Politics & Policy

Waiving the Jones Act for Puerto Rico Is the Right Step

A cargo ship outside the port of San Juan, Puerto Rico, September 24, 2017. (Reuters photo: Carlos Garcia Rawlins)
Repealing it altogether would be even better. Then the GOP can move on to killing other onerous regulations.

Republican senators Mike Lee (R., Utah) and John McCain (R., Ariz.) have introduced legislation to permanently exempt Puerto Rico from the Jones Act. This is a common-sense decision on the merits that will help the island recover from Hurricane Maria. It might also be a way for Republicans, who have so far been an inert governing party, to refresh their legislative agenda.

The Jones Act, passed after World War I, requires that shipping between U.S. ports be conducted with American-made ships that are staffed by American crews. The Jones Act prevented foreign vessels from delivering aid to Puerto Rico in the wake of the hurricane. Waiving it was an obvious move, and after hesitating, the Trump administration granted a waiver last week. That was a good decision at the time, but the legislation of Lee and McCain is a warranted next step.

On the merits, the Jones Act is a bad law. It cost Puerto Rico $17 billion in economic growth between 1990 and 2010, according to one economist’s estimate, and costs Hawaii and Alaska, too. It raises the cost of consumer goods, which particularly hurts poor consumers. All of this is to protect the interests of the American shipping industry, which lobbies ferociously. A full repeal of the act would be best, but McCain and Lee are right to try to pass a permanent exemption for Puerto Rico.

But the law could also chart a path forward for the Republican party, which is currently wedded to a stale agenda. In a Washington Monthly article titled “Why the Jones Act Is Robin Hood in Reverse,” political scientists Brink Lindsey and Steven Teles describe the legislation as an example of “regressive regulation” and rent-seeking:

The people who benefit from the regulation have big economic stakes on the line, while those who pay the costs may not even notice the effect on their individual well-being. This is true even though those costs may add up, across the whole economy, to billions of dollars, well in excess of what the beneficiaries take home.

According to Lindsey and Teles, authors of the forthcoming The Captured Economy, such regulations “generate economic inefficiency” and also “exacerbate the trends in the economy” that generate income inequality. Poor consumers in Puerto Rico and Hawaii lose; politically connected shipping interests win. Lee and McCain’s bill, then, is the kind of regulatory reform that will help regular consumers.

Regular consumers in Puerto Rico, that is. The natural disaster occasioned the Republican proposal, but it might be wishful thinking to cast this bill as a first step toward enacting a broader middle-class agenda. Yet increasingly, it’s middle-class Americans who vote Republican; Republicans could better serve their interests.

The Jones Act is an obvious target in the wake of Hurricane Maria, and McCain and Lee have been working to limit it for years.

So far, they haven’t. House Republicans first passed a health-care plan that financed tax cuts for the wealthy with cuts to Medicaid, then Senate Republicans failed to shepherd through more modest health-care reforms, and now the GOP is tinkering with a tax-reform framework that doesn’t do enough to help middle-class families, as Ramesh Ponnuru has argued. It’s worth asking how long this can go on, especially given the schism, laid bare by Trump, between the party’s donor class and its base. Party leadership has remained studiously opposed to fresh thinking, but if Republicans want to maintain power, they will eventually have to pass legislation and govern.

The Jones Act is an obvious target in the wake of Hurricane Maria, and McCain and Lee have been working to limit it for years. But there are plenty of other similar regulations on the books. Lindsey and Teles envision a future where lawmakers “reach across the aisle to hack away at occupational licensing, excessive intellectual property protection, constraints on development, and a myriad of other forms of regulatory upward redistribution.” That would blunt the criticism that deregulation is a handout to the rich or that it always comes at the expense of the environment, and it could also grease the congressional wheels.

That future might be distant, and this bill might be less a harbinger than an overdue corrective to an outdated law. Still, Republicans should learn from its example. They might back into an agenda that can finally get off the ground.


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