Jones Act turns 100 amid renewed controversy
By Larry Luxner
Special to News is my Business
Sen. Mike Lee, a Utah Republican viewed as one of the most conservative members of Congress, said lighting “a Dumpster full of manure on fire” would be an appropriate way to mark today’s 100th anniversary of the Jones Act.
The controversial legislation, approved by Congress on June 5, 1920, requires that all goods transported by water between US ports — including those of Puerto Rico, Alaska, Hawaii and Guam — be carried on US-flag ships that were built in the United States, and are owned by US citizens and crewed by either US citizens or permanent residents.
Lee, a self-described libertarian, called the Jones Act a prime example of “crony capitalism” during a June 4 webinar hosted by the Washington-based American Enterprise Institute.
“The Jones Act has lived far too long,” said Lee, who is seeking to repeal the law. “People in Puerto Rico and Hawaii are paying 10%, 20% or 30% and more on common grocery items. This is a classic example of a small handful of big wealthy corporations with concentrated benefits becoming further enriched on the backs of poor and middle-class Americans who are powerless, and unaware why everything is so expensive.”
According to a 2019 study by PriceWaterhouseCoopers, the Jones Act supports 650,000 US jobs, with Louisiana, Florida and Texas as the top three beneficiaries. Both the shipbuilding industry and the Pentagon generally support the law, arguing that it provides sealift capacity for the military in times of national emergencies.
Yet the law has long faced fierce opposition in Puerto Rico because it drives up local prices for consumers and manufacturers.
The senator said building a ship that complies with the Jones Act costs six to eight times as much as building one that doesn’t — ultimately driving up costs for everyone.
“Costs are inflicted on those who have little bargaining power or ability to access the information they need against those who benefit from this evil system,” said Lee, adding that the Jones Act forces Puerto Rico to import liquefied natural gas (LNG) from Venezuela.
“It’s not because of a shortage of LNG in the United States, but rather because there are only so many Jones Act-compliant vessels capable of handling LNG shipments along coastlines — and not one of them happens to be US-flagged, US-crewed or US-built,” he said. “So, we don’t just empower bad regimes, but also impoverish American citizens.”
Economist Aaron Klein of the Brookings Institution said Lee’s thinking is misguided, and that his insistence on building 355 Navy ships “will $865 billion in taxpayer-funded debt over the next 30 years” while outsourcing American jobs to China. And even if the Jones Act drives up consumer costs in Alaska and Hawaii, residents of those two states can well afford it, he claimed.
“Alaska’s median household income is $74,000 a year, and Hawaii’s is $80,000. These states are large net recipients, getting way more in tax dollars than they pay into the system,” he said — without mentioning that Puerto Rico’s median household income barely reaches $20,000 a year. “Go visit Mississippi, where unemployment in the shipbuilding industry has devastated communities. Go to Newport News, Virginia, or coastal Maine, and ask yourselves who’s better off?”
On the contrary, Anne Krueger of the Johns Hopkins School of Advanced International Studies said Lee isn’t harsh enough in his criticism of the Jones Act.
“We have only two or three oceangoing vessels built in the United States per year, and more than two-thirds of the fleet is more than 30 years old,” she said. “Shipping crude oil from the Gulf of Mexico to New England costs $5-$6 a barrel, while to Canada it’s only $2. Cattle are sometimes air-freighted to the US mainland rather than going by sea because it’s more expensive to ship them.”
Particularly stinging was criticism from Rob Quartel, executive chairman at NTELX and a former member of the U.S. Federal Maritime Commission.
“I think it’s ironic that a 21st-century economy and military are held hostage to a law that was written before containerization, nuclear weapons, jet planes, aircraft carriers and the Internet,” Quartel said.
“It failed to prepare us for World War II, and in the first Gulf War, it utterly failed. It’s a law that has failed in everything its supporters claim it was set out to do. And it has destroyed shipbuilding, undercut domestic forestry and mineral production, and in the long-term, national security,” Quartel said.