The cost of aluminum is going up, and it isn’t a mystery as to why the price is increasing. President Trump has decided to raise the price on aluminum through tariffs. When aluminum costs more, beer costs more — and that doesn’t make me happy.
It shouldn’t make any of us happy. When a good costs more to produce there a lot of economic effects that we don’t often think about. When prices rise, fewer products are purchased, and when fewer products are purchased, fewer people are employed. When fewer people are employed, fewer items are bought throughout the economy, and therefore fewer people overall are employed. It isn’t a good sequence of economic effects.
And it all starts by making my beer more expensive.
Now, the beer companies are trying to fight back, because they are losing real money. They don’t want to lose money. They don’t want to hire fewer people. They don’t like high beer prices either. So Big Beer is lobbying politicians to put Band-Aids over the situation. They have pushed for the creation of The Aluminum Pricing Examination Act (S. 1953), introduced by Sens. Cory Gardner, a Republican from Colorado, and Tammy Baldwin, a Democrat from Wisconsin, which would give the Commodity Futures Trading Commission the authority to oversee and investigate price reporting and setting in aluminum markets, while also enabling the agency to work with the Department of Justice to investigate anti-competitive behavior in aluminum price reporting.
I get it, but it is cronyism.
I do want cheaper beer now. But, whether in one year or five, Trump will be out of office, and it is likely that when he leaves the Oval Office, so will his burdensome trade policy. So, getting behind cronyism and a program that expands the government and asks them to attempt to steer the aluminum market (if not completely drag it around by its nose) by “setting” a reference price of aluminum isn’t a good policy.
It’s like a tariff Band-Aid.
The driver of aluminum costs, like anything, is due to a variety of things, but there is wide agreement that tariffs are the primary driver. The head of the Commodity Futures Trading Commission was even asked about market manipulation (the reason that politicians and cronies are using to give the commission the power to set a reference price) as late as May of this year, and he said that there was none, saying:
Imposing more government to combat the aluminum price increases is not the answer. It will just lead to more unintended consequences. What we need is for the president to recognize the high costs of his trade policies.
I am personally a fan of Big Beer, but they are the only people with enough money to attempt to push this crony solution. But, it is bad policy. Really they just should find new consultants. They need consultants that attempt to get the government off their backs instead of burdening their market with more government. They need someone that has the long-run interests of low-cost beer at the forefront of their mind, instead of just their next trip to the store.
Good policy takes a long-run outlook. Whenever we see cronyism, we should take a long, hard look. Whenever we see short-sighted policies, we should take a long, hard look. And whenever we see something that is going to raise beer prices in the long run, we should just say no.
Charles Sauer (@CharlesSauer) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is president of the Market Institute and previously worked on Capitol Hill, for a governor, and for an academic think tank.
