TAA Program Shouldn’t be Renewed

By Mohammed Almahmoud

June 18, 2012

Most economic decisions involve trade-offs between different objectives.  program (TAA) is no exception. TAA program has benefits and costs but the net value should guide the decision of wither TAA should be extended or should expire. I believe TAA program should not be renewed because it is ineffective, unaffordable, unfair, and because alternatives for TAA exist.

The supporters for the existence of TAA program argues that TAA reduces negative side effects of removing international trade barriers. Without a program that helps those losers—by offering Training, reemployment services, relocation allowances, income support and wage subsidy— they will need a long time and go through a rough situation until they adjust and find another job. TAA improves the transition and adjustment possesses and make it easier for those workers to get new jobs. (1)

Also, supporters argue that TAA program helps workers move out of uncompetitive industries and into more competitive industries. That might reduce the need to protect uncompetitive industries, and thereby promote a more efficient allocation of labor and capital, leading to higher productivity growth and living standards throughout the entire economy.

Another argument for TAA program is that there is moral obligation for the government to help reduce the costs from job losses caused by the increase in imports and production offshore shifts.

An additional argument that support the existence of TAA program is it offers an indirect support for trade and investment liberalization.  Congress Members are willing to vote in support trade liberalization acts if assistance programs, like TAA, exist. This actually happened with the case of the approval of free trade agreements with Colombia, South Korea and Panama. (2)

Those supporting arguments can be refuted by exposing some flawed assumptions that have been used. First, those arguments disregard other programs that help the unemployed endure the transition and get a new job. There are federal programs—such as Workforce Investment Act (WIA) dislocated workers program, employment Service and unemployment insurance—and state programs—like Florida’s Welfare Transition Program (WTP) —which are enough to help the unemployed despite the reason of job loss.

Another flawed assumption in this argument is assuming TAA efficiency. The Office of Management and Budget assessment rated TAA as “ineffective in in 2003 and 2007. Which means that the program is “not using your tax dollars effectively. Ineffective programs have been unable to achieve results due to a lack of clarity regarding the program’s purpose or goals, poor management, or some other significant weakness” (3). Some researchers used the word “failure” to describe TAA program because of the “adjustment failure, the adjustment failure and the frailer to persuade workers to adopt the free trade principle. (4)

Also, a report to the committee on finance, U.S. Senate argues that TAA Program delays might leave workers less time to enroll in training, especially in case of large layoffs because the program capacity becomes overwhelmed with a large number of workers who need TAA services within a very short time period. (2)

Another counter argument is that very few people losses their jobs because of import competition. A study by James Sherk found that only about 1% of unemployment is caused by international trade competition. Instead, most people lose their jobs due to lower demand for products caused by shifts in popular tastes for goods and services, changes in technology and business productivity, and other non-trade reasons. (5)

As for the argument that TAA program offers an indirect support for trade and investment liberalization, one thing is that politics shouldn’t be the guide of economic decision. The second thing is that government should inform the public of the other programs that helps unemployed workers. That would make it unnecessary for the government to approve an ineffective program to satisfy the public.

Aside from refuting the supporting arguments, opponents to the TAA program have arguments against the renewal of the program. First, with the U.S. need to cut spending to reduce it huge budget deficits, the TAA is one of many subsidy programs that the country can no longer afford. According to the U.S. Department of labor, the TAA program cost around $2 billion annually (6)

Another reason concerns equality, why would a worker that lost his job sue to international competition get more help  than a worker that lost his job due to domestic competition?  All unemployed workers should receive an nondiscriminatory help from the government in spite of the reason of their loss.

I submit that even though the TAA program helped some people adjusting to their job loss, the program shouldn’t be renewed because its net value is negative, meaning that its cost exceeds its benefit. Using TAA’s fund to improve other programs that provide assistance to a vast number of unemployed workers would have better impact in improving the U.S.

Reference

1. “What is Trade Adjustment Assistance?”, employment and Training Administration, U.S. Department of Labor, June 22, 2012. http://www.doleta.gov/tradeact/factsheet.cfm

1. Trade Adjustment Assistance , Reforms Have Accelerated Training Enrollment, but Implementation Challenges Remain, Report to the Committee on Finance, U.S. Senate, United States Government Accountability Office, September 2004. http://www.gao.gov/new.items/d041012.pdf
2. Program Assessment, Trade Adjustment Assistance, U.S. Office of Management and Budget and Federal agencies, 2008. http://georgewbush-whitehouse.archives.gov/omb/expectmore/summary/10000340.2007.html
3. “Trade Adjustment Assistance: A Case of Government Failure.”, Dont, James A.,Cato Journal 2, no. 3 Winter 1982: 898. http://www.cato.org/pubs/journal/cj2n3/cj2n3-11.pdf
4. “Congress Should Allow Trade Adjustment Assistance to Expire,”, James Sherk, Heritage Foundation, February 4, 2011. http://thf_media.s3.amazonaws.com/2011/pdf/wm3134.pdf
5. Budget Authority Tables, Employment and Training Administration, U.S. Department of Labor, 2009
6. “Trade Adjustment Assistance: Misaimed and with Limited Effect”, Timothy Taylor, Conversable Economist, Monday, April 16, 2012. http://conversableeconomist.blogspot.com/2012/04/trade-adjustment-assistance-misaimed.html
7. Policy Watch, Trade Adjustment Assistance, Baicker, Katherine and Rehavi, M. Marit, Journal of Economic Perspectives—Volume 18, Number 2—Spring 2004. http://www2.hawaii.edu/~noy/362texts/adjustment.pdf
8. Trade Adjustment Assistance, James , Sallie, Cato Institute, May 2011. http://www.downsizinggovernment.org/labor/trade-adjustment-assistance
9. “Assessment, Case Management, and Post-Training Assistance for TAA Participants”, An Occasional Paper Prepared as Part of the Evaluation of the Trade Adjustment Assistance Program, Social Policy Research Associates, June 2009. http://wdr.doleta.gov/research/FullText_Documents/Assessment%20Case%20Management%20and%20Post-Training%20Assistance%20for%20TAA%20Participants%20-%20Final%20Report.pdf