What if I told you that there was a single policy that increased the cost of groceries and energy, increased your carbon footprint and propped up an industry that behaved like a cartel, all with the explicit instruction of Congress? This policy area is not sexy. It’s not foreign policy or immigration. You’re not going to hear about how awful it is on talk radio and you’ve likely never heard the name of this bill. But for over 100 years, the Jones Act has let the shipping industry destroy states and territories like Hawai’i and Puerto Rico all while lining their pockets.
Section 27 of the Merchant Marine Act of 1922, also known as the Jones Act, is one of the worst pieces of legislation ever enacted by the U.S. Congress and the worst piece of trade policy ever passed, and we’ve been using it for over 100 years. The act — which was passed in an attempt to “save America’s shipbuilding industry” — requires that any maritime vessel carrying cargo between U.S. states or territories must be American flagged, American crewed, American owned and American built. This, on face value, sounds like a great idea with the best of intentions. What could go wrong?
It turns out that making, staffing, flagging and owning boats where labor and capital are relatively expensive drastically increases the cost that consumers pay when they have their goods moved from port to port. The exact estimates of how much this costs consumers is very nebulous, but many reports conservatively put the cost to the American consumer at over $1.4 billion a year. Other — more realistic — estimates have put the costs to residents of individual states and territories in that ballpark. A report from the Grassroot Institute of Hawai‘i found that the Jones Act cost Hawaiians alone $1.2 billion a year, and put the cost for Puerto Ricans at $1.5 billion a year, totaling the cost to Americans in the multi billions.
But why would a policy that simply regulates what kind of boats you can have increase the cost of goods? Despite popular misconception, comparative advantage does exist. It is cheaper to build boats not in America. It is cheaper to staff a boat with non-Americans and regulate it according to non-American policy than it is to do so in the U.S. According to the Department of Transportation, American vessels cost 2.7 times the amount that their international competitors do to build, staff and maintain.
So when you have a more expensive mechanism of delivering goods across the country, the cost is going to increase. And despite what right and left-wing populists will tell you, that cost ALWAYS falls on the consumers, especially when you live in a part of the U.S. that is entirely dependent on water-based transportation like Hawai’i, Alaska, Puerto Rico and Guam.
For residents of Puerto Rico, the Jones Act increases the cost burden of the average family by over $1000 a year. To put this into perspective, the median household income in Puerto Rico is about $25,000, so a median household could be spending 4% of their income on Jones Act related price gouging. This cost is a tax on people who need goods. These are people in Alaska or Puerto Rico who simply need food or fuel and have a regressive 4% levied against them just because they happen to live in these places.
Despite all of this, the defense of the Jones Act is always about its intentions. The act was passed to protect American national security and protect the jobs of American shipbuilders. On face value, the Jones Act probably has good intentions; but the road to bad policy is paved with good intentions. The primary reason that the U.S. needs these boats to fit into Jones Act compliance is in the event that we need them for national defense. In effect, the U.S. military can nationalize them in the event of a war. This argument is bad. The Jones Act has crippled the amount of boats that can be used for this purpose; the number of boats that the shipping lobby thinks are military ready in the entire Jones Act fleet is 77. Beyond that, foreign flagged, staffed, owned and built boats nearly tripled the cargo and utility provided to the effort that their Jones Act compliant counterparts did during the last three wars where they’ve been used. The Jones Act does not do what the shipping monopoly has convinced Congress it does.
But the disingenuous arguments of the shipping lobby don’t stop at national security, they continue to argue that it protects American jobs, and this is just wrong. America has built, on average, one to three Jones Act-compliant cargo boats a year in the last couple of decades, and our fleet of Jones Act-compliant ships has decreased by over 64%. Clearly jobs are not being protected, and the Jones Act is the worst thing to happen to boats since icebergs.
These arguments aren’t terribly compelling. A senior can rebut these claims at 3:00 a.m. on a Thursday morning, days before his comps is due. The only people who have gained anything from the Jones Act are the shipping cartel. Companies that make boats, have the boats and run the boats. This cartel has been granted a century-long, state-sanctioned monopoly over this industry, and no foreign competitors are allowed to compete, driving up their prices in the way that cartels do. They’ve used their power to ask Congress to charge anyone caught criticizing the Jones Act with treason. Which — as a side note — is not the best way of convincing critics that you’re not corrupt. And this would be funny, if the lobby didn’t actually have power. Since 2020 alone, the shipping industry has spent over $121 million lobbying Congress on matters of trade policy. And they’ve gotten exactly what they want, protecting their monopoly at the cost of Americans.
But the price of the Jones Act is more than just the dollars it costs Americans, it’s the slew of impacts that comes with this outdated policy. The Jones Act drastically increases carbon emissions by a staggering amount. If you live on the mainland, a barge could travel up the Mississippi, and deliver your goods through America’s natural waterways, or it could go on the interstate highway system and burn an insane amount of carbon. The carbon output of shipping one ton of cargo with waterborne vessels is roughly 6% that of shipping one ton of cargo by truck, adding the trucking industry to the list of interests that rob the American people through this awful policy.
If this article sounds different from my usual writing style, it’s because I’m mad. The Jones Act is an unconscionable policy and one that is likely to continue and grow stronger with protectionist administrations like this one. The government should not be picking winners and losers in the market, especially when it hurts their constituents. The Jones Act is a tax on Americans that we did not consent to pay and hurts our poorest citizens the most. If you claim to be progressive and care about the poor, the environment or corruption, the Jones Act should be near the top of your list of policies to dismantle. If you claim to care about free markets, minimized deadweight loss and hate monopolies, I’ve got target number one for you right here. The Jones Act is a blight, and it should sink to the bottom of the sea.
