Suppose you own a car dealership in San Juan, the capital of Puerto Rico, and you want to sell new Fords. The only way to get them to the island is by boat -- but not just any boat.
In 1920, Congress passed a law restricting all trade between U.S. ports to American-flagged vessels crewed by U.S. citizens. After the First World War, Congress's idea was to protect the country's merchant marine from foreign competition, so that the United States would have plenty of boats and able-bodied sailors at the ready in case the Germans came after the U.S. again in their submarines.
The law, known as the Jones Act, is the naval equivalent of the Second Amendment. If it was ever likely that merchant marine vessels could have stopped an enemy U-boat, it's far less likely that they'll stop an intercontinental ballistic missile. The law has long outlived its original purpose.
These days, it's defended by American shipping interests, which appreciate their monopoly on trade by sea between U.S. cities, and attacked by businesses -- particularly energy firms -- that would like to ship their goods on any vessel that's available. Many experts argue that the Jones Act increases prices for consumers, too.
That's certainly the case in Puerto Rico. A car dealer in San Juan would have to wait for an American-flagged boat to bring Fords from the mainland to his dealership. That raises costs for the dealer as well as for Detroit, although the crew and the owner of the boat are guaranteed business.
The governor of Puerto Rico, Alejandro García Padilla, said Monday that the territory would not be able to pay its enormous debts because of bad management and a poor economy. The Jones Act is one small reason -- among many, many others -- that the economy is so weak.
"It really affects trade," Sergio Marxuach, general counsel at the Center for a New Economy in San Juan, told Wonkbook. "It does increase the cost, significantly, of living in Puerto Rico."
What's in Wonkbook: 1) Christie declares run 2) Opinions on Greece and Obamacare 3) The Supreme Court rules on lethal injection, air pollution and redistricting, and more
1. Top story: Christie 2016
Chris Christie will announce his presidential campaign Tuesday. "The New Jersey governor is expected to make his campaign official Tuesday morning in a gymnasium at the high school that he attended in Livingston, N.J. ... Tuesday's expected announcement will come as his appeal to Republicans has hit a low point -- a sharp departure from the highs of late 2013 when he was fresh off a decisive reelection victory in his heavily Democratic state and was seen widely as the GOP establishment favorite for president. Dogged by the 'Bridgegate' scandal in which then-aides and appointees snarled traffic in an apparent act of political retribution, Christie's popularity has since plummeted. He's also faced heavy skepticism from conservative activists throughout his tenure." Robert Costa and Sean Sullivan in The Washington Post.
His record in New Jersey could be an obstacle. "The economic recovery he promised has turned into a cascade of ugly credit downgrades and anemic job growth. The state pension he vowed to fix has descended into a morass of missed payments and lawsuits. The administration he pledged would be a paragon of ethics has instead conspired to mire an entire town in traffic and the governor’s office in scandal. ... Today, a staggering 55 percent of Republican primary voters say that they cannot envision voting for Mr. Christie... With two pillars of his presidential run — his record and his judgment — looking wobblier than ever, Mr. Christie must build a campaign around his most raw and prodigious asset: his personality." Michael Barbaro in The New York Times.
At least one major donor will be tempering his support. "As Chris Christie announces his bid for the White House, he's expected to lean heavily on the financial support and network of Ken Langone, a billionaire Republican donor and one of Christie's most visible and vocal backers. But in an interview with National Journal on the eve of Christie's launch, Langone, a co-founder of Home Depot with a Forbes-estimated net worth of $2.7 billion, said he would not be dipping into his personal fortune to write the kind of massive, eight-figure check to Christie's super PAC that would instantly change the complexion of the 2016 race. ... Langone, 79, who has long been expected to be one of the chief underwriters of a Christie candidacy, is reluctant to invest huge sums of his own money in his favored candidate." Shane Goldmacher in National Journal.
He'll run on a conventional GOP economic platform. "The heart of Chris Christie's economic plan is 4 percent annual growth driven by what he called 'a flatter, fairer, simpler' tax code that rewards U.S. businesses for not sending jobs overseas. Christie, the 52-year-old Republican New Jersey governor who is set to announce the start of his presidential campaign Tuesday, attributes the weak recovery from the 18-month national recession to seven years of Democratic leadership in the White House. In a speech to a New Hampshire audience on May 12, he said President Barack Obama has focused on 'redistribution of wealth' rather than on strengthening the middle class. ... In a Christie administration, tax brackets would be reduced to three, from six, with burdens ranging from less than 10 percent to 28 percent, he said in a New Hampshire policy speech. He would end some deductions, though leave those for first-home mortgage interest and for charitable giving." Elise Young and Terrence Dopp for Bloomberg.
2. Top opinions
STIGLITZ: The Greek crisis is entirely political. "European leaders are finally beginning to reveal the true nature of the ongoing debt dispute, and the answer is not pleasant: it is about power and democracy much more than money and economics. ... Concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project. Most of its members’ governments did not seek their people’s approval to turn over their monetary sovereignty to the ECB. ... Many European leaders want to see the end of Prime Minister Alexis Tsipras’s leftist government. After all, it is extremely inconvenient to have in Greece a government that is so opposed to the types of policies that have done so much to increase inequality in so many advanced countries, and that is so committed to curbing the unbridled power of wealth. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate." Project Syndicate.
RACHMAN: The dream of a united Europe is ending. "The current crisis is not just a reflection of the failings of the modern Greek state, it is also about the failure of a European dream of unity, peace and prosperity. ... The idea was that European nations could consign the tragedies of war, fascism and occupation to the past. By joining the EU, they could jointly embrace a better future based on democracy, the rule of law and the repudiation of nationalism. ... The danger now is that, just as Greece was once a trailblazer in linking a democratic transition to the European project, so it may become an emblem of a new and dangerous process: the disintegration of the EU. ... For the horrible truth is dawning that it is not just that the EU has failed to deliver on its promises of prosperity and unity. By locking Greece and other EU countries into a failed economic experiment — the euro — it is now actively destroying wealth, stability and European solidarity." The Financial Times.
RAMPELL: The common currency has become a weapon. "Europe had a dream. It would yoke neighbor to neighbor under a common economic system and thereby end a centuries-long tradition of the states destroying one another with bombs and bayonets, cannons and crossbows, machine guns and mustard gas. But instead the countries just gave themselves a new weapon to use against each other: debt. That noble European economic experiment seemed to have promise. The 'capitalist peace' theory — which can be traced back at least to Kant and Montesquieu — asserts that trade is a prophylactic for war. ... Establishing a common currency was meant to facilitate the cross-border flow of goods, services, people and capital, and thus bond disparate countries through the mutual benefits of trade. But... Rather than promoting political unity, [Milton Friedman predicted], 'the adoption of the Euro would have the opposite effect.' ... European countries’ history of mutual resentments seems to have been sublimated into punitive economic policies that have caused a different form of suffering." The Washington Post.
BERSHIDKSY: Tsipras is manipulating Greeks' humiliation. "Prime Minister Alexis Tsipras mentioned humiliation twice in a speech on Saturday, as he proposed the referendum, calling the euro area's proposed bailout terms an 'extortionate ultimatum that calls for strict and humiliating austerity.' ... Yet the humiliation narrative is, first and foremost, manipulative. It's about apportioning blame, and the politicians who use it usually refuse to accept any. ... Many Greeks already feel humiliated by their economic tribulations. To hold on to power, Tsipras needs to keep their anger focused on the creditors at least for another week, until the referendum. It may be useful for Greek voters to recall, however, that political decisions motivated by wounded pride have rarely led to good outcomes. More often they have produced chaos, if not bloodshed, and further humiliation." Bloomberg View.
FRUM: Republicans should give up on repealing Obamacare. "The Affordable Care Act is riddled with clunky irrationalities. The law taxes and subsidizes in ways that don’t always make a lot of sense. It encourages businesses to employ low-wage workers less than 30 hours a week to avoid employer mandates. Subsidies fade in and out in ways that push economically marginal people into high-deductible bronze plans that leave them worse off than they were before. The tax penalty for individuals who don’t buy insurance is big enough to impose hardship, but not big enough to change behavior. And so on and on. Yet it’s simultaneously true that the Affordable Care Act meets some real national needs. It did provide insurance to millions who lacked it. It did put an end to some outrageous practices by health insurers. It does seem to be slowing the growth of per-person healthcare costs. ... The Republican alternatives, such as they are, would remove coverage from many who have it now. In my opinion, that one fact is likely to cost Republicans the White House in 2016." The Atlantic.
CHAIT: They could always end the filibuster in order to repeal the law. "If Republicans win the presidential election, their party will control the House, the Senate, and the executive branch. What would stop large chunks of their agenda cold is the Senate filibuster. When the Democratic Party won the trifecta in 2009, they allowed the Senate minority to use the filibuster to impose a 60-vote requirement on all major legislation. ... If [Republicans] want to fulfill their goals, they will have to eliminate the filibuster. That is probably what they’ll do. Conservative talk radio host Hugh Hewitt is preparing for this possibility by putting candidates on the record regarding their willingness to end the filibuster." New York.
3. In case you missed it
The Senate will vote on an extension of the Export-Import Bank. "The supporters of the federal Export-Import Bank have the Senate votes to revive it and will get a chance to do so, Majority Leader Mitch McConnell said Monday. 'Looks to me like they have the votes, and I'm going to give them the opportunity,' McConnell, who opposes the bank, said in a telephone interview from Kentucky, where he is spending Congress' July 4 recess. He said he expects supporters to try to attach the reauthorization to a highway bill. The 81-year-old bank will expire at midnight Tuesday." Laurie Kellman for the Associated Press.
Obama is proposing new rules on overtime. "The Obama administration is proposing making up to 5 million more people eligible for overtime - its latest effort to boost pay for lower-income workers. These workers would benefit from rules requiring businesses to pay eligible employees 1 1/2 times their regular pay for any work beyond 40 hours a week. ... Employers can now often get around the rules: Any salaried employee who's paid more than $455 a week - or $23,660 a year - can be called a 'manager,' given limited supervisory duties and made ineligible for overtime." Christopher S. Rugaber for the Associated Press.
The Supreme Court has upheld a procedure for lethal injection. "A divided Supreme Court on Monday turned aside claims by death-row inmates that a drug to be used in their executions would lead to an unconstitutional level of suffering, a narrow but unequivocal ruling that made clear that states have leeway in carrying out the death penalty. The justices ruled 5 to 4 against inmates in Oklahoma, who alleged that the use of a sedative called midazolam has resulted in troubling executions that violate the Constitution’s prohibition on cruel and unusual punishment. Executions in Oklahoma and elsewhere have generated national headlines about inmates writhing in pain or taking hours to die when the drug was involved." Robert Barnes in The Washington Post.
Two of the justices think capital punishment is unconstitutional in any form. "Monday's ruling also came with a face off between two of the court's liberal judges (Justices Stephen Breyer, joined by Ruth Bader Ginsburg) and two of the court's conservatives (Justices Antonin Scalia and Clarence Thomas) over whether the death penalty itself is constitutional. ... Breyer isn't the first justice to argue that capital punishment is unconstitutional. ... Breyer relied heavily on government data, statistics, criminal justice studies and articles online and print publications. To show the the death penalty is unreliable, he cites a 2009 New Yorker story on Cameron Todd Willingham, a Texas man executed in 2004 but believed to be innocent. To show that it is arbitrary, he references studies that show that the race and gender of the victim influence the use of the death penalty. To show that the long wait times death row inmates face are cruel, he noted that the inmates spend their time in solitary confinement... And to show that the death penalty is unusual, he notes its decline over the last 40 years, both in frequency of executions and in the number of states that still execute offenders." Arit John for Bloomberg.
ROBERTS: The court issued a pointless ruling against the Environmental Protection Agency. "The ruling amounts to [Justice Antonin] Scalia poking his thumb in EPA's eye, to no particular effect. ... Most power plants have already installed the controls necessary to comply with the mercury and air toxics (MATS) regulations. ... While we were debating this, the power sector went ahead and complied with the regulations. Notice any blackouts? Any big bankruptcies in the power sector? Any economic devastation? No. As usual with air pollution rules, when the power sector quits complaining and starts complying, the costs turn out to be much lower than anyone anticipated. This case was a fight over a question that's already been settled by facts on the ground." Vox.
COHN: Redistricting commissions aren't going to save Democrats. "When the Supreme Court ruled Monday to allow independent redistricting commissions in Arizona, the decision was greeted with enthusiasm from liberals who support redistricting reform. ... For the Supreme Court’s decision to ultimately help Democrats, redistricting commissions will need to spread to states where Republicans currently control the redistricting process. Independent commissions in states like Michigan, Pennsylvania, Ohio, Virginia and North Carolina would almost certainly yield additional seats for Democrats. But so far, there have been no major moves toward establishing independent commissions in the states where Republicans control the redistricting process." The New York Times.