Monday, September 29, 2008

U.S. Consumers Are Being Taken to the Cleaners

In May, I posted about tariffs on hangers from China, enacted to protect the only remaining domestic supply of hangers, M&B Hangers in Leeds, Alabama, and to "punish" Chinese manufacturers for "dumping."

Economist Frank Stephenson now reports in The Freeman that hanger tariffs are responsible for doubling the price of hangers from $28 to $56 per box over the last year, which will cost each dry cleaner $4,000 or more per year.

Bottom Line: If you thought your dry cleaning bills were high in the past, well "hang on," because as surely as night follows day, higher hanger prices will be passed on to U.S. consumers in the form of higher dry cleaning prices. Tariffs, which are simply taxes on Americans buying imported goods, ultimately "punish" U.S. consumers and firms with higher prices more than they "punish" China.

Further, Stephenson cites this analysis that divides the total cost of the hanger tariff to U.S. dry cleaners ($4,000 x 30,000 dry cleaners = $120 million year), by the number of potential domestic jobs saved (564 jobs) in the U.S. hanger industry, indicating that each American job saved costs us about $212,765 per year. Since the typical full-time worker in this sector earns about $30,000 per year, it would be cheaper for the U.S. to eliminate the tariff, purchase cheaper hangers from China, let the domestic industry die, and pay each American hanger worker $30,000 per year to retire.

Like thousands of other examples, trade protection of inefficient American producers always imposes much higher costs to the country (measured in higher prices and jobs lost) than it generates in benefits (measured in jobs saved). And it's usually not even close, it's typically $2 in cost per $1 of benefits, or 2 lost jobs per job saved, when Americans are "punished" with trade protection.

7 Comments:

At 9/29/2008 10:08 AM, Anonymous Anonymous said...

Metal prices increased more than double during said persio.

Are you ever going to quit creating strawman arguments in favor of your globalized economy that got us into this mess?

Or maybe to you prefer hamgers made of radioactive waste in China?

or maybe you enjoy seeing fellow citizens loosing their jobs and Chinese driving mercedes-benz?

Are you part of a special interest group financed by foreign exporters?

Are you American after all?

 
At 9/29/2008 10:10 AM, Anonymous Anonymous said...

excuse my typing I meant to say: "during said period"

 
At 9/29/2008 11:52 AM, Anonymous tCA said...

I tried to recycle my hangers by returning them to my dry cleaner once I got a decent stash saved up. Shockingly, my dry cleaner said they don't recycle...much to my disappointment. From the looks of this entry, maybe I should have said I would sell them back at a discount to their current supplier. Ugh!

 
At 9/29/2008 12:01 PM, Anonymous alex said...

Anon 10:08 - while it is a valid point to make that metal prices have increased, if you're going to pull the "strawman" card, it would probably be best to not present ad nauseum and ad hominem, logically falicious attacks as the other 85% of your retort.

 
At 9/29/2008 1:47 PM, Blogger juandos said...

"Are you ever going to quit creating strawman arguments in favor of your globalized economy that got us into this mess?"...

Are you lying with that statement or are you refusing to come to grips with reality?

The present mess?!?! Well thank your fellow travelers for the present condition...

 
At 9/29/2008 11:58 PM, Anonymous Darcy Moen said...

500 hangers to a case, and cost is $26 dollar per case, works out to five cents per hanger.

Doubling the cost moves the hanger in your suit to a whole DIME!

OH MY GOD, the SKY IS FALLING!!!

Ten cents added to the price of cleaning a suit, that is simply HORRENDOUS! No wonder the market dropped 770 points today!

Come on man, get over it. A dime is nothing.

 
At 9/30/2008 12:45 AM, Blogger Arman said...

When the dime is in protection of the US job market, it is something.
90% of a region's economy is local (the dime against the salaries of the staff of the dry cleaners). Trading beyond the region is economic froth, and conventional economists are fools for putting so much hype into it.

 

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