The Jones Act: How Secretary Of Transportation Pete Buttigieg Will Keep Poor People Poor

The Jones Act, Section 27 the Merchant Marine Act of 1920, requires cargo ships traveling between U.S. ports to be built in the U.S., owned by U.S. companies, employing only U.S. workers.

That means a ship from Asia can’t stop in Hawaii, drop off food and other products, pick up other cargo and continue to the West Coast. As a result goods are generally shipped to the mainland and then from the mainland to Hawaii. That’s one reason why things are so much more expensive in Hawaii.

This isn’t just a problem for Hawaii. It’s also a big deal for Puerto Rico, where per capita GDP is half the U.S. average. We make goods more expensive to buy for people with the lowest incomes. And we do it on purpose. It’s also a problem for Alaska as well as places like Guam.

The Jones Act was waived in the aftermath of Hurricane Irma, Harvey, and Maria in 2017, because economics couldn’t take the double whammy of the Jones Act and a destructive hurricane.

But Secretary of Transportation designate Pete Buttigieg knows that the political voices of unions, and support from West Coast Senators whose constituents benefit, is more important to him than poor people who suffer under the law. Senator Maria Cantwell from Washington even put out a press release applauding herself for getting this support for her state.

Since the Jones Act drives up shipping costs, operators use older and less costly ships. Replacing ships only with those built in the U.S. is expensive, so companies avoid doing it. And as a result, maintenance aside, these ships aren’t equipped with the latest technology. So the Jones Act makes shipping less safe.

Proponents argue that the Jones Act is a necessary subsidy for U.S. ship manufacturers, so that those companies are able to produce ships for the military. But military ship producers have sold no more than 5% of heir ships as Jones Act merchant vessels so this doesn’t hold up. The late Senator John McCain, no slouch in his support for the military, proposed repealing the Jones Act.

They further argue that ‘we don’t want foreign ships traveling close to our waterways’ but we get that all the time, because foreign ships travel to California, Washington State, Florida, Texas, etc. all the time – the Jones Act just prevents them from stopping in Hawaii or Puerto Rico first.

It turns out that when it comes to the effect of transportation costs on the poor, Buttigieg prefers ‘thoughts and prayers’ over action.

The truth is that U.S. manufacturers and labor look at it as a subsidy and fight for it, and their voices ae heard far more loudly than residents in places like Puerto Rico who are made poorer by it.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Good points Nick Thomas! Cabotage regulations should be revised to help the financial health of carrier.

  2. Click bait headline. You are ignoring the fact that nothing has been done to repeal this law since the 1920s.
    Why blame the guy whos been in office for *checks* 3 days now????

  3. Islands having higher wholesale and retail good costs than the contiguous 48 US states? That is natural.

    Industry protectionist measures increase consumer costs? Often, yes. But where were all these Jones Act-enforcement critics when Trump was enacting protectionist measures by hiking the cost of Chinese-made goods? Trump’s protectionist approach — enabled also by Trump’s enablers — against Chinese goods negatively impacted wholesale and consumer prices applicable to a lot more Americans than can be found living on US islands.

  4. Looks like a lot of people with no idea how cabotage law works talking about shipping in the comments. 1) good can be dropped off in Hawaii on a ships way to the states. They aren’t because the port isn’t capable of handling the much larger transpacific carriers like the ever growing 20,000 TEU and greater containerships. The same can be said of Puerto Rico and Guam. They don’t have the infrastructure for larger ships and foreign freight isn’t willing to make a smaller ship for those runs alone as they are not that profitable. 2) the ships that are not US flag however cannot pick up goods in those territories and proceed to bring them to the mainland, they would have to take said cargoes to a foreign nation. That’s the only thing the Jones act prevents is cargo moving from one US port to the next under another flag. 3) the writer and most of you commenting are extremely misinformed.

  5. The biggest supporters of the Jones Act (besides the commercial shipping lines with monopoly status) are the unions. I assume that’s because any modernization or liberalization of the Jones Act would include port modernization. Has anyone ever looked at how many it takes to offload a cargo ship in a U.S. port compared to Asia or anywhere first-world? U.S. ports are basically highly inefficient, jobs programs for union members. I get and support the whole America First-thing given China, but something needs to be done. What’s more concerning is China is basically buying up major ports around the world either directly or through front companies who operate or rebuild these ports. U.S. really needs a bipartisan consensus akin to the early postwar years, when we rebuild our country and our territories but also buy goodwill in all the places we’ve forgotten about since (a) the collapse of the Soviet Union and (b) the pivot toward the Middle East and terrorism. China has made huge inroads in the Caribbean, Latin America, and the Pacific since we turned our attention to the Middle East.

  6. The Jones Act: How Secretary Of Transportation Pete Buttigieg Will Keep Poor People Poor

    The title of the post is pure sophistry. The Jones Act of 1920 was an act of Congress. Therefore, until Congress changes the law, it is utterly ludicrous to blame the Act’s consequences on a cabinet secretary.

    The last administration simply ignored laws that it did not like, something that the new administration has emphatically indicated it won’t do.

    If you do like a law, then have the Congress change it. Do not blame those who took an oath to faithfully execute the law.

    Elliot Ness enforced prohibition laws. At the end of the Untouchables informed that probihibition laws had been repealed and then asked what he thought about it, Kevin Costner as Ness replied: “Think that I will go have a drink!”

    Translation: Buttigieg would be happy if the JA were repealed tomorrow…No doubt about it whatsoever.

    G’day.

  7. The Jones Act is one of those laws that is pretty much impossible to change because the only people getting screwed by it lack a vote in Congress (Guam, Puerto Rico, Virgin Islands) or they live in a 1-party state (Hawaii) where the dominant party fully supports it. Basically, nobody on the mainland cares about repealing the Jones Act.

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