TRADE EXTORSION ASSISTANCE / THE WALL STREET JOURNAL REVIEW & OUTLOOK ( VERY HIGHLY RECOMMENDED READING )

REVIEW & OUTLOOK

MAY 20, 2011.

Trade Extortion Assistance

Obama throws up a new union barrier to Korea, Colombia and Panama.

"Last month, we finalized a trade agreement with South Korea that will support at least 70,000 American jobs. This agreement has unprecedented support from business and labor, Democrats and Republicans, and I ask this Congress to pass it as soon as possible."


So said U.S. President Obama in his January State of the Union address. Well, this week U.S. Trade Representative Ron Kirk and White House economic aide Gene Sperling told journalists that Mr. Obama will send none of the pending free trade agreements—Korea, Colombia or Panama—to Congress for a vote until Congress also agrees to expanded subsidies for jobless workers.


"I just want to stress that one of the things that we are making clear today is that the Administration will not submit implementing legislation on the three pending FTAs until we have an agreement with Congress on the renewal of a robust, expanded TAA program consistent with the objectives of the 2009 trade adjustment assistance law," Mr. Sperling said.


Translation: Hand over more than $2 billion a year to its union allies or the White House will block trade deals that would create hundreds of thousands of new jobs. Those familiar with the tactics of this White House won't be surprised to learn that beneficiaries of the program that Mr. Obama wants to resurrect include union workers whose job losses had nothing to do with foreign competition.


TAA has been around for decades but the 2009 version was expanded to include any worker whose job was moved overseas. It widened eligibility to include service and government workers—not merely those in manufacturing—and it increased the health-care subsidy and extended the time a worker is covered.


Benefits included job-search resources and reimbursements, relocation allowances, retraining assistance for up to two years, a tax credit to cover 80% of health insurance premiums and wage subsidies to top up the income, for two years, of older workers who take a new, lower-paying job. All of this was in addition to jobless insurance that lasts 99 weeks.


There was also a handout for Voluntary Employee Benefit Associations (Vebas), which are designed to take over the employee health-care benefits of bankrupt companies. As James Sherk, a labor economist at the Heritage Foundation, wrote in February, under TAA 2009 the federal government ended up "covering 80 percent of the cost of retiree health benefits at bankrupt companies—no matter why they went out of business." This "primarily helps unions, since unionized companies are disproportionately likely to offer these benefits." It was in effect a government guarantee of "top-of-the-line benefits to a small minority of workers."


Congress killed the 2009 program in February and TAA has reverted to the benefits from 2002, saving $800 million. This is not exactly hardship—for example, health-care benefits are still subsidized at 65%. But Mr. Obama has nonetheless decided to link ratification of the three trade deals to restoring the 2009 "stimulus" TAA.

The big business lobbies, which won't foot this bill, are pushing Republicans to agree to Mr. Obama's demands. But TAA ought to be debated on its own merits. Even the scaled-down version costs more than $1 billion annually—not counting the health-care subsidy—and only about 1% of the unemployed can blame foreign trade for their job losses. At least three economic studies have found that beneficiaries of TAA subsidies don't tend to secure better-paying jobs after retraining. A 2006 Government Accountability Office study concluded the same.


Mr. Obama tried this same TAA-for-trade-deals game in 2009, but after Congress passed the expanded TAA he bowed to Nancy Pelosi and never did submit the trade deals. Now that Republicans have won the House, he's asking them to dun taxpayers again for the Pelosi union package before he'll let Republicans pass trade deals that Mr. Obama claims he wants.


Or maybe the truth is that Mr. Obama doesn't really want to pass the deals. But he also doesn't want to admit this to the Fortune 500 CEOs he's trying to court for re-election cash, or to the foreign leaders pounding him for ratification. So instead he's adding a new demand at the last minute that will let him blame Republicans if the trade deals don't pass.


Republicans—and business—should tell Mr. Obama that Democrats no longer run the House, and that if he wants to hold jobs and taxpayers hostage to union payoffs, he'll be responsible for the failure.

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