Hey, they're aud Loots listeners. It's Tracy Alloway.
And Jill Wisenthal.
We are very excited to announce that Audlots is going to Washington That's right.
For the first time, we are going to do a live public Odd Lots recording in our nation's capital. That's going to be March twelfth in Washington, DC at the Miracle Theater and guests will be announced in the coming days, but in the meantime you can find a ticket link at Bloomberg dot com, slash odd.
Lots, Bloomberg Audio Studios, Podcasts, Radio News.
Hello and welcome to another episode of the Odd Lots podcast.
I'm Jill Wisenthal and I'm Tracy Alloway.
Tracy, let's get back on the supply chain, shipping and industrial policy.
Bee.
I love it.
I've been waiting for us to get back on that. Although actually, okay, so I'm excited about this for two reasons. One is I enjoy talking about supply chains and talking about how goods are actually transported. And I think I've told you before, I actually wanted to be a commodities reporter because like there's this element of romanticism to shipping
actual things moving actual stuff around the world. But then secondly, the reason I'm excited for this conversation is because this is a rare example or instance of something that has bipartisan support.
Yes, that's right. And so obviously during the last administration we saw these things. Do is the Chips Act, do is the Inflation Reduction Act, which primarily focused on energy, a lot of alternative energy. There's been some question obviously, with the changing of the guard in DC, are we going to see some more like activist efforts to shore
up certain aspects of the US industrial capacity. There's a lot of anxiety about that right now, but you know, it's obviously an open question where that's going to go. But one of the things that has come up in some of our conversations that we haven't dived too deep into it is American maritime capacity specifically, and it comes up when we reference the Jones Act, and it comes up when we talk about port automation, and we've talked a little bit about icebreakers and things like that, and
how sort of atrophied US capacity has become. And so then there's this question, like, you know, a what can we do about it and be how urgent is there a reason to rebuild this capacity.
I was kind of wondering how long it would take for us to bring up the Genes Act in this conversation, and the answer is about one or two minutes. But I think this is it's a really interesting topic. From an all blots perspective. We have done shipping episodes in the past, and obviously everyone learned during the pandemic that shipping costs are really important. But also I'm just interested in this discussion from a sort of policy design perspective.
How do you go about actually designing something like this that at first clients seems absolutely sprawling and complicated and touching on all these different things.
Well, I'm excited to say we really do have the two perfect guests for this conversation. We're going to be speaking with Republican Senator Todd Young from Indiana and Democratic Senator Mark Kelly from Arizona. Senator Kelly is a trained merchant Marine. I see a class of eighty six the Merchant Marine Academy. So, like I said, truly the perfect guests. Senators Kelly and Young, thank you so much for coming on Outlaws.
Thanks for having us.
Yeah, thank you. Joe and Tracy for having us on.
Why don't we just start what do you describe one of you or both of you describe the existing state of America's maritime capacity, and just like why it's something that we need to in your views address it.
Joe, this is Mark Kelly. You know, just to start, I would say, big picture, the state of our maritime industry is really, really poor. I was in a brief just yesterday with the Admiral, the four star admiral, Admiral Paparo, who's the head of Indopaycom, and we're talking about the Western Pacific, and he was talking about the Military Sealift Command and how it is in bad shape materially and also from a workforce perspective.
But when you consider where.
We were and where we are today. So when I graduated from the US Merchantary Academy in nineteen eighty six, as you mentioned, made about four hundred US flagged ocean going vessels, and that was down, by the way, from.
Thousands after World War Two.
Today that number has fallen to eighty, so eighty US flag vessels in international commerce flying the US flag. China, you know, our peer or near peer adversary has five thousand five hundred and most of the cargo that comes to the United States can come on Chinese ships. So if you remember what happened in twenty twenty one twenty twenty two is supply chains and bottleneck at seaports, especially on the West Coast. I mean, if China wants to do that similar effect to US, they can.
On any day, President she could.
Say, hey, no Chinese ships take cargo to the United States anymore, and it would essentially shut down our economy. So this is a problem. It's a national security problem. We got to fix it.
So how did this happen?
I mean, eighty US flagged vessels versus five thousand, five hundred out of China is pretty stunning statistic. What are the things that went into making I guess the US less competitive when it comes to shipbuilding?
God, I don't know if you want to take that or I could kin, yeah, I'll speak at a high level.
I mean, what we have seen over the years is China, in a number of different sectors of the economy, they've subsidized their activities in furtherance of national security and domestic job creation and to master certain technologies and crafts so that they can leverage those for geopolitical purposes and also for commercial purposes to put other industries and other countries
out of business. So examples, one example would be semiconductors, and it's not just the Chinese, many other Asian nations understood back You could point to the nineteen eighties. They understood that having some measure of control and expertise over semiconductor technologies was important to their growth and also important to their military using these technologygies, embedding them in different
military platforms, and so they invested in them. We instead, we have a more efficient economic model that doesn't lead to the sort of over investment and waste by our capital markets and others that the Chinese do. We also don't look at economic exchanges historically through a military lens.
Well.
The disadvantage of that is when other countries are subsidizing their businesses, in this case shipbuilding, and we're not subsidizing, they will undercut us on price, and given enough practice,
sometimes undercut us on quality. So we have gotten out of the business, in the case of semiconductors, of making them, and over time we became vulnerable the interruptions in the supply chain, the interruption that we might experience in shipbuilding our maritime industry that Mark just alluded to is one
we're trying to prevent. We don't want a situation, whether it's a pandemic or a military conflict, in which we are dependent on our chief adversary, China to move materiel and personnel to other places, and on a day to day basis, as our government leaders are making foreign policy, we don't want to be coerced into making certain decisions by the mere threat of Chinese interruption of our economy.
So that's why, at the highest level this is very important and why some sort of government intervention is needed because this, in the end is an economic security issue and also a national security issue.
And Tracy to add on to that just a little, in the nineteen eighties, we used to do this differently, and before there was some more government involvement. We got out of that kind of left the maritime industry totally on its own, and it just decayed.
Over decades for the last forty years.
And you know, the other concern here about you know, it's not only the number of ships, but you know, the Chinese ships, the ocean going their ocean going vessels fifty five hundred or so that they have requirements put on them by the PLA Navy.
So these ships are you know.
Well equipped and configured to be what they need if they were in a conflict with US. Now, we rely on the Military Sealift Command for our initial capacity to move combat equipment and troops in some cases troops overseas, but.
Those numbers are rather limited.
And the reason why you want a large maritime fleet is not only you know, peace time to move you know, cargo, and it's healthy for our economy and it also helps us shipbuilding. But the other reason, as in time of conflict, we might have to rely on this capacity of ocean going merchant vessels to get combat power across the Pacific or Atlantic.
Sorry, I was just going to build on Mark's point and emphasize the capacity that Mark just alluded to. Is what we're essentially trying to do is we're trying to train more mariners, build more ships, and then create more yard space in our existing yards and perhaps some older yards that need to be refurbished, create more yard space that can support additional military shipbuilding and repair during a wartime situation.
It's interesting, you know, we're having this bipartisan conversation, and you laid it out the sort of tension very well, which is that sort of American economic philosophy has been optimized for efficiency and profit. And obviously we're extraordinarily wealthy
as a country, probably enlarge part of that. But A there's the geopolitical risks that emerge with losing basically the ability to build stuff, and you mentioned semiconductors and ships, and there's a lot of this and so A, you know, you run the risk it's overseas, and then over time perhaps they don't even need the subsidies anymore because they just have years and years and years of practice getting
better and better at it. Do you see this sort of framework, this sort of lens with which to view economic policy is fundamentally changing in DC because we're trying to sort of understand, you know, how much momentum and continuity there will be for just this general notion of what people call industrial policy.
I do. I believe a lot of minds have been changed changed, and policy makers pensient for embracing these sorts
of policies has fundamentally changed. Mark was helpful to me as we tried to push through the Chips and Science Act dealing with the semiconductor challenges, and I think through that exercise, many of us had to make what were challenging arguments to colleagues about why we needed to bake in a national security premium to the price of certain products, knowing that if we didn't make them here have the capacity to make them here in the future, there would
be national security consequences to that. And we've done that on so many other technology areas in the past. The only difference now is that we have an adversary that does not really look at any commercial transactions through a purely commercial lens. There's always a geopolitical or military overlay to it. So we have to extend the long standing philosophy to other areas of our economy in order to
protect our people. So if we continue to make the arguments, I think more people in Washington will embrace what most people across America already intuitively understand, which is yes. I remember during the global pandemic when I tried to get at Walmart and buy a consumer electronic and the shelves were half empty. They understood why that was and why it's hard to run a modern economy without more resiliency and a little more just in case instead of just in time.
So one of the things that comes up quite a lot on this show is the importance of institutional knowledge. So, you know, you can have people in DC agree that the US should build, you know, more big and complicated things, whether those are semiconductors or ships, but you actually need people who know how to do that. And if we haven't been building these things for decades, then there probably aren't that many people around who have practical knowledge or
experience of how to do this. And in fact, I don't think there's any major shipbuilder that is actually headquartered in the US, although there are some subsidiaries. How do you actually go about building up institutional knowledge for shipbuilding?
Tracy So, one of my classmates from the US Merchant Many Academy in nineteen eighty six is a woman named Jennifer Boykin. She's the president of Newport News Shipbuilding, And before I was in this job, I remember going down there to visit her.
And talking about some of the workforce issues.
She builds aircraft carriers and Virginia Class submarines. You know, one of the pre eminent shipbuilders in the world. When you consider just the capability of these vessels, a US aircraft carrier or the Ford class aircraft carrier and the Virginia class attack submarines are you know, there's nothing better. So we can build really, really good and capable ships.
But one of the challenges, you know, the chief faces is what you're talking about, is the workforce, you know, constantly trying to find people that will do these jobs and do them well and have the skills. Now, they train a lot of their own people welders and pipe fitters, electricians, but they often run into challenges and finding, you know, people to go into these jobs, and when they need people that are trained already, that ecosystem of shipbuilders doesn't
really exist anymore in the United States. So part of the benefit of this and in the legislation itself, is a strategy to provide help for training programs so to build the workforce. You can think of this as kind
of a three legged stool. One of them be in the shipyards, one of them being the US flag the vessels, and the third being the and by supporting the schools like the US Merchant Marine Academy and the state Maritime Academies and also the you know, the schools that train the unlicensed mariners, but then also programs to you know, help shipyards find pipe fitters and train them, and welders and electricians and all those trades will then grow this
entire ecosystem. So there's extra capacity of a workforce that existing shipbuilders that build naval combatants can rely on.
And then that extends not only.
To the workforce, but to the companies that build the parts, you know, pumps and pipes. If you grow that, there's a more competitive economic environment, there's more availability in some cases now when when they're buying, you know, a pump or pipes, they might have only one or two vendors that they can rely on. So the idea here is by building the US merchant marine and the shipbuilding workforce, we're also going to help our naval shipbuilding.
Well, this is actually just a good moment. Why don't you describe what give us the outline of the Ships for America Act. How much do you underspend, what does it hope to achieve? What would the US industry look like if all successfully implemented.
Well, it's a three hundred page piece of legislation.
It touches every aspect or nearly.
Every aspect of the maritime industry. I guess I'll just start kind of in a random place here. Provide for a maritime Security Advisor within the White House who would lead an interagency maritime Security Board to make some whole of government strategic decisions on how to implement a national
maritime strategy. It also establishes a Maritime Security Trust Fund that would rein asked duties and fees that are paid by the maritime industry into maritime security programs and infrastructure programs, with the goal here of having two hundred and fifty ocean going merchant vessels in ten years.
We would create a strategic commercial fleet program.
We would change or establish a rule making committee on commercial maritime regulations and standards, and then we would do things like requiring government funded cargo to move on US flag vessels and require a portion of the cargo imported from China to go on US flag vessels starting at a later time. There's tax credits, there's Title eleven Federal ship financing, there's shipbuilding financial incentive.
Programs in the legislation.
There's also a part of this it's about manufacturing and innovation and coming up with the next generation of ships and ship energy systems, and I could go on.
Yeah, the bill in its official format is actually three hundred and forty four pages long, and I will confess I did not read all of it.
Did you upload it?
I did not. That's a good idea, Actually I did.
One of the things I was wondering is, you know, this is kind of a Devil's advocate question, but a lot of the ACT, as you just outlined, is about creating incentives to build ships through things like tax credits or providing some subsidies for construction or training. Why can't the US government just fund ships directly? If ships are so important for national security and trade, why even try to leave it to private capital to build?
Well, that's a good question.
I mean, I guess that's what China does, right, They build them, you know, they put them out there on the oceans. They really belong to the Chinese government in a way. You know, we are a democracy, we're capitalist society. We believe in private markets and private ownership, and we believe in, you know, to some extent, maybe helping companies, but eventually getting them to the point where they're on
their own. They're profitable, they're creating good paying jobs. These are jobs often that you can raise a family on, that do not require a four year degree. So these are you know, great you know jobs that are you know, provide an economic benefit not just to the people who work them, but.
To our country, and they help us grow the economy. I don't think the.
Government operating its own you know, fleet vessels to move commercial cargo, you know, makes a ton of sense, because this is this is an important part of our economy. It's deteriorated over the years. But you know, what you're suggesting would be really like a you know, wholesale pivot to government owned industry.
Let me ask you another question. You know, we've done a lot on industrial policy in the past, and one of the preconditions or you know, industrial policy can fail easily, and you can have cronyism, and you can have companies overbuilding the government for mediocre products. And this is just one of the pitfalls of anytime there's a lot of
public money going to something. But one way that this gets addressed historically in some markets is this idea of the domestic champion has to be competitive on the global market. And so if you're a car company or a chip company in China or something like. You know, you don't have any guaranteed buyers overseas because the chip maker is still competing with Texas Instruments or BYD is still competing
with Tesla. What are the mechanisms that you have in place or that you envision to still have that sort of market discipline so to speak, so that yes, there is this public money going, but there is still this element that, yeah, we want the ships to be really good and competitive and competitively priced and to sort of win, so to speak, so that we know we're getting value from the spending.
Well, yeah, let me take that.
And frankly, this builds off of the previous question. First, I've learned a lot and frankly thought a fair amount about industrial policy in recent years through.
The Chips Act.
From a purely economic standpoint, there would be no difference when it comes to direct payments to grantee companies that are charged with building ships on behalf of both our commercial industry and for future national security reasons. But administratively you can cut down on any concerns over croniism or waste by having a neutral arbiter. And despite some anomalies over time. Our IRS is a pretty neutral arbiter. So when you are funding this shipbuilding initiative through the tax code,
it does provide a neutral arbiter. Sometimes the downside to that approach is that you end up funding through the tax code more enterprises and certain enterprises the would otherwise fund. So there are trade offs when you make decisions about how you administer your industrial policy. That would be point one. Point two about establishing market discipline is very important. If you look at semiconductors, that market is incredibly distributed and
ramified all across the world. We will see for any given semiconductor it going across international borders dozens and dozens of times before it becomes assembled component. In the case of ships, of course you're going to have components going in and out of the country some but it's less distributed, and it will be the job in the main of our diplomats and of our private enterprises to sell our
ships into other markets. We need to open up other markets through trade policy, something I'm also an advocate of and will continue to argue for. In part, and this is a rarely mentioned dimension of trade policy, but one of the reasons we want to trade with the rest of the world is to enforce a certain efficiency and discipline on our own economy so that we will see a deployment of resources efficiently and we can grow faster and all become more wealthy. So I mean, that's how
this will be accomplished. But what we have right now is we have a more concentrated shipbuilding industry in particular countries because they see not only the commercial but also the national security upside to excelling in shipbuilding. And it will take some work from our government to open up foreign markets for our ships down the road, so we're not there yet. We can't wait for that, however. I mean, we own three percent of the global commercial fleet right now.
China owns roughly one fifth of the world's fleet, and they will, through their bulk carriers, move a far larger
proportion of American goods into the United States. So they've got us at the end of a barrel, frankly, and there is some urgency to us beginning this exercise now, especially in light of many of our national security communities predictions about Chinese misbehavior visa VI Taiwan or South China Sea, which will require a maritime response from the United States, and at this point in time, we just cannot move enough material and enough of our soldier sailers and airmen
to win a fight. And that ought to send a shiver down the spine of most Americans.
Since you brought up the broader trade landscape, would you expect retaliation from China for this act? I think it's fair to say at the moment the relationship between the US and China is pretty freed given the ongoing trade war. And one of the things this act proposes is creating a commercial cargo preference, so that in fifteen years, ten percent of all cargo that's imported into the US from China will need to be imported on US flagged vessels.
And I imagine that China might not like that, right We talked earlier about how they've been supporting their own domestic shipbuilding industry, so clearly this is important to them. Could they potentially respond in kind with their own restrictions.
Well, they could always do that, Tracy, But when you think about ten percent is pretty modest. You know, we're building our capacity. We're going to require you know, certain cargo to be carried on US flag ships. Under you know, this Act, but we can't be making industrial policy decisions based on what we think the response from China is going to be.
You know, if they.
Respond, we'll figure out up way forward and figure out how do we you know, counter a response if it's unfair.
But right now.
When you you know, just consider the capacity that China has in this industry five thousand, five hundred ocean going merchant vessels and.
We have eighty.
We've got to turn this around. Like semiconductors, we didn't get into the you know, details of why you know, the semiconductor industry is so important, but the best semiconductors are made in Taiwan company to call TSMC, and if we lose access to those this is part of the discussion we had today with our yesterday with Admiral Paparo. If we lose access to semiconductor chips from Taiwan, we could very quickly lose five to ten percent of our GDP.
Unemployment could go up ten percent in the United States rather rapidly. So that's one of the reasons we wanted to onshore you know, this capability. And you know, Todd was the author of the bill that I worked on with him. So, yeah, I think it's always possible we could see a response from the Chinese. But that doesn't, you know, mean we shouldn't do this.
Yeah, Tracy, we have to assume that the Chinese will, you know, be upset. But what they aim to do, and it's an intelligent thing to do, is by threatening a response, because our economies remain interwoven. By threatening a response, they want to deter us from making our own economy more resilient. And as long as we remain vulnerable to their provocative threats and activities, then our policymakers will have to think about the economic cost and sometimes even military costs.
They'll impose on our country.
We have to get ourselves out of this predicament, and why not do so by being consistent with something we've told the Chinese and the rest of the world for generations, which is the United States of America will be the world's best friend and at times your best enemy. But all we ask to ensure we remain friends is a measure of reciprocity. It's a fundamental trading principle, and the
Chinese favor their own commercial vessels. The Chinese offer extensive subsidies not only for their shipbuilding industry, but across the board for industries they regard as strategic. So we're following through with a long standing philosophy, and a key here is that when we make these sorts of actions, we
do so in coordination with partners and allies. In this case, in the last administration, the Secretary of the Navy and the administration, we're able to unlock a significant investment which I understand may be forthcoming in our Philadelphia Naval shipyard
from South Korea. So that's an illustration of how if we start to get some buy in from other economies and businesses and countries to our own shipbuilding exercise because they too have a vested interest in our economic and military strength, we can mitigate any blowback from China.
You sort of anticipated my next question, because one way that you can sort of balance the goals for efficiency and dynamic market economies alongside the national security concerns is working with allies and countries that we trust in countries
in similar positions and et cetera. In your law, in your proposed bill, what is the role for foreign companies either building directly here or you know, us investment elsewhere, but among friends, so to speak, in revitalizing this capacity, how are allies treated?
Well, you know, we want our allies to work with us here in the United States. You know there are foreign shipbuilders that could build capacity here in shipyards and be our partners. You know, that's built into the legislation. So this could benefit our allies, and that's one of our you know, strategic strengths as.
We actually have a China doesn't have that.
So when we develop this sort of policy, it's important that we keep our allies in mind, and this legislation does that.
One of the other things I'm sure people will be curious about is the ultimate impact on cargo costs. And as you mentioned, during the pandemic, we all experience the frustration of not being able to buy toilet paper or electronic goods or whatever because of empty shelves. And with this Act, on the one hand, you're trying to expand capacity with additional ships, which would presumably bring costs down.
But on the other hand, there are people out there, I'm thinking specifically of Lars Jensen, shipping expert, who argue that the ACT as currently designed would increase shipping costs for US importers and exporters. And yeah, as we learned during the pandemic, the cost of transporting goods is pretty important to broader inflation. It feeds into almost everything, at
least when it comes to goods. How do you sort of balance I guess, the additional costs of transitioning to this new system versus ultimately trying to bring down prices.
Well, let me address that. From an economic standpoint. What you want to establish is certainty in your economy, and at the consumer level and the business level, you don't want big spikes and then valleys and prices. That does not lend itself to stability or confidence in the markets. It makes it very difficult at the household level to
plan your expenditures. We I think all experienced a measure of that during the pandemic, where some things were shooting up and then other things were on discount, and it became kind of an alternative universe. And the way we aim to address prices, and you alluded to it, Tracy, was by making sure we have more control under a key uncertainty and the value chain, and that value chain is the shipping of your products across an ocean and that's at the export and import level, and so we
have control over that. Does that in the near term, prior to a crisis lead to marginal premium on certain products.
It could, it could lead to a marginal increase. But net net, you're not going to be experiencing those highs and lows, and most importantly, you will not experience the incredible cost of losing sovereignty, losing the ability to make your own economic policies because of economic coercion a key tactic of the Chinese Communist Party, or to be able to defend your way of life through military force, because you can't move the men and women to where they
need to go and the material and difficult circumstances. So you know, as with other construction efforts, you know, we build military jets here. For example, there wasn't a robust enough consumer market in the United States to build fighter jets, so we ask the taxpayers to front some investments so we have the capacity to build it for a military There's a dimension of that here as well.
I mean, I think this is a really important point. It gets to this very sort of deep tension. Everyone likes the idea of spare capacity, especially in the moment, like a March twenty twenty, or a pandemic or a theoretical war. On the other hand, you know in times of peace or in times of health when there isn't a pandemic, you know, it is a cost, and it's very hard to quantify or sort of perhaps into it the price that you're paying for this sort of you know,
potential black swan event. Just real quickly, because we didn't touch on this, how much are you envisioning this would cost to get to your goals? How much would be actually allocated? And what are the funding mechanisms. I think you mentioned some sort of trust fund, but just talk us through the dollars aspect.
Well, this bill is paid for, I mean, it's paid for within fees that are generated within our maritime industry. So there's not a significant amount of like direct funding. I don't think we have a score on it yet. Okay, tax credits are paid for by fees that you know, shipping companies you know, will be paying as they bring cargo into the United States, tonnage fees and other programs
like that. So in some ways I'd say it's different than the Chips and Science Act in that regard and how these things are paid for.
How confident are you of pushing this proposal through because you know, on the one hand, it has bipartisan support, and there are a lot of things you can say that about nowadays. But on the other hand, a lot of the focus of the new administration seems to be on dismantling various things or making things more efficient versus actually building new stuff.
Well, I can as a Republican, I can tell you that President Trump likes to build things. He likes beautiful things. He likes to create jobs, manufacturing jobs. He especially likes the opportunity to create more manufacturing jobs in the industrial Midwest, a place that loves President Trump. And there will be compos of these ships, if not additional shipyards brought to
bear on this national and economic security challenge. And he's enlisted the help already in his national security team of key individuals who are fully supportive of this effort, one being a friend of Mark Kelly's, Mike Waltz, who is now the National Security Advisor. He's bought into this vision in the past as a member of Congress. Another is Jerry Hendrix, who Mark also knows happens to be from
my state. Jerry is a supply chain expert with particular expertise in shipbuilding and spent a career in the Navy, and he's bought into this sort of vision. So we have some key allies and surrogates who can help us make the case. It's never easy during times like these, when we Republicans, I think are rightly focused on fiscal responsibility, which I don't want to suggest Mark doesn't care about either.
He does, but we are warm to making our military more effective and this is an important way to do so.
And Tracy, I think there's going to be a tremendous amount of enthusiasm for this legislation. It's the kind of thing that works on both sides of the aisle. You know, we all realize that China is an adversary. President Shei, the Chinese president, has said things that are rather aggressive in the past. We've got to rebuild this industry. We are a maritime nation. We've got water on both sides.
You know.
The Chinese have this vision of being a worldwide naval and maritime power. They're building more naval ships than we are every single year.
They're building more submarines.
We've got to get this back on track, and this legislation is going to be a part of the thing that we need to do. A big part actually to turn this well, since I'm a Navy guy, to turn this like aircraft.
Carry around take some time. It's a big part of this.
But unfortunately I've got to go, so I want to wrap this up.
Here with you.
I appreciate your interest in this. You know, Todd and I have been working on this for some time. Todd mentioned Mike Waltz originally when this started. It was because we had a common interest in this topic. He's now the President's National Security Advisor, so we know at least in his office there's a lot of interest in getting this done. So I'm incredibly excited about getting this across
the finish line. We're going to reintroduce this soon in this Congress, and then Todd and I in the Senate and Representative Kelly in the House and Representative Garymandi, We're all going to work together to get more co sponsors to go through the process of getting this across the place.
Life Senators Mark Kelly and Todd Young, thank you so much for coming on online. There was fantastic Thanks.
For having us write it.
Tracy A. I really enjoyed that conversation. B You're gonna make fun of me because of how boomer I'm getting. Like when like when you just want to build the big Yeah, like Senator Kelly starts like a Virginia Class submarines and stuff like that. I get the hair on my arm picks up. You know, I get excited about stuff like that.
They are cool things.
You know what.
I was rewatching Pretty Woman the other day, Yeah, and I realized I had an epiphany. It's actually it's all about shipbuilding. Yeah, right, that one guy wants to build ships and Richard Gear ultimately has it come to Jesus moment and decides to build them with him rather than dismantling the company. So you know, shipbuilding is part of the American jury.
I mean it literally, it literally is. And you know, I actually really liked this conversation for many reasons. But one it's sort of like gets down to some core economic philosophical questions. And I remember, I think it was spring of last year we did that conversation with Christian Parente about Alexander Hamilton's Treaty or Treatise on Manufactures and this idea that I think there's two things. A that a country that can't build things is a country whose
sovereignty is really in doubt. I think is a really just like core idea, And it's interesting to hear them articulate this. And then this idea that, yeah, the US economy is largely governed, so to speak, by the profit principle and maximum efficiency, and it's cheaper to ship goods on foreign owned ships, particularly if foreign governments are subsidizing those ships, which means it's a de facto subsidy to
American consumers. But then the idea of okay, well, if that ultimately long term puts us in a position where our sovereignty is threatened. It's not just ships, it's obviously things like semi cans and really many other things, then you have to think about what is the price you're going to pay for avoiding some tail risk, which is really hard to measure down the.
Road, There is certainly a tension there.
Yeah.
The other thing I would say is it's interesting to me how much this lines up with very traditional Knesian economics, right in the sense that Kines argued that there's a role for government to smooth economic cycles.
Yes, and we're talking about.
An extremely cyclical industry that's famous for boombust periods, and so, you know, coming at it from that perspective, the idea of the government being a sort of like smooth the cycle actor makes some sense.
Well, this is interesting.
I've been, you know, trying to read more about defense history and about defense procurement, and this is one of the arguments that the big defense giants have always made in the past, which is, you know, you can't just have their argument, and I find it there's some logic
behind it. You know, you can't just have big orders come in during war and then all the orders go away, you know, after the war is over, and then you know, everyone gets a different job and the factories are dismantled and stuff, because then, you you know, you lose that institutional memory.
This is how the Jones Act happened. So after the First World War, we had a surplus of ships, and so everyone was like, well, we'll just restrict it to US owned ships and everything will be fine. And then you know, fast forward like one hundred years and we don't have that surplus anymore.
This is a really good topic for us. We should do more on this.
Do you like how I brought it full service?
Yes to the Jones well done? Yeah, thank you.
And one day we're going to do a Jones Act episode.
We will. There's a long.
Recurring joke that we've never done a Jones Act episode.
All right, shall we leave it there?
Let's leave it there.
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