Crony Capitalism

The Military Is About to Buy A Lot of New Balance Shoes. Thank Cronyism.

The company can exploit an advantage created by foolish protectionist laws to sell cheaper shoes and capture more consumers.

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New Balance
Screenshot via KurtzerTech / Youtube

Corporate welfare takes many forms: a tax break to a particular industry, a tariff against foreign sugar producers to shelter domestic producers from competition, a loan guarantee program for exporters, etc. It can also take the form of lawmakers forcing the Department of Defense to provide New Balance athletic shoes—and only New Balance athletic shoes—for new military recruits.

This story is actually worse than it sounds. Let's start from the beginning: Did you know that the military is required to buy uniforms and boots that are made in the USA? Aside from the unintended effects of such a mandate (hint: it hinders economic growth, costs jobs and makes us relatively poorer), until now it hasn't applied to sneakers because it's difficult to find athletic footwear made in the United States. Most sneakers are made in Asia.

So recruits receive a cash allowance to buy sneakers. Army and Air Force recruits may choose from 14 different variations of shoes between men and women at troop stores. More consumer choice is always good, but in this case the health of the troops is also at stake. The military spends $100 million annually to treat injuries to new recruits, with 80 percent treating injuries to lower extremities. Not everyone has the same type of foot, so the wider the choice of sneakers the fewer injuries.

Enter New Balance. The company recently opened factories in Massachusetts and Ohio, where it makes different shoe components. It expects to reap the benefits of being the only sneaker-maker that can claim a 100 percent American-made label. Though consumers may not care about that feature, they'll certainly care about the price of the shoes, which is likely to be cheaper than those made in Asia. That's because shoes made abroad are slapped with a tariff of up to 20 percent. This hidden tax on foreign athletic shoes increases the price for consumers.

This is good for New Balance, which can exploit this advantage created by foolish protectionist laws to sell cheaper shoes and capture more consumers. That was the plan, at least, until the Trans-Pacific Partnership came along. One of the features of the trade deal is that, if ratified, it would reduce trade barriers between Vietnam and the United States by lowering tariffs, including those on imported sneakers. That's good for consumers, who would see a reduction in the price of their footwear.

However, you can see how this free trade development threatens New Balance's made-in-America advantage. Not surprisingly, the company is vocal in opposing the trade deal in order to protect its U.S. factories.

Now enter the Obama administration. It wants the TPP to be ratified and wants dissenters to get in line. This is easy for the federal government, which can buy favor with government privileges—in this case, the promise of a lucrative military contract for being the sole made-in-America producer of athletic footwear. A coincidence? I think not. According to Heritage Action for America's Michael Needham, the company lobbied the military for some time for that exact outcome. It would mean roughly 250,000 American-made shoes annually—and no competition.

Conveniently, Congress adopted an amendment to the National Defense Authorization Act for Fiscal Year 2017 by Massachusetts Democrat Niki Tsongas to force the military to only buy shoes with every component made in the USA—a feature that only applies to New Balance.

It's a good deal for the administration, the company, its lobbyists, and the members of Congress whose districts house the New Balance factories. It's not good for taxpayers (the New Balance shoes are $30 more expensive than shoes currently available at troop stores), and it's not good for new recruits, who went from being able to choose among 14 pairs of sneakers to being able to choose among three pairs and may see more foot injuries as a result.

And that, my friend, is how interest groups are compelled to support things they don't like. They get a government-granted privilege that cheats taxpayers and consumers—our troops, in this case.

Thank goodness there's one lawmaker in Congress who won't tolerate this blatant cronyism. South Carolina Republican Mark Sanford offered an amendment to strip the Tsongas-New Balance language from the NDAA. He told me his main concern is the health of our military, which requires consumer choices, adding, "Besides, when it smells and looks like an earmark, it's probably an earmark." Unfortunately, there will be no vote on Sanford's amendment. He's still fighting, however, and we can expect the Senate to pick up the fight, too. It's not over yet.

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96 responses to “The Military Is About to Buy A Lot of New Balance Shoes. Thank Cronyism.

  1. Mark Sanford is still around? Who knew.

    1. Ah yes, the man who everyone thought said he’d be hiking the Appalachian Trail, when he actually said he’d be chasing some Argentinian tail.

      Must be hard to campaign against him, not being able to bring up his little history. Once or twice might pass muster, but more than that would just seem petty.

  2. I can actually see some point in insisting that military equipment must be made in the country, since the idea of a military being beholden to foreign powers seems rather strange. But this is really just another crony spectacular.

    1. Foreign companies like FN win lots of military contracts – then open factories in the south to fulfill the orders.

      1. FN wins military contracts because they make really good guns. And it’s smart to open their US factories in the south,where they aren’t burdened with unions and all their leftist baggage.

    2. Yeah, sure, if you are talking about weapons and vehicles and stuff. But it should be pretty easy to find alternative shoe suppliers if necessary.

      1. If the shoes weren’t made in America, we’d have to check every pair for tiny listening devices and remote detonated explosives in the soles. It’s for the children, the ones we’re getting ready to send off to get shot at.

      2. That was one point I disagreed with in “ecomics in one lesson”, tariffs for military interest. If the military can save money on shoes, they have more budget for ammunition.

        1. “they have more budget for ammunition”

          you say this like they don’t get everything they want regardless of costs.

        2. We invented a gun that fires shoes! It’s estra-insulting to certain groups.

          1. I Mean, Honestly, Who Throws A Shoe?!

    3. Being made in another country =/= not possible to switch production to this one if necessary.

      And the less technical or expensive the item the easier it is to switch production. We’re not talking about buying ships made elsewhere but shoes and clothing.

      And its the *buy American* mandate for military equipment that has lead to this. Its not really even cronyism – New Balance just moved to make shoes in the US so, at the moment, they’re the only ones qualified to do so. And since they are qualified to do so, there’s no reason to keep the *exemption to existing law* (which was put in place because there were no qualified suppliers).

      All this will mean is that, if this generates sufficient profits, that other manufacturers will move some portion of their production back to the US to gain access to this market.

      1. Little known fact:

        The two really important (not most valuable or biggest) Lend-Lease purchases during World War 2 were a)Spam to the Soviets and b)boots to the Soviets. They didn’t make canned food – and central planning was not a system that made ‘shoes’ important and once the war started they had to focus on ‘big’ stuff like ammo, guns, tanks, planes. But those are two of the more important things that an Army needs if it is going to move out of an entrenched position and go on the offensive. If it hadn’t been for those two, Soviets would have been able to defend forever – but with only one winter offensive each year. With those two, they were able to go on the offense all year (and pick up more boots from POW’s) – and end up in Berlin.

        I have no doubt that this requirement by the Army is mostly cronyism. But the US Army is also the only military in history that has focused so much on logistics (prob because Valley Forge has symbolism for us) and made it a differential skill. For others, strategy and tactics and such are the sexy things that are the focus of attention. For us, its been always been logistics – and we are damn good and uniquely good at it. It can end up as cronyism/corruption – but it is also a really important focus for us. And honestly I think that was the frustration/dilemma that led Eisenhower to his farewell address.

        1. I work for DLA. Totally agree!

      2. But if there are no US factories that make shoes and apparel, where will we make them in the US? Who will have the equipment and the know how?

        It is at least a legitimate point of concern.

        But with allies around the globe making similar items, they could surely be sourced elsewhere should a conflict arise.

        And if it became us against the entire rest of the planet, maybe we’d do well to rethink our position.

        1. A loss of naval supremacy followed by a tonnage war would result in us being cut off from our allies’ industrial bases – besides, in the strategic big war, they might not have surpluses.

          Lastly, we had plans to invade canada if need be, and should be prepared for all contingencies.

    4. I have a little different take. I’ve found New Balance shoes to be superior to any other shoe at its price point and believe that the troops will actually have fewer injuries than if they’d used other shoes. That’s good for the troops and good for the military.

      What horrifies me about this article is not so much that the US Military must purchase US-made goods as the fact that opposition to the TPP is being defeated by using military contract/bribery. I admittedly know little about the TPP. (The fact that it has been negotiated in secret, behind locked doors contributes to this.) What I’ve heard is not good. That politicians are paying off opponents with tax dollars tells me that it’s the TPP that we should be opposing – not the “Made in America” label.

  3. I coulda sworn New Balance made the news on this maybe…..12 years ago? Unless something just came up for review again, I’m pretty sure this was the policy when I went through basic in 2004. (course I just brought my own sneakers).

  4. “Did you know that the military is required to buy uniforms and boots that are made in the USA?”

    Yes. You should have seen the shitstorm that hit when we got those $#%& black berets and they found out “Made in China” was in place…

    Massachusetts Democrat Niki Tsongas

    What is it with Niki’s around here?!

    1. “We’re all Army Rangers now, except for the Rangers who get a different colored beret, and Special Forces who get a different colored beret, and…wait…”

  5. When I went to Boot Camp, we were told to bring our own running shoes or else I would have wear the shitty “go-fasters” they issued. I see it’s still true. Running shoes were the only article of clothing not issued to me that I wore for 3 months.

    1. When I was in, we were issued….none other than New Balance. This was in 2001. PI got New Balance, San Diego got these ugly black and camo Asics.

      I prefer New Balance anyway – I have a wide foot and NB tend to accommodate that more than most running shoes.

    2. “When I went to Boot Camp…”

      If only you’d gone to Shoe Camp…

  6. You really want to cause a shitstorm? Do some investigative journalism on the entire DoD acquisitions process…if you dare.

    1. +1 DoD Lifecycle Chart

      While it definitely violates the Purity Clause, I don’t have a giant problem with a military contract going to a domestic supplier vs a foreign supplier. The argument’s good enough for the EB shipyards anyway.

      Especially when the domestic supplier puts out a decent product. At least, based on my personal experience with NB. Other shoemakers are at least exploring the wide foot market now, but for awhile, it was NB or nothing if you were cursed with EEE-EEEE feet, and you wanted athletic shoes.

      This is DoD acquisition rage that is, IMHO, better turned onto the giant disaster that is the F-35 program, or that the Army is looking to spend $350 million on new pistols. FFS, just give them Glock 17s or 19s and call it a day already. Glock’ll even make them with safeties, if you’re that worried about Glock Leg.

    2. Start with the FAR. It’s a great read.

  7. New Balance wouldn’t exist without protective tariffs and government acquisitions. They’re cronies in every way possible.

    1. We’re teaching young people that this is the capitalism under which every American has an equal opportunity to get ahead. It’s no wonder they think we’re full of shit.

    2. Figured it had to be something like that. Their shoes definitely suck. *tightens laces on Nikes*

      1. Nikes look good but don’t perform worth shit, especially over-pronators. ASICS, Brooks, Mizuno are better running shoes. I like Newton personally.

    3. This be nonsense. I have a wide foot and NB are the only running shoes that I can buy now. Otherwise, shoes that give me heel blisters and raw ankles – or toe crunchover – or so uselessly padded that your feet are sopping within 10 mins with two days for the shoes to dry out. re the latter – most people I know just think that’s the way shoes have always been.

      Count me as a consumer who is unimpressed now that clothes are no longer made in America. Cheap shirts that you gotta buy twice as often because the buttons crush and the stitching is crap and the collars pucker and the sleeves fray. T’s where you gotta compromise – size them for your shoulders and wear a parachute – or size them for your side and walk around with armhole splits once you raise your arms. Dress shoes that used to last a lifetime – not anymore. Off-the-rack suits? – whew no one has to wear them anymore. The clothing compromises are endless and required now.

      Fortunately I know we are better off with all this. Gummint (and Reason) informs me that these new clothing options are not lower quality (no hedonic adjustment in inflation stats for clothing) but are lower price. So ‘free trade’ must be a miracle.

      1. You are perfectly free to buy clothes made in America. They are all over the place. I bought a great button down shirt in Hawaii last month, and there are boutique shops in pretty much every american city that specialize in American made, expensive clothing. Nevertheless, the average person tends to like having 50% more disposable income even if they have to buy new twice as often. So big box stores cater to that.

        And if you think clothing being sized to fit Americans’ growing beer bellies is something unique to foreign manufacturers, you are wrong.

        1. You’re wrong. I am perfectly well aware what my clothing choices are now – and they are more limited now than ever in my life. I am not perfectly free to buy clothes made in America now – because they are DAMN hard to find now. The only thing that is left now is the hugely upscale stuff – that I never had to buy before.

          And I resent the hell out of people who want to impose THEIR ideas of how free I personally am based on the ‘average’ person. That is manipulative utilitarian crap that does not belong in any libertarian ideas that I accept. And your assertion of ‘50% more disposable income’ is nothing more than your proud acceptance of government-manipulated inflation information (including its failure to ever make hedonic adjustments for decreased product quality) which is intended solely to preserve some deception about the value of floating fiat currency that isn’t actually linked to production anymore. You are perfectly free to jump on board that gummint delusion. I’m not interested.

          1. And BTW – my first job out of college was actually with the BLS as an economist – doing the basket adjustments and the survey/statistical design work and such. Before they actually went over to the dark side and compromised to political imperatives. But even if those imperatives didn’t exist, trying to be ‘accurate’ in measuring ACTUAL consumer choices over time is a real challenge.

            If over time, consumers move from buying ‘steak’ to buying ‘hamburger’ to buying ‘dog-food’ to buying ‘beef-flavored kibble’ to buying ‘dandelions’, is that a consequence of true free choice – or a consequence of some systematic distortion of a free market?

          2. And I resent the hell out of people who want to impose THEIR ideas of how free I personally am based on the ‘average’ person.

            Oh, poor Jfree. Other people don’t make the choices he wants to make and so some how they are imposing their ideas on him.

            I am perfectly well aware what my clothing choices are now – and they are more limited now than ever in my life. I am not perfectly free to buy clothes made in America now – because they are DAMN hard to find now.

            Then frankly, you are an imbecile. Try googling “american-made clothing”. Try going to the site: americansworking (dot) com. There is clothing of all types available all over the country. Much is available online with easy “try and send back if it doesn’t fit” policies.

            And your assertion of ‘50% more disposable income’ is nothing more than your proud acceptance of government-manipulated inflation information

            No, it is based on studies show that people can buy more for an hour of their labor (electronics, clothes, etc) than they could in the 80’s. Inflation numbers have nothing to do with it.

            1. Try googling “american-made clothing”.

              I don’t care about ‘made in America’ because of a label. I care about ‘finding something that fits’ – and ‘made in America’ to me used to mean ‘made for the American market’ where body types (and not just fat) are not the same as ‘global’. I’m not a clotheshorse who likes shopping. I’m a 1-2x/year who used to be able to get whatever I wanted from wherever with few problems. Now I have to shop around for shops, waste time trying on stuff, so I don’t have to waste time returning it. Internet? Hahaha. None of which is even MEASURED in all the benefits of ‘more crap from China’. Maybe I’m the only one on Earth who has this problem – and I’m not calling for protectionism anyway. But I doubt I’m the only one – and unlike some, I haven’t also lost my job in the process.

              Inflation numbers have nothing to do with it

              That data comes from the same data sets at BLS (maybe one from Census) – no matter who is actually doing the analysis of them. CPI is just one series. I’m using the term inflation in a much broader sense (not even an economic sense but a time-series metadata sense). I’m not saying that summary of yours is definitively ‘inaccurate’. I’m saying BTDT and I don’t take any of them at face value anymore. But knock yourself out. If you believe strongly enough it’s probably true.

      2. I live in Maine where the factory is located, and their reps are on the radio a lot when the company makes the news. They’ve said so themselves that they need both government contracts and protective tariffs to survive. And they make sure to put a patriotic spin on it. You know, AMERCAN JERBS! U! S! A! U! S! A!

        1. Well if that’s true, then I better start preparing for the day of true freedom when I can no longer buy running shoes anymore. Because the other brands made overseas sure as hell aren’t getting better for my feet over time – and I do still keep trying them on every time I buy shoes.

          1. JFree, I’m a lifelong NB user, and I switched to Asics for the pair I have now. (Gel Venture 5s) A touch heavy, but a great stability shoe and plenty of width in the EEEE pair I have. As good as my former NBs. If you race, you might want a lighter shoe, but my Asics have lasted 6 mo and about 700 miles now.

            Time to find a new pair pretty soon.

            1. I had a gel bicycle seat,and the damn thing split and oozed sticky gel all over my butt. Never again.
              For shoes,I’d rather have sorbothane.

      3. brooks makes the best period for any type of foot….nike sucks and it’s not worth it to waste your money figuring out the ONE shoe that nb might have for you..

        1. nike is for american queers that have kaleidiscoped eyes when they hear the word patriotism

  8. Welch,

    Love your hair. More de Rugy, please.

    Kisses,

    Hamster

  9. I was looking for tennis shoes a couple of weeks ago. Walked into the New Balance store at the mall, looked at the prices, walked out

    1. Just buy off Amazon, old man. My Pumas were $30.

      1. People go to the store to buy things? I thought it was just to try the product out and then leave it on the floor.

        1. JB is in his mid-80s, and sometimes he needs reminders.

          1. I’m sorry, I forgot what we were talking about. Can someone turn on Matlock for me?

        2. I do sometimes feel guilty looking at things in the store and then taking out my phone to buy it on Amazon. Not guilty enough to stop.

          1. For generic items and big box stores that’s what I’ll do. For more niche-market stuff I’ll pay the premium for a local supplier, even if it’s cheaper on Amazon, because they typically offer me better service and have experience with the product. I’m paying extra for the product knowledge and support that I won’t get from Amazon.

            I’ve had more than a few local experts that I purchased from stay on the phone and talk me through install or even stop by and help.

            I’ve also heard them talk about how many of their “customers” will buy a product from Amazon and then bitch when the local supplier is unable to jump through hoops to support them when the product they get isn’t what they expected/needed. They demand swaps or support and they expect to pay nothing for it just because the local guy carries the same line as Amazon.

      2. Zappos.com is owned by Amazon, but I tend to go to them for my shoes. First time I used them, I used paypal and didn’t notice until I received the receipt that paypal had supplied them the wrong shipping address. I called them up and explained the situation. It was my fault (since I had provided the right shipping address on Zappos but failed to confirm it when going through paypal).

        Nevertheless, the Zappos rep changed the order quickly, and gave me a free subscription to Zappos VIP (Free shipping) “for my trouble”.

        Beyond the friendly service, the Zappos website is designed mostly for shoes, meaning that they have done things like sizing charts and categorization of their inventory better than Amazon who has to spend their time supporting all sorts of products. In general, I’ve found it to be a better experience.

        1. Cool. I’ll have to check that out.

  10. I thought the military only cared that steers and queers were American made.

    1. The US military has never cared much about the nationality or even current citizenship of its steers or queers. I’ve served with people from the UK, Ghana, Guatemala, Pakistan, Philipines, setc.

      1. I should’ve said Made in Texas.

  11. Oh goody, it’s happening.

    http://hotair.com/archives/201…..l-clinton/

    1. I think Trump is just warming up. After the convention, Clinton is going to get worked over worse than .

      1. George Forman’s heavy bag.

        1. That’s the one thing I think a lot of pundits types have overlooked. The GOP has been terrified to really get after the Clintons ever since the failed impeachment vote. Trump doesn’t care. I can’t stand the guy, but if I’m forced to endure an election with him and Cankles I at least want my fair share of lulz.

          1. The impeachment vote succeeded, the subsequent conviction vote failed.

          2. Dole, Bush, McCain, and Romney were all pansies. I can’t wait to see the brawl that’s coming.

  12. Army and Air Force recruits may choose from 14 different variations of shoes between men and women at troop stores.

    Heh, sure. As long as everyone in the training company buys the same type and color of shoe they can choose.

  13. It seems that the racist, homophobic South is the last bastion of reason, personal autonomy, and free enterprise for everyone. I wonder if the tolerant, progressive North gets the irony of that. Even some ultra-progressive comedians are starting to notice that while the South doesn’t use the correct ‘words’, they aren’t actually any more or less racist than bastions of supposed tolerance like New York or California.

  14. Thirty years ago, the USMC was recommending New Balance sneakers for boot camp. They didn’t pay for them, you had to do that yourself. And they weren’t required, IIRC, but highly encouraged.

    1. Until you graduate, you don’t realize that you’re actually paying for everything in boot camp, including laundry and haircuts. Then they give you a bill at the end.

  15. In 2001 we (Navy recruits) were required to buy one style of New Balance shoes in Navy boot camp; the reasoning given to us was that some recruits came in and insisted on using skate shoes (or some other sort of nonsense). Sadly the shoes were not pleasant to wear or run in, and due to being forced to buy them I did the proper thing and never bought a pair of them again.

    1. Sailors don’t wear Boondockers anymore? Does the navy working uniform even allow for removing with boots on or create flotation devices with pants/shirt/Dixie cup? Oh that’s right, no Dixie cups, dungarees or other uniforms that might save your life because it has been battle tested.

      Now sailors can be camouflaged in the water with working uniforms that don’t help you stay afloat. Stupid.

      1. We’ve had something like 3 sailors and one Marine fall overboard in the last 25 years. Only the Marine spent more than a short time in the water and that Marine was able to get his BDU pants off (over the boot bands) and use them as a flotation device.

        *None* of our uniforms – including the disco pants and dixie cup were ever *designed* to serve as safety devices, it was only found that they could serve that purpose incidentally. The dixie doesn’t help anyway as you wouldn’t be wearing it in the one situation (being underway) where you’d be in danger of needing its capability.

  16. Nobody needs that many kinds of sneakers anyway. I read that somewhere.

  17. When I lived in Brazil a few years ago it was protected economy.
    Tariffs of 100% to 300% were imposed on all imported goods or they were simply banned. Brazilian producers had little, if any, competition and as a result, despite having low labor costs, Brazilian made goods were shoddy, obsolete and relatively expensive. Of course, the politically connected drove US and European cars and had killer home entertainment systems.

    Protectionism really only protects inefficient, noncompetitive producers and their government patrons. The consumer is always screwed because he is the one paying for it.

  18. RE: The Military Is About to Buy A Lot of New Balance Shoes. Thank Cronyism.
    The company can exploit an advantage created by foolish protectionist laws to sell cheaper shoes and capture more consumers.

    I spent seven years in the military.
    Explain to me why they need these kind of shoes again.

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  20. When I went to bootcamp, the military provided everything- boots included. They were not super comfortable but they had a proven history and got our feet used to wearing military grade footwear. It is a mistake to pamper military recruits as they will not be pampered in combat which most military training tries to prepare troops for.

    About the cronyism part of the story… having our military outfitted with equipment that can be readily produced in the USA, so hopefully war would not interrupt production is not necessarily cronyism. The cronyism part comes into play when businesses seeks out special benefits from our government. it is a tough decision because production in the USA costs more than Asia. On the other hand, do we want our potential enemies (Commie China) producing our military equipment? I advocate no cronyism, good military readiness and keep military costs down.

  21. I bought some Reebok basketball shoes once, but on my credit card they still showed up as “New Balance”.

  22. In USAF Basic,circa 1970,I had to do all my running in chukka boots.(the “uniform of the day”) Nobody had any sneakers or athletic shoes for running. I injured my foot,and had to wear only combat boots and had to go to the Army base hospital for custom arch supports. I would have LOVED to do my runs in sneakers,even if I had to buy them myself. And I’m GLAD that the US military has to buy US made products.

  23. Pretty weak requirement.

    I would expect a massachussetts democrat to require them to be recycled or made from all vegan materials or something.

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  25. Meh. I suspect the entire DOD procurement process would make us gag if we ever got a whiff of it. Call me if it’s discovered that they’re paying $500 per pair.

  26. and knowing tight ass uncle sam new balance is probably giving the government the cheapest k-mart piece of shit version it makes for $120.00 a pair….the good models would probably get sold to the government for three or four hundred a pair.

    1. but the bitch at deloitte gets a new coach handbag when she gets hired….

  27. nike should be used for shooting skeets

  28. Speaking of cronyism – why is it that the military only issues right-handed rifles? That is clearly both discriminatory and a reduction in the freedom for lefties to be able to use left-handed rifles. Which – yeah – wouldn’t be cheaper – and has nothing to do with imports – and would really screw things up in the field – but FREEDOM!!

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