Odd Lots Podcast Summary: "The Plan to Get America Building Big Ships Again"

Release Date: February 20, 2025 Host: Bloomberg's Joe Weisenthal and Tracy Alloway

Introduction

In the February 20, 2025 episode of Bloomberg's "Odd Lots," hosts Joe Weisenthal and Tracy Alloway delve into a pressing issue facing the United States: the decline of American maritime capacity and the proposed legislative efforts to revive it. This episode features a bipartisan discussion with Republican Senator Todd Young from Indiana and Democratic Senator Mark Kelly from Arizona, who champion the Ships for America Act—a comprehensive plan aimed at revitalizing the U.S. shipbuilding industry.

Current State of American Maritime Capacity

The conversation begins with an overview of the deteriorating state of America's maritime industry. Senator Todd Young highlights the stark decline in U.S.-flagged ocean-going vessels, emphasizing the national security risks associated with this trend.

Todd Young (05:55): "The state of our maritime industry is really, really poor... Today that number has fallen to 880. So 880 US flagged vessels in international commerce flying the US flag. China, our peer or near peer adversary, has 5,500."

This decline not only impacts the economy but also poses a significant threat to national security, as the U.S. becomes increasingly dependent on Chinese shipping for the transportation of goods and military supplies.

Decline Compared to China

Senator Mark Kelly elaborates on the competitive disadvantage the U.S. faces due to insufficient investment in shipbuilding, contrasting it with China's aggressive subsidization of its maritime industry.

Mark Kelly (07:56): "China has subsidized their activities in shipbuilding... They have 5,500 ocean-going merchant vessels compared to our 880. Most of the cargo that comes to the United States can come on Chinese ships."

Kelly explains that China's strategic investments are not just for economic gain but also serve geopolitical and military purposes, enabling China to leverage its maritime capacity for broader national interests.

National Security Implications

The discussion underscores the national security implications of America's dwindling maritime capacity. Senator Young points out that without a robust fleet, the U.S. risks being economically and militarily vulnerable.

Todd Young (07:37): "If President Xi could say, 'No Chinese ships take cargo to the United States anymore,' it would essentially shut down our economy. So this is a problem, it's a national security problem. We got to fix it."

The reliance on a foreign adversary for critical shipping needs exposes the U.S. to potential economic coercion and hampers its ability to respond to military conflicts effectively.

The Ships for America Act: Overview

Senators Young and Kelly introduce the Ships for America Act, a 344-page legislative proposal aimed at restoring and expanding the U.S. maritime fleet to 250 vessels within ten years. The Act encompasses a wide range of measures, including the establishment of a maritime security advisor, creation of a maritime security trust fund, tax credits, and financial incentives for shipbuilding and training programs.

Senator Young (20:58): "We would create a strategic commercial fleet program, change or establish a rulemaking committee on commercial maritime regulations and standards, and require government-funded cargo to move on U.S. flagged vessels."

The Act seeks to build a sustainable ecosystem by investing in shipyards, fostering workforce training, and incentivizing private investment in the maritime industry.

Funding and Economic Policy Considerations

A critical aspect of the discussion revolves around the funding mechanisms for the Ships for America Act. Senator Young clarifies that the Act is self-financed through fees generated within the maritime industry, such as tonnage fees, rather than relying on direct government funding.

Senator Young (42:02): "The bill is paid for within fees that are generated within our maritime industry. So there's not a significant amount of, like, direct funding."

This approach aims to mitigate concerns about government overreach while promoting private sector investment and maintaining economic efficiency.

Potential Impact on Shipping Costs

The potential economic impact of the Act, particularly on shipping costs, is a point of contention. Tracy Alloway raises concerns that incentivizing U.S.-flagged ships might lead to increased shipping costs for importers and exporters, potentially fueling inflation.

Tracy Alloway (37:54): "This act as currently designed, would increase shipping costs for U.S. importers and exporters... the cost of transporting goods is pretty important to broader inflation."

Senator Kelly responds by arguing that while there may be modest increases in costs, the long-term benefits of economic resilience and national security outweigh these concerns.

Mark Kelly (38:54): "We have control over that value chain... in the near term, prior to a crisis, lead to a marginal premium on certain products... but you'll not experience the incredible cost of losing sovereignty."

Bipartisan Support and Political Strategy

The bipartisan nature of the Ships for America Act is highlighted as a significant factor in its potential success. Both Senators Young and Kelly emphasize the broad support across party lines, framing the Act as a national imperative rather than a partisan issue.

Senator Kelly (43:01): "As a Republican, I can tell you that President Trump likes to build things... There will be components of these ships, if not additional shipyards, brought to bear on this national and economic security challenge."

This unity is further reinforced by the Act's alignment with national security priorities, garnering support from key figures within the administration.

Conclusion and Reflections

As the episode concludes, hosts Weisenthel and Alloway reflect on the broader economic and philosophical implications of the Ships for America Act. They discuss the balance between economic efficiency and national security, drawing parallels to historical policies like the Jones Act and Keynesian economics.

Joe Weisenthel (48:37): "If a country can't build things, its sovereignty is in doubt... the idea is the U.S. economy is governed by the profit principle, but sovereignty demands resilience."

The conversation underscores the enduring tension between free-market efficiency and the strategic need for industrial resilience, advocating for a nuanced approach to economic policy that safeguards national interests.

Tracy Alloway (48:39): "There is certainly a tension there."

The episode concludes with an acknowledgment of the complexity of shipbuilding as part of the American dream and its critical role in maintaining the nation's economic and military strength.

Key Takeaways

• Declining Maritime Capacity: The U.S. has significantly fewer maritime vessels compared to China, posing economic and national security risks.

• Ships for America Act: A comprehensive legislative proposal aiming to expand the U.S. maritime fleet to 250 vessels within ten years through incentives and infrastructure investments.

• Funding Strategy: The Act is designed to be self-financed through industry-generated fees, avoiding direct government expenditure.

• Economic vs. Security Balance: While there may be short-term increases in shipping costs, the long-term benefits of reduced dependency and enhanced national security are prioritized.

• Bipartisan Support: The Act enjoys support across political parties, framing maritime revitalization as a national priority beyond partisan divides.

Notable Quotes

• Todd Young (05:55): "China has subsidized their activities in shipbuilding... They have 5,500 ocean-going merchant vessels compared to our 880."

• Mark Kelly (07:56): "China has subsidized their activities in shipbuilding... They have 5,500 ocean-going merchant vessels compared to our 880."

• Tracy Alloway (37:54): "...this act as currently designed, would increase shipping costs for U.S. importers and exporters..."

• Mark Kelly (38:54): "...you will not experience the incredible cost of losing sovereignty."

Conclusion

This episode of "Odd Lots" provides an in-depth exploration of the critical issue of maritime capacity in the United States, offering listeners a comprehensive understanding of the challenges and proposed solutions. Through expert insights and bipartisan dialogue, the discussion underscores the importance of strategic industrial policy in safeguarding national security and economic resilience.