Josh Hawley Wants to Make the Supply Chain Crisis Permanent

If the power to his house went out during a storm, one assumes Hawley would declare electricity to be a mistake and demand that homes be lit with candles.

Sen. Josh Hawley (R–Mo.) has a plan to address the current supply chain issues bedeviling the American economy.

He wants to make them permanent.

In an op-ed for The New York Times published Friday, Hawley uses the temporary supply chain problems as an excuse to push for a permanent expansion of federal power over the affairs of private businesses. We must "fundamentally restructure our country's trade policy," Hawley demands, and that means injecting both the Pentagon and Commerce Department bureaucrats into companies' purchasing decisions. Under the terms of a bill that Hawley is proposing, any product determined to be "critical for our national security and essential for the protection of our industrial base" would have to have at least 50 percent of its value made in the United States.

Why is it necessary for the government to get significantly more involved in the system of global trade that's allowed Americans to enjoy unparalleled prosperity in recent years? Because "the global pandemic has exposed this system for what it is—a failure," Hawley writes.

One must assume that if the lights in his home went out due to a storm, Hawley would respond by declaring electricity to be a mistake and demanding that the government require homes to be lit with candles and gas lamps. After all, what is the electrical grid but a complicated supply chain that leaves Americans woefully dependent on production and distribution systems (power plants, substations, and lines) that they do not fully control? Better to produce your own lighting, right? If that means you have to live without television or the internet, well, those are just the trade-offs required to achieve self-sufficiency.

A storm—or a pandemic—can create temporary problems in the highly complex systems that run so much of the modern world. That's hardly a reason to abandon them. If Hawley is imagining a world in which the United States is wholly self-sufficient, then he's asking you to accept a scenario in which the United States is significantly poorer than it is today.

"The supply chain for an Apple iPhone crosses an international border more than 600 times, and if it didn't, you probably wouldn't have one—it would be too expensive," writes Mario Loyola, a senior fellow at the Competitive Enterprise Institute, in an op-ed for National Review that does a much better job than Hawley's of outlining the true culprits of the supply chain nightmare.

Regardless of where you assign the blame, there's no arguing with this bigger point: Trade makes things like iPhones and modern automobiles possible. Hawley's proposal would involve a massive disruption of supply chains, far worse and longer-lasting than the one we're currently experiencing. Mandating that at least 50 percent of all vital products be made in the United States would mean that many of those products would simply not be available anymore—not because they are sitting on a ship somewhere, but because the federal government is literally prohibiting their import.

"Like the problem of jobs going offshore," writes Loyola, "the supply-chain crisis is not caused by globalization. The culprit is an uncompetitive level of regulation and taxation, and protectionism only makes that problem infinitely worse."

More government is hardly the solution to the supply chain logjam. Indeed, government meddling in the economy is one of the reasons why this mess exists in the first place. One of the acute bottlenecks that's causing problems right now is a shortage of truck chassis—a special type of truck trailer made for hauling shipping containers. Since 2018, tariffs on imported truck chassis have increased by more than 200 percent, effectively tripling the cost of buying one. Those tariffs were supposed to do exactly what Hawley wants to see happen: encourage more domestic manufacturing. Instead, they've just caused shortages.

Hawley says the supply chain crisis is the result of "a crisis of production." Wrong again. American manufacturing is stronger than it has ever been, in part because outsourcing low-level production has allowed companies here to focus on higher-value goods (which means higher wages for the people who make and sell them). The true cause of the current mess is a disconnect between supply and demand—supplies have been constrained by a number of pandemic-related issues like temporarily closed factories and worker shortages, while demand has shifted in unexpected ways.

Hawley's proposal would only exaggerate this disconnect by further constraining supplies. He says that he wants to apply the same "Made in America" rules that already govern federal procurement "to the entire commercial market."

What's the main effect of those federal procurement rules? More expensive goods and fewer choices. Sure, sounds like exactly what the country needs right now!

Or Hawley could take a look at how U.S.-based supply chains are faring during the current mess. If his thesis is correct, then items that are already mostly produced domestically should be exempt from the problems with foreign supply chains, right? Except, no, that's not true. As Scott Lincicome, a senior fellow with the Cato Institute, points out, the vast majority of food consumed in the United States is grown, raised, and otherwise produced here. And yet Americans are seeing higher prices and supply issues at the grocery store too.

"That a mostly‐​domestic U.S. food supply chain hasn't protected American consumers from recent shortages and price increases is unsurprising," Lincicome writes. "For starters, many of the same things that stress global supply chains—COVID-19 outbreaks; supply‐​demand imbalances; labor shortages in the trucking and warehousing industries; misguided trade, transportation, and immigration policies; etc.—stress domestic ones too."

Hawley's proposal, therefore, would be ineffective at best. At worst, it would impose new barriers between producers and consumers, beef up the regulatory power of the federal government, and arbitrarily ban products that Americans would otherwise choose to purchase. Hawley's ideas won't resolve the supply chain problems plaguing America; they would make empty store shelves the new normal.