Make Washington County great again

Originally published in the Herald-Mail

Thomas A. Firey Mar 21, 2018

America’s current economic boom has been especially good for Washington County, where the unemployment rate has hovered around 4 percent for the past year.[1] That’s an important threshold; some economists consider 4 percent the threshold of “frictional unemployment,” where joblessness is just the normal “churn” of an economy as workers lose or quit one job and quickly find another.

 

Still, things could be better. The county’s median household income is around $57,000, which is slightly better than the national rate but disappointing for a county in the Washington, D.C. region.[2] Local workers could use a boost to keep them in the middle class.

 

Maybe local leaders could borrow a strategy that President Trump believes will help the nation’s middle class. Since the start of the year, his administration has imposed hefty tariffs on foreign-made washing machines, solar panels, steel and aluminum, and is threatening to add foreign cars to the list. The tariffs are intended to punish American consumers who don’t buy domestic products, pushing them to switch to U.S. manufacturers. Perhaps Washington County could impose similar tariffs on goods made outside the county. Think globally, act locally, as it were.

 

The county was once home to several major manufacturers. Consider aviation. Maryland Pressed Steel built biplanes here during World War I. Kreider–Reisner opened its plant in 1923, and its products are so well regarded that one of its C-4C biplanes hangs in the Smithsonian. Fairchild Aircraft bought Kreider–Reisner in 1929 and moved its corporate headquarters to the county, where it would build such legendary aircraft as the C-119 Flying Boxcar transport and the A-10 Thunderbolt II attacker, as well as supply major parts for the B-52 bomber and the F-4 Phantom II and F-14 Tomcat fighters. But Fairchild closed its plant here in 1984.

 

Mack Truck, and now its parent company Volvo, has been a major employer in Washington County for decades and appears to be going strong. But Mack/Volvo isn’t the only automaker in county history. The Crawford Automobile Co. began making cars here in 1904. It was rechristened the M.P. Moller Motor Car Co. in 1923 and produced stylish roadsters like the Dagmar until it ceased production in 1936.

 

Other major county manufacturers included the Crawford Bicycle Co., Brandt Furniture, Pangborn Corp., and M.P. Moller Pipe Organ Co. Today, all except Mack/Volvo have either relocated or closed. New planes, cars, bikes, furniture, sand blasters, and pipe organs, not to mention many heavy trucks, used in the county now come from somewhere else.

 

So imagine what would happen if the county imposed tariffs on those goods that come from outside county borders. It could even tariff raw materials used in those goods—steel, aluminum, petroleum—to encourage the creation of local metal and oil industries.

 

Wouldn’t those taxes make Washington County great again?

 

You might object that this idea is ridiculous. No steel mill or automaker would build a plant here in order to access the local market, so the tariffs would just mean higher local prices and less economic activity in the county. National tariffs, on the other hand, would induce firms to build in the United States so they can avoid tariffs on goods the sell in the United States. But the problems that would plague county tariffs—higher prices, lower employment, less economic activity—also plague national tariffs.

 

An important concept in economics is the Principle of Comparative Advantage, which holds that people are better off when producers focus on products they’re relatively good at making. For instance, some American companies are very good at steel, producing and profitably selling between seven and eight million tons of it a year. Other companies—namely antiquated steelmakers with inefficient plants—can’t keep up with the efficient American producers and similarly efficient foreign ones. The tariffs are intended to push out the efficient foreign producers in favor of the higher-cost, inefficient American ones. The efficient American steelmakers will then raise their prices because they face weaker competition.

 

American steel-using industries like Mack/Volvo—which employ many times more workers than the steelmakers—have been hiring more workers and making and selling more products because they buy steel from the efficient domestic and foreign producers. But with tariffs in place, these steel-users will have to pay higher prices for the metal, which means they’ll have to cut their employment and production. They’ll also pass on the higher prices to consumers, who will buy less steel goods. That’s why, back in 2002 when the United States last tried steel tariffs, it resulted in an estimated net loss of 200,000 American jobs.[3]

 

Just like county tariffs, the national tariffs will result in higher prices and less economic activity, benefiting domestic steel company executives and workers but hurting America as a whole. That isn’t great for America, just like Washington County tariffs wouldn’t be great for the county.

 

Thomas A. Firey is a senior fellow with the Maryland Public Policy Institute and a Washington County native.

 

[1] Maryland Dep’t. of Labor, Licensing & Regulation. “Local Area Unemployment Statistics (LAUS) - Workforce Information & Performance.” Accessed March 13, 2018.

[2] U.S. Census Bureau. “Quick Facts: Washington County, Maryland” and “Quick Facts: United States.” Accessed March 13, 2018.

[3] Joseph Francois and Laura M. Baughman. “The Unintended Consequences of U.S. Steel Import Tariffs: A Quantification of the Impact during 2002.” Trade Partnership Worldwide, Feb. 7, 2003.