The Biden Administration has said it is throwing everything at tackling inflation. Truth be told, quick fix options are limited, and many of the tools are under the purview of the Federal Reserve. But something that should receive more focus are unnecessary parochial, protectionist, or crony capitalist (pick your label) policies that drive up costs for consumers. In many cases, these instances of federal favoritism also increase costs for the federal government while being counter-productive to achieving their stated goals. Eliminating counter-productive policies will take time to produce savings, but they will pay off in the long-run. It also would increase opportunity and equity by reducing the power of special interests to tilt the playing field in their favor. 

And we get it. It’s not just the Executive branch’s fault. Parochial provisions emanate from Congress too. The president can’t effectively tackle problems alone. So, it’s incumbent on Congress to do its job as well.  

President Biden can lead by unwinding some of the tariffs his predecessor was fond of. A restrictive tariff (roughly 15 percent or more) contributed to the baby formula shortage, for instance. Tariffs are used to protect domestic industries, but if that industry isn’t producing, then what is being protected? Further, tariffs – even well intentioned – by their very definition increase the cost of goods. To be clear there would not be a price drop tomorrow from eliminating the Trump, now Biden, tariffs. But easing tariffs in a targeted, reasoned way will help reduce inflationary pressures by increasing competition and spurring efficiency. 

Americans also pay some of the highest prices in the world for a pound of sugar. Instead of tariffs, it’s import quota restriction and policies that limit domestic supply. You and every restaurant, bakery, candy company, and other food manufacturer could cut your sugar bill in about half, but instead federal law props up this candy-coated cartel of sugar growers.   

So-called “Buy American” provisions sound good, in the abstract, but federal mandates for federal contracts to purchase only products made in the United States quickly become another exercise in parochialism, particularly when Congress gets involved. We won’t argue against the value of the U.S. having a domestic supplier of protective medical clothing and masks. But, Navy peacoats? Not so much. Flatware and tableware for the military can only be manufactured in the U.S.? Definitely not.   

There are a variety of cabotage laws that have long been on the books. These laws restrict the vessels engaged in domestic transportation – most notably maritime. The biggest of these is the Jones Act which requires cargo that is transported between two U.S. ports to be shipped on vessels that are U.S. built, U.S. owned, U.S. crewed, and U.S. flagged. This 1920 law was intended to protect shipbuilding and a domestic shipping industry. The problem is the so-called Jones Act fleet (vessels that comply with the law) is small and dwindling. This means that virtually all the large container ships that call on the U.S. cannot pick up cargo at one U.S. port and deliver it to another. It also inhibits coastwise trade keeping more trucks on the road. There are other cabotage laws such as the Passenger Vessel Act (cruise ships can’t go between ports) and the Foreign Dredge Act (the largest most efficient companies can’t work in the U.S.) that drive up costs for consumers as well.  

Again, some of this will take work and time, but the Biden Administration can point to the need to take action on these issues. Inflation isn’t only affecting the U.S. but the president can lead the way to reducing impacts on Americans by removing or fixing some of the U.S policies and laws that contribute to the situation. That way he doesn’t have to resort to heavy-handed tools like the Defense Production Act to meet national needs. The DPA empowers the president to compel private industry to prioritize orders from the federal government and produce materials it demands. The DPA has been used and abused by presidents in both parties since the Korean War-era statute took effect. The president has used the DPA to compel emergency production of COVID-19 test kits and vaccines, but also  baby formula, rare earth metals, and solar panels. But if you fix the underlying problems as outlined above some of that perceived need abates. Furthermore, diverting domestic manufacturing from one item to another is going to displace some production and yes create inflationary pressures. On baby formula, in addition to easing the tariff, the president can target removing dairy protectionism, FDA overregulation, and rules that allow states to restrict people receiving food assistance to buying formula from only one-specific company.   

Inflation is a major problem that demands attention. It is not going to be solved by quick fixes. Part of the solution is for Congress and the administration to remove federal policies currently distorting the playing field for the benefit of special interests. Driving up costs for taxpayers so that a small number of special interests don’t have to compete is never a good idea, and it’s especially costly and harmful right now.