Wednesday, August 01, 2007

Those Who Don't Learn From History

Politicians that don't remember the Smoot-Hawley tariff act of 1930 are apparently doomed to repeat bad economic polciy:

It has become a Capitol Hill ritual: A few senators, always including the New York Democrat Charles E. Schumer, introduce a bill to punish China if its leaders do not raise the value of the nation's currency. Photos are taken, news releases are issued, but nothing really happens.

This year, the atmosphere on the Hill is markedly different. Powerful senators from both sides of the aisle, Schumer among them, are pushing two bills that threaten retaliatory action if China does not budge. For the first time, the idea is gaining broad support. The bills are moving swiftly through the Senate, and many analysts expect one will pass.

Economists are almost unanimous in their support for free trade:

In 1930, Congress passed and President Hoover signed into law the Smoot-Hawley Tariff Act. At the time, this protectionist measure was vigorously opposed by 1,028 of the nation’s top economists. They rightly predicted the tariffs would devastate the economy. And, in fact, the country subsequently plunged into the Great Depression.

Now some in Congress are considering ways to enact similar protectionist policies against China. Once again, 1,028 of America’s top economists, from all 50 states and top universities, have signed the following petition sponsored by the Club for Growth
in opposition to protectionist policies against China. In addition to many other prominent and well-respected economists, signatories include Nobel Laureates Finn Kydland, Edward Prescott, Thomas Schelling, and Vernon Smith.

Here's a link to the petition.

I have written here many times about the export boom currently underway in the US. It's just plain stupid to start a trade war when China has us by the Treasuries and our exports are booming. Stupid.

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