Duncan Hunter’s Real Crime Is the Jones Act

(Bloomberg Opinion) -- A $14,000 family vacation in Italy. Zipline rides for $399. Tickets to see “How the Grinch Stole Christmas” for $704. Dozens, if not hundreds, of purchases of groceries and sundries and meals out. The breadth of transactions in the 47-page indictment against Representative Duncan Hunter for allegedly tapping more than $250,000 in campaign funds for personal use is matched only by their banality.

Hunter, who has been stripped of his chairmanship of the House Subcommittee on the Coast Guard and Maritime Transportation and other positions, will yet have his day in court. But as an ardent champion of a rather obscure law involving U.S. commercial shipping called the Jones Act, he’s already guilty of fleecing U.S. taxpayers and consumers.

For nearly a century, the Jones Act has required all waterborne commerce traveling between U.S. ports to be carried by ships that are U.S.-owned, U.S.-crewed, U.S.-registered and U.S.-built. Intended to bolster U.S. maritime commerce and the civilian and military industrial bases, it has instead built a protectionist dreadnought that artificially raises shipping costs to defend the interests of a small crew of companies and labor unions and the congressional representatives they have in their pockets.

Hunter’s campaign coffers are a case in point. In this election cycle, his top donor has been General Dynamics, which has a shipyard in his district. At least four other entities that benefit from the Jones Act were top 20 contributors. In the 2016 and 2014 cycles, sea-transport companies were his biggest industry donors (more than $200,000) and transport unions were the sixth-largest (nearly $100,000).

The Jones Act lobby argues that the law is essential to maintaining the U.S. ability to build ships, to provide seaborne transport and crews to the military in times of war, and to protect the homeland from foreign spies and saboteurs. They also say it achieves these goals without imposing additional costs on consumers and taxpayers.

These claims mostly don’t hold up to serious scrutiny. For starters, despite the protectionist grip of the law on coastal commerce, the U.S. shipbuilding industry and coastal shipping continue to sink. From 1983 to 2013, more than 300 U.S. shipyards shut down. The number of oceangoing Jones Act-qualified ships of more than 1,000 tons has shrunk by more than half since 2000. Even as the U.S. economy has more than quadrupled since 1960, the amount of freight carried by U.S. coastal commerce has fallen by almost half. Most of the Ready Reserve Force, which the U.S. Maritime Administration can call on to transport military supplies during crises, is foreign-built. Notwithstanding fear-mongering about the security threat posed by foreign-flag ships with foreign crew members, they already safely make thousands of calls each year on U.S. ports, including inland waterways.

Even though foreign ships are generally much cheaper to build and to operate, the act’s defenders insist that there’s no proof that it burdens American consumers, especially those in Alaska, Hawaii, Puerto Rico and other territories dependent on maritime commerce. Apparently, the laws of economics are suspended on water. The proponents’ slender reed of support is a Government Accountability Office report that said “the independent effect and associated economic costs of the Jones Act cannot be determined,” because of the myriad factors that go into assessing the costs of seaborne shipping and product pricing. Of course, that means you can’t prove that foreign carriers wouldn’t be cheaper, either.

You wouldn’t have heard any honest discussion of the Jones Act’s costs and benefits at Hunter’s committee. Consider its recent hearing solely to tout a study funded by U.S. shipping interests arguing that the Jones Act exacts no extra costs on Puerto Rico, whose post-hurricane plight prompted calls for relief from the act. As usual, most of those called to testify were providers of shipping service, not its users. Half the panelists were from organizations that had bankrolled Hunter’s campaigns — another regular feature of his hearings on the Jones Act, which preach to the faithful instead of conducting real oversight.

Hunter has also blasted Customs and Border Protection officials who have granted exceptions to the Jones Act as members of the so-called “deep state,” while blithely asserting that it is the Jones Act that allows the U.S. to “project power and be the greatest country in the world.”

The Jones Act is not only failing to build up a vibrant U.S. shipping sector. It also raises energy prices by depressing competition in shipments of U.S. oil and natural gas between U.S. ports (the U.S. hasn’t built an LNG carrier since the 1970s). It clogs roads, railroads and pipelines by raising the cost of coastal shipping, which is more energy-efficient and environmentally friendly. It makes erecting wind turbines, which require specialized vessels, more time-consuming and expensive.

Even dredging U.S. ports and waterways is more costly, because those dredgers have to be built in the U.S. And don’t even get me started on the new icebreakers that the U.S. Coast Guard badly needs: They may cost nearly four times as much to build in the U.S. as to build in Finland.

Sadly, even if Hunter heads to the hoosegow, the Jones Act is likely to stay in place. Congress’s shipbuilding caucus is one of its biggest — there’s nothing like a deep trough to bring out bipartisanship. Shipping interests gave more than $10 million in the 2016 cycle, and spent almost $25 million in lobbying. Perversely, representatives from Alaska and Hawaii — the two states most disadvantaged by the act — are among those most in thrall to such campaign cash. And although many residents in those states and Puerto Rico are aggrieved, national outrage is hard to summon. As Colin Grabow of the Cato Institute has observed, the act’s “vast costs are dispersed across the economy in the form of higher prices, inefficiencies and forgone opportunities that few people can even tie to the cause.”

Unfortunately, lawmakers are only concerned with a different sort of calculus: Why should they give up ready campaign cash, especially when their chairman has allegedly found so many everyday ways to spend it?

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

James Gibney writes editorials on international affairs for Bloomberg Opinion. Previously an editor at the Atlantic, the New York Times, Smithsonian, Foreign Policy and the New Republic, he was also in the U.S. Foreign Service from 1989 to 1997 in India, Japan and Washington.

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