JLF alum Bakst explains how policies often hurt the poor

Former John Locke Foundation analyst Daren Bakst, now with the Heritage Foundation, recently investigated the big-government policies that cause special harm for the poorest Americans.

Heritage’s “Insider” offers the following summary:

… [G]overnment is very good at doing two things: (1) foreclosing opportunities for the poor by raising the costs of employing low-skilled labor and the costs of starting a small business; and (2) making basic consumer goods that everyone needs—and that the poor spend a disproportionate share of income on—more expensive. Restrictions on trade are a prime example of the second problem. Bakst and Tyrell write:

“Import restraints, such as import tariffs on food and clothing in the U.S., impose a large financial burden on the poor by driving up prices. Americans paid a 20 percent import tariff on some dairy products in 2016, a whopping 131.8 percent import tariff on certain peanut products, and up to a 35 percent import tariff on canned tuna.

“A 2013 report by the International Trade Commission estimated annual welfare benefits from liberalization of import restraints for various sectors, including food. Liberalization of import restraints would benefit U.S. consumers annually by an average of $50 million for cheese, $277 million for sugar, and $8 million for tuna between 2012 and 2017.

“Tariffs on imported clothing were 8.9 times as high as those on imported goods overall in 2015. Such restraints on imports are a hidden tax hitting the poor’s pocketbooks each month.

“Import restraints on food and clothing are regressive in nature. […] [A] greater share of income from low-income households goes to food and clothing than from higher-income households. In 2015, those in the bottom 20 percent of income spent 33 percent of their after-tax income on food. This compares to 11.6 percent for all consumers and 8.7 percent for those at the highest income level.

“The lowest-income households spent 6.8 percent of their after-tax income on clothing in 2015. This compares to 3.1 percent for all consumers and 2.8 percent for the highest-income households.

“It is not merely imported goods that are affected. Import restraints on imported goods also raise the price of domestically produced goods because import prices do not reflect demand. The poorest Americans are hit the hardest.