For the average person concerned about managing a household budget, the debate over trade and regulatory policy might seem abstract, not directly affecting their economic situation. But historical measurements of the prices of basic goods and services can offer a clearer picture of how costs are indeed influenced by the degree to which different products are subject to regulatory policies.
Consumers pay less today for automobiles, electronic devices, clothing and household furnishings than they did 20 years ago, measured against inflation. They pay much more, however, for health care, childcare, college-level education and other important services that have been traditionally subject to different kinds of regulatory policy and less open to competitive market forces.
A chart compiled by Mark J. Perry and published by the American Enterprise Institute, a policy think tank, uses consumer price index data from 1997-2017 to show generally how those products and services that are more influenced by free market forces than regulatory policy tend to remain stable in price and availability, or even get cheaper as time goes on.
The data are relevant in the context of the Trump administration’s efforts to impose tariffs on aluminum and steel imports, and the reciprocal tariffs imposed by China, and potentially other countries, on U.S. exports. The long view of pricing levels suggest that when government stays out of the picture and there are low levels of protectionism, costs do not grow at rates much beyond the rate of inflation. Though other factors are in play, the data offer evidence that competition among global markets has allowed for products to be made more efficiently and at a cheaper relative cost.
Products that are partially affected but not wholly governed by regulatory systems tend generally to rise in cost in tandem with levels of inflation, as is the case with food and beverage products. Workers’ wages and housing costs tend to mirror the overall economy — rising during times of expansion and falling in recessionary periods.
The data demonstrate the impact of two decades worth of increasingly open levels of global trade, which has been largely beneficial to the American consumer. The fact that we are now immersed in an integrated global economy dependent on the participation of international partners makes trade and regulatory policy all that more complex, and inherently risky.
Take for example the case of a new Volvo automobile plant in South Carolina. The company’s CEO warns that if tariffs on aluminum and steel imports are met with retaliatory tariffs on auto imports by other countries, it could force the plant to reduce its workforce by 2,000 jobs. That’s because the company intends to export more than half of its cars overseas. Adding more than a little irony to the situation is the fact that Volvo is now under the ownership of a Chinese conglomerate.16 comments on this story
It’s true that many manufacturing jobs formerly held by U.S. workers have moved overseas during the two-decade period. But many other jobs have also been created during that period, which has also seen the cost of important products remain low or even decrease. The data provide a compelling argument that the best regulatory and trade policies are those with the lightest touch. Lawmakers should keep this top of mind while they work to address real-world problems and allow markets to function in a way that brings mutual benefit to all of their participants.