, fine we?ll give it to them for the rest of their lives. They?d be better off. We?d be better off, the country would be better off. You can explain that, you can even do the numbers, but then you go out and talk to the steelworkers and they get all emotional and they talk about their culture, their way of life.

- Jim Rogers

Nobody is entitled to keep

Nobody is entitled to keep their traditional job forever, culture or no.

I think harping on the fact that 5 people (who, collectively and probably individually make more than the average steelworker) lose their jobs for every steelworker saved will be more successful than straight-up economic arguments ala Ricardo. It gets one on the right side of the problem (5 people getting screwed count for more votes than the one guy getting goodies).

the 5 people losing thier

the 5 people losing thier jobs are usually not organized or in a fixed location, nor do they have the cachet of illiberal directors and DP's using slow motion photography showing blast furnaces and dirty good looking men leaving the job site while tumbleweeds blow. the idiot level emotional attachment to these creaking obsolete positions is never underestimated by the left/right wing, or the ad agency filth they hire to film it , with tears in their eyes , i'm sure.

All the more reason for

All the more reason for those on our side to hire the ad agencies to detail the 5 people screwed out of their jobs, showing dirty but good looking auto workers leaving the job site while tumbleweeds blow..

or better yet, showing smiling indian and chinese workers at manufacturing jobs saying "thanks for the steel tariffs!"

...that might be a bit too un-PC tho. As well as uncharitable, but it would work on the level of the protectionists' thinking.

"protectionist thinking" is

"protectionist thinking" is a stretch. group-think maybe, no-think,hmmmm close, there must be some term to accurately describe the lack of insight and reversion to blunt emotional/tribal responses .

The trade-skeptical left

The trade-skeptical left wing's real problem is that programs like this DON'T exist. If the government put more resources into retraining and easing the pain of unemployment, the left would get behind trade. And that's probably what's going to happen, as the right grows more protectionist.

Studies on the impacts of

Studies on the impacts of steel tariffs in the past have shown that 5 jobs are lost for every steel job saved

Got a link? This looks like a handy factoid to use. I might not be able to use it as eloquently as your hypothetical ad agency, of course...

http://www.citac.info/study/c

http://www.citac.info/study/citac_2002jobstudysum_020703.pdf
and
http://www.citac.info/release/2001/17_12.htm

These are the first ones I came across- its newer, and related to the 2002 tariffs (the one I was thinking of is from decades ago). This study suggests a 8:1 job loss-to-retain ratio. A caveat would have to be that the study is from a "Consuming Industries" organization, who will of course tell us that the tariffs are bad (doesn't mean they're wrong, either).