(Erin Mitchell | Student Life)

A rather frightening development has occurred within the White House regarding economic policy. It would appear that the president’s Council of Economic Advisers has expanded to include labor unions. This is troubling not simply because it represents a misstep in economic policymaking, but also because it demonstrates a yielding of control to economic viruses known as “labor unions.”

Some background is needed on what exactly has been going on in our economy. Roughly two weeks ago, President Obama passed a set of tariffs against Chinese-made tires. This action was taken in response to complaints made by American labor unions that they could not compete with the less expensive Chinese goods. According to a recent Bloomberg article, the tariff is on the magnitude of 35 percent of the cost of the tire. The question now becomes: Why does this matter?

It matters because an increase in union power over the Obama administration’s decision-making represents a threat to our economic recovery. Unions by their very nature drive up the prices of manufacturing. Economic models of production rely on two types of inputs: capital goods and labor. Capital goods are the machines and infrastructure needed to produce outputs; labor is everyone who runs a machine or pieces together an object in the manufacturing process. The aforementioned economic models thus assume various costs to go along with the capital and labor. With labor comes wages. When you buy an object at a store, the price you pay partially reflects the cost of labor. The cost of an employee at a farm, for example, is factored into the price of a cantaloupe at your local supermarket. Likewise, the cost of a worker at Goodyear is reflected in the price of the tires you put on your car.

The tire market is naturally a very competitive one. Companies like Michelin, Goodyear, Bridgestone and Pirelli, as well as dozens of others, compete to sell you some oversized rubber donuts for your car. Tires come in a variety of sizes for various automobiles, but they’re basically all dark, rubbery, wheel-shaped objects with some tread pattern in them. A quick search of TireRack.com to outfit a 2009 Prius reveals that, save for some gimmicky Michelin offerings, brand-name tires run between approximately $50 and $80 each, with the Goodyears and Bridgestones coming in at around $75. They’re all pretty close in price because they’re all, for the most part, the same item, just rebranded. Here’s where the economics comes back in: Those tires could be cheaper. Why aren’t they?

The answer is Obama’s protectionist policies. Charging a tariff on Chinese tires just makes them more expensive to the end consumer. The 35 percent increase means that for every inexpensive $50 Chinese tire that comes into the United States, Joe Citizen will have to pay an extra $17.50 for it. The aim of the tariffs is to bring the price up to better match the American and other non-Chinese manufacturers’ prices so that consumers will buy local tires instead of foreign ones.

Perhaps, though, we ought to ask why American prices are not as low as Chinese ones. The answer lies in the aforementioned labor costs. Unions drive up the price of labor via collective bargaining. Simply put, every worker demands an unnecessarily high salary and threatens to strike unless their demands are met. Instead of paying laborers $20 per hour, they’re now making something like $27 due to their extortion tactics. This 35 percent wage increase is passed onto you, the consumer, through higher product prices. Seems like a tax, no? Regardless of the fact that I cherry-picked those wage examples to make the 35 percent line up with the amount of the tariff, the point remains: Unions drive prices up.

If the White House’s latest actions are indicative of who really carries sway with the president, our economy is not going to recover very quickly, if at all. Appeasing unions will only serve to weaken our economy as people are forced to spend increasing amounts of money on previously inexpensive products. Unions are myopic like that: They see a short-term wage victory but are unable to comprehend long-term economic hardship. If we want consumers to return their spending behavior to normal, we should be asking ourselves why American products are so expensive, not how can we level the playing field to appease economically damaging unions.

Richard is a junior in Business. He can be reached via e-mail at Richard.Markel@gmail.com.