Opinion: Putting some WD-40 on the U.S. supply chain
Politicians, the Federal Reserve, and Fed and administration apologists like to claim that the inflation we face is caused by supply constraints. This claim goes against the facts on the ground. According to the World Trade Organization, even though there was a collapse in trade at the beginning of the pandemic, trade in intermediate goods — critical inputs in finalized products — quickly recovered despite port and shipping bottlenecks.
For instance, Congress should immediately repeal the 1920 Jones Act, also known as the Merchant Marine Act. Under the Act, all freight moving by water between U.S. ports must be hauled on ships that are built, crewed and flagged only by Americans. These requirements directly raise the costs of shipping freight by water. And by artificially increasing the demand to instead ship by rail and trucks, the Jones Act also increases the cost of hauling freight on land.
Immigration restrictions affect supply chains, too. As the Cato Institute’s Scott Lincicome notes, these restrictions have “removed at least 1 million potential workers from the U.S. labor market, putting acute pressure on labor-intensive industries like warehousing. ”
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