"The Tragedy of the Ironing Board Tax"
Today’s Washington Post has a fascinating piece by Peter Whoriskey about the last factory in America that makes ironing boards. It stays in business in the face of Chinese competition only thanks to the fact that it’s persuaded congress to impose an extremely heavy tax “of 70 to more than 150 percent on its Chinese rivals.” If I proposed a 70-150 percent tax on sugary sodas, there’d be a big political debate about it, but this kind of thing goes unnoticed because it’s filed in people’s “obscure trade dispute” mental box rather than their “taxes” mental box. But make no mistake, it’s a tax and it results in more expensive ironing boards.
A soda tax, of course, would have a public health rationale—less obesity, longer lives. The ironing board tax lacks such a rationale. Instead its purpose is to protect the $15/hour jobs of 200 factory workers along with the profits of Chicago-based Home Products International.
What I would like to say is that this is a bad reason to impose extra costs on those of us who iron things from time to time. That if you repeal the tax, the profits will flow away from Home Products International and toward retailers like Target and Wal-Mart. Consumers will spend less money on ironing boards and will either spend more money on other things, or else will save more money generating extra investment funds. Either way, 200 people will lose their jobs but new jobs will be created from the extra investment and consumption financed by cheaper ironing boards. All-in-all, throughout the economy resources would be better-allocated and the vast majority of people will end up better off.
The problem for me is that with unemployment at nearly 10 percent and projected by the Powers That Be to stay above 8 percent for years it’s really hard for anyone to say with a straight face that if the factory closes down the employees will be able to find new jobs. Those adjustments are always difficult to make, but given healthy labor markets they’re very possible. Given today’s labor market, I don’t think you can say that with a straight face. Which means the longer elevated unemployment persists, the more random trade barriers we’re going to see, not just in this country but in countries all around the world. And over the long haul, that’s going to reduce the world’s overall ability to produce things and earn income.