Public Policy: Bedtime Story

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In the far-off land of Suburbia, a weary taxpayer sought to quiet his children by spinning them this bedtime tale:

Once upon a time there was a rich country whose President made eloquent speeches about what a happy world it would be if the merchants of all nations could trade their goods freely and without hindrance. But in the President's country there were some people called voters who raised cotton. Some of these voters were wealthy men with big farms in the sprawling West, but many of them scratched only a bale or two each year out of the harsh red clay of the South, and these could not earn much money. So to help them, the government promised to make its citizens pay 33¢ a pound for cotton—which was much more than it was worth anywhere else in the world.

Instead of saying "Thank you," the growers complained anew: "How can we sell our cotton to the foreigners if the price is so high?" So the government said: "Don't fear—you sell your cotton to those foreigners at the price they are willing to pay, and we will pay you another 8½¢ for every pound you sell." Well sir, no sooner were the growers of cotton mollified than the makers of cotton cloth and yarn and clothing began to moan. "All those foreigners," they wailed, "are buying our country's cheap cotton and making it into cheap goods and sending them back here to eat up our markets." (The clothmakers were careful not to remind the President that his country earned much more money selling cotton and cloth to the foreigners than it spent on the cloth it bought from them.)

At that, the President scratched his head—remembering, perhaps, that the makers of cotton cloth were also voters. And so he ordered the wise men of his Tariff Commission to consider whether they should not put a tax of 8½¢ on each pound of cotton in the cloth that the foreign merchants sold to the President's country. The wise men of the Tariff Commission knew that such a tax would not satisfy the clothmakers of their own country, whose real hope was that the President would tell the foreign merchants straight out that they could sell only a little bit of cloth to his citizens. The wise men also knew that the tax would anger many of their country's friends around the world and perhaps even drive them to stop buying cotton from the President's country. But the President had spoken, and the wise men promised to look into the idea.

The children giggled, knowing that even in a fairy tale no one would be so foolish as to put on a tariff to offset a subsidy to offset a price support. But their daddy did not join in their merriment, for he knew that the tale he told actually happened in John F. Kennedy's Washington last week.