Government policy is like a Calder mobile — touch something here and things jiggle over there. For example, the president has acted to discourage the use of Canadian wood when making planks for the rising edifice of American greatness. A 20 percent tariff on softwood imports from Canada — about 30 percent of the softwood lumber used in U.S. residential-housing construction — is retaliation for Canada’s government supposedly charging Canadian lumber interests too little for trees harvested in government forests. The tariff will raise the price of flooring and siding and therefore of houses.
Dismayed U.S. homebuilders foresee a 6.4 percent increase; U.S. lumber interests say that is an exaggeration. Even allowing for theatricality on both sides, lumber protectionism will certainly deepen two problems: Because the mortgage-interest deduction enables higher housing prices, Americans will continue to pour too much wealth into housing. And inequality will be exacerbated.
Homeownership is crucial to the accumulation of wealth. But as social scientist Joel Kotkin writes, Millennials are caught in a pincer of low incomes — the Census Bureau estimates that even those with a full-time job earn $2,000 less in real dollars than the same age cohort did in 1980 — and high housing prices. Kotkin says “homeownership rates for people under 35 have dropped 21 percent” since 2004.
And there is this: The percentage of persons ages 25 to 34 who have never been married has risen from twelve in 1960 to 47 today. There are cultural as well as economic reasons for this delay in two powerful economic multipliers — family formation and house-buying — but certainly, the rising cost of housing is a factor. This is just one of the unseen costs of protectionism’s seen benefit of a small number of domestic jobs protected.
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