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OPINION
Page 6
Vol. XClV, No. 21-S
94 Years of Editorial Freedom
Managed and Edited by Students at
The University of Michigan
Editorials represent a majority opinion of the
Daily Editorial Board
No more promises
THIS WEEK-JUST as President Reagan
was visiting Detroit in one of his first of-
ficial campaign swings-the administration
back in Washington carefully let it slip that
auto import quotas will almost certainly be
extended for another year. So falls another
Reagan promise.
In the past, one of Reagan's few redeeming
qualities was his at least rhetorical commit-
ment to the principles of free trade. Now, ap-
parently, even that commitment has gone the
way of his promises to end draft registration,
to eliminate the federal budget deficit, and to
"get government off the backs of the
American people."
Although the president may gain a few votes
through his shift in policy, further moves
toward protectionism could have a
devastating impact on the nation's industry
and on the consuming public. This time
around, the president's blatant bid for votes
could have disastrous consequences.
Part of the problem with avoiding a trade
disaster is that too many groups have an in-
terest in seeing the quotas continue. The
domestic car companies and much of the
leadership of American auto unions are ex-
tremely fond of any system which virtually
guarantees a certain level of sales regardless
of wage or production efficiency. The higher
costs-from poor management, lazy design,
and high labor costs-are simply passed onto
the American consumer, whose option of
buying more competitive models hasj
been eliminated by the quotas.
And, as recent years' experience with im-
port quotas has proven, the Japanese op-
position to import quotas has been largely
'muted by the tremendous opportunities the
quotas themselves have created for the
foreign manufacturers. Since, with the quotas,
they don't have to worry so much about U.S.
competition, the Japanese are able to ship
only their more expensive models to the
American market, thereby increasing their
markup and profits.
Everybody wins-except, conspicuously,
the U.S. consumer, who gets to pay an average
of hundreds of dollars more because of the
quotas.
But the damage done is even greater thanE
that. The import quota system now advocated
by the president only encourages the produc-
tion inefficiencies which led to the problem
with Japanese car imports in the first place.
Although the U.S. auto industry has made1
great strides in recent years-mostly out of
fear with foreign competition-optimal ef-
ficiency in the industry cannot be restored un-
til domestic manufacturers are competing
head-to-head with their foreign counterparts.
Sunday, July 8, 1984
Wasserman
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A triumph of U.S. ingenuity?
ply has generally been growing A number of factors have led to
By Franz Schurmann and this fourth raise in the prime this remarkable American
rate since March was expected. economic buoyancy, but they can
The recent hike in the prime MORE SIGiNIFICANT than the all be reduced to one: American
te evoked predictable warnings hike itself was the timing. ingenuity. When they lost jobs, a
out the long-term threats to the Federal Reserve Chairman Paul lot of Americans simply went out
covery by many economists Volker chose to let the rate rise at and created-or "hustled"-new
d a lone voice of optimism by a time when national and inter- kinds of income-earning work.
reasury Secretary Donald national political waters have Despite Americans
egan. It has long seemed that in calmed: The first signs are notoriously low savings rate,
economic arena we have a emerging that the Persian Gulf shrewd entrepreneurs went in and
w lone bulls surrounded by a war might wind down. created a mass money market;
rde of bears. Washington is talking with the now some 14 percent of U.S. per-
Hardly a day passes when the Sandinistas; El Salvador's sonal income comes from in-
acial news does not remind us President Duarte is offering to terest payments. High interest
the federal deficit, portrayed talk with the Salvadoran rebels rates pushed up the dollar
:e some tremendous iceberg on and a slight warming has begun abroad, leading to a cascade of
hich our Titantic is bound to in frozen U.S.-Soviet relations. foreign investment which the
ash. And while the Fed, naturally, is United States, unlike
If that isn't enough, there also nonpolitical, it is not farfetched to nationalistic Japan, welcomed
the monumental Latin Amer- assume the Fed chairman would with open arms. And American
n debt problems. If Latin not mind seeing the re-election of hustlers created vast new in-
tions default, the result would Ronald Reagan, with whom he dustries like computers and fast
nd domestic interest rates has learned to work. food.
aring and wreck the great So the interest rate was timed AMERICAN INGENUITY, in
edit system on which to come at a point when the effect, created new economics
merica's consumer affluence is recovery is running strong but where oldons were vanishinat
sed. also when the overall political AeTchenu beletat
A THIRD specter that seems to environmenthbodesrbetter for American ingenuity will be a
stify all the pessimism is the Cat- stability. match for all the challenges
-22 of unemployment and in- MEANWHILE. THERE is which the economy faces. The
tion. If unemployment goes nothing but amazement abroad bears worry that the architecture
wn, inflation goes up, and so we at the American economy. othesstraie wofif cumb ean
eate unemployment to keep in- Growth rates are far higher than the dilemma of unem d ment
tion down, and so on. expected. West Europeansh and inflation can be resolved.
If the structure of the U.S. assumed that even with recovery In thent e reled.
onomy is subject to such the U.S. would be stuck with end, the real differences
stabilizing forces, why hasn't it the kind of permanent unem- between bears and bulls is
crumbled before? The bears ployment that characterized philosophical-a question of
ay be right, but there are Britain, France, and Italy. In- whether the economy is basically
ounds for thinking that the stead, unemployment has been sick or healthy. The circumstan-
merican economy is a versatile coming down. Consumer spen- ces of the prime rate hike suggest
ast that has learned to bend but ding, especially, has been strong, ° that there was plenty of bullish
t break with all the pounding it even with ups and downs in home optimism along with bearish
s taken. and automobile sales. And it has prudence in Chairman Volker's
The stnek market- notoriously been the American reevr mo.
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neurotic, this time reacted indif-
ferently to the hike. After all, it
was anticipated. The money sup-
MM-1 61C sliulual rcovery
which once again has acted as
the "locomotive," pulling along
other stagnant economies.
Schurmann wrote this article
for Pacific News Service.