Biden’s Support for the Jones Act Illustrates His Economic Incoherence

F ew things demonstrate the inconsistencies of President Biden’s economic policy more than his support for the Jones Act. After being beaten around in the media for a few days, his administration finally granted a limited waiver to allow a non–Jones Act vessel carrying diesel to dock in hurricane-stricken Puerto Rico. But the law will continue to impose substantial costs on the residents of Puerto Rico due to lack of competition, which Biden claims is a major concern for his administration.

In the aftermath of Hurricane Fiona, which struck Puerto Rico on September 18, the island territory is in need of supplies for recovery. The Jones Act is a potential impediment to providing those supplies, because it restricts which ships are allowed to service the island from the U.S. mainland.

The Jones Act says that any ship delivering goods between two U.S. ports must be built in the U.S., flagged in the U.S., owned by Americans, and operated by American crewmen. It’s one of the strictest protectionist laws on the books, and few vessels meet its demands. It makes U.S. domestic shipping uncompetitively expensive. It puts New England in the awkward spot of importing natural gas from Russia instead of buying from Texas (there are currently zero LNG tankers that are Jones Act–compliant). And even though Puerto Rico is not a state, the law applies there as well, saddling the island with high shipping costs.

There’s nothing wrong with foreign trade per se, but when American citizens — whether they live in Puerto Rico or the continental U.S. — are forbidden from purchasing domestic goods that would be more cost-effective absent government interference, there’s something deeply wrong with the government’s policy. The Jones Act does particular damage in the case of Puerto Rico, which even before being devastated by Fiona was much poorer than even the poorest U.S. state.

Douglas Holtz-Eakin of the American Action Forum summarizes the problems with the law well: “It has generated none of the supposed benefits, imposed large costs on America and its territories, and permitted the inflated prices to benefit the shipping middlemen. It is time to sink the Jones Act.”

When a hurricane strikes Puerto Rico, as hurricanes often do given its location, the Jones Act’s damaging effects become most apparent. After Hurricane Maria struck in 2017, the Trump administration granted a ten-day waiver of the law’s requirements to allow foreign ships to serve the island.

The story has been much the same in the aftermath of Fiona. A tanker carrying 300,000 barrels of diesel from Texas steamed to Puerto Rico to offer relief, but it had to ask for a waiver because it is flagged in the Marshall Islands. Remember, if this exact same ship were carrying 300,000 barrels of diesel from another country, it would be allowed to dock, no problem. But since it came from a U.S. port, it has to ask special permission from the U.S. government to deliver U.S. diesel to U.S. citizens.

It finally got permission to dock, but not after the U.S. maritime lobby did its best to block it. They argued that there is not currently a diesel shortage on the island, so a waiver is not necessary. In truth, the New York Times has reported that, “In the days since the storm hit, hospitals, supermarkets, businesses and residents have had trouble finding diesel to fuel their generators, forcing some to turn them on for only a few hours a day.”

Regardless of the limited waiver, by supporting the Jones Act in general, the Biden administration is effectively saying that the small group of domestic companies protected by the law ought to be allowed a monopoly on shipping between the mainland U.S. and Puerto Rico. By merely granting a limited exception rather than calling for the law’s repeal, it is saying that such an arrangement is good and proper most of the time.

Biden is hardly alone in supporting the law. According to the Congressional Research Service, the only administration in the modern era to call for its repeal was Lyndon Johnson’s. But Biden claims that competition in the American economy is one of his top concerns. This was an administration that issued a celebrated executive order on competitiveness to start a “major new battle between the administration and corporate titans,” the Washington Post said. The order said that “excessive market concentration threatens basic economic liberties.”

To appear as if they are actually fighting this “major new battle” against monopolists, Democrats have made stuff up about a supposed lack of competition in meatpacking, international ocean shipping, retail, groceries, and petroleum. But when they are confronted with an actual example of lack of competition hurting Americans, such as the one now unfolding in Puerto Rico, they all of a sudden explain that the issue is very complicated.

A Washington Post article lays out the Democrats’ political dilemma: The Jones Act is “backed by labor unions and key to the president’s ‘Made in America’ agenda.” A Puerto Rican official is quoted in the story criticizing “the ‘unholy alliance’ between the U.S. shipping industry and the unions.” But that unholy alliance is key to the president’s political coalition, so the people of Puerto Rico will have to suffer.

You can be “the most pro-union president leading the most pro-union administration in American history,” or you can be pro-competition; you can’t be both. You can support protectionist policies that favor domestic industry, or you can support reducing consumer prices; you can’t support both. Biden’s backing of the Jones Act is a perfect illustration of these contradictions, which ultimately make his economic policy incoherent and self-defeating.