The Free-Market Case for a Strong Social Safety Net

My time constraints mean this needs to be brief, but I think one of the strongest arguments for a strong social safety net comes directly from free-market economics. Let me explain.

In last night’s snoozer of a presidential foreign policy both candidates argued that they would be better able to project American jobs from foreign competition. Obama in particular pointed to tire tariffs on China as a major success. But these tariffs are an economic disaster that the American consumer is paying for (see http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/10/23/how-obamas-tire-tariffs-have-hurt-consumers/). A very conservative estimate says that each job has cost consumers nearly $100,000 a year.

There is no unified lobby for the American consumer. When we all take small hits, it gets ignored.

Instead of pursuing really bad economic trade policy that cost the American consumer loads of money to save a couple of jobs, we would be much better off pursuing free trade, helping the world specialize and grow. By lowering the cost of job loss, a strong social safety net can free us up to pursue good policies at a cheaper end cost to consumers. There is a true pareto improvement to be had here.

Sadly, this is a case of the all-to-often true: when the political parties agree, they usually are both wrong. George W pursued similar policies in the steal industry, with will documented massive cost to the American consumer and economy.


One thought on “The Free-Market Case for a Strong Social Safety Net

  1. DS Reply

    “steal industry” – loving the Freudian slip! very appropriate when talking about politicians.

    anyways, what is the objective function of politicians? i posit they maximize it alright, it’s just not the welfare maximization of the country or the world, it’s the welfare maximization of the median undecided voter.

    also, please keep in mind that i took my job from a perfectly good American youngster. he then languished unemployed for a few years, now he works at Starbucks. tell him about the economic gains from free trade.

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