U.S. Rep. Dr. Greg Murphy’s Buying American Cotton Act is a near-perfect example of the old adage that government intervention leads to more intervention.
According to Murphy, R-N.C., the bill is due in part to “global competition” making the survival of domestic cotton farmers difficult. The bill would create a tax credit to incentivize the purchase of products made with American-grown cotton.
North Carolina ranks sixth in the nation in cotton production, so Murphy is right to be concerned about that industry.
But is this bill an admission that Murphy doesn’t think American – and North Carolina – cotton growers are capable of competing in an international market? Or is the bill a recognition of, and a response to, the damage done by retaliatory tariffs imposed by foreign countries in response to President Donald Trump’s tariff regime.
I would strongly suggest it’s the latter.
A recent report published by the John Locke Foundation warned of the negative impact that retaliatory tariffs could have on North Carolina agricultural products. Authored by N.C. State Professor of Agricultural and Resource Economics Jeffrey Dorfman, the report estimated that North Carolina-grown cotton would be at particular risk from retaliatory tariffs because roughly 86% of the cotton grown in North Carolina ends up exported.
That places about $200 million worth of North Carolina cotton at risk should foreign markets become more difficult to crack due to tariffs being increased on U.S.-made goods.
In response to Murphy’s bill, Steve Troxler, commissioner of the North Carolina Department of Agriculture and Consumer Services, told Carolina Journal that the cotton industry is in “awful shape right now,” not due to weather but because it has been impacted by “world economic conditions and U.S. economic policy.”
The “U.S. economic policy” likely includes the aggressive, albeit often unpredictable, set of tariffs that has triggered retaliatory tariffs from foreign nations. This tariff war has created “world economic conditions” in which domestic cotton growers need government action to incentivize the purchase of U.S.-grown cotton.
Clearly, Murphy’s bill is in response to diminishing foreign demand for U.S. cotton due to retaliatory tariffs making it more expensive, and he’s willing to manipulate the tax code in an attempt to tweak domestic demand to help fill in the blanks.
In short, intervention leads to more intervention.
Moreover, all of this smacks of central planning. The Trump administration has decided that the U.S. economy needs more manufacturing jobs and output as a share of the economy and is using government measures to direct that outcome.
Murphy sees the impact of this tariff regime and decides that it will leave the cotton industry smaller than he’d prefer, so he is seeking to leverage government action in an attempt to reverse that outcome.
It’s easy to foresee other industries seeing the preferential treatment given to the cotton industry (if Murphy’s bill passes) and asking for their own political favors. What would be the unforeseen consequences of all those favors, and what would be the government response to those? The cycle would repeat.
A far better alternative would be not to engage in government intervention in the first place and furthermore to strip away as many regulations, mandates, restrictions, and other government interventions in the market process as possible.
History has shown that when politicians give in to their impulse to interfere in the free interplay of consumers and producers, not only does their desired result fail to materialize, but also new problems arise. These new problems, in turn, give rise to a new impulse by politicians to interfere yet again.
Every political decision about the economy either moves us a step in the direction of top-down, centralized planning or toward a thriving free-enterprise system. Unfortunately, Trump’s tariffs and Murphy’s response lead us down the path to centralized management and manipulation of the economy.
North Carolina’s farmers are hard-working, dedicated, and innovative. But an international tariff war hamstrings them by cutting off much-needed international markets. Murphy’s lifeline to cotton growers wouldn’t be necessary if our nation’s leaders embraced free markets and free trade instead of deploying tariffs to manage the economy politically.
While the best way to prevent an endless cycle of government intervention is to avoid starting it in the first place, that train has already left the station. Now, the only realistic path to breaking it is an abrupt and determined halt to further interventions, and a return to the free market principles that made our nation great.
