“Buy American” Sounds Good; Carries An Unbearable Down Side

American tax dollars directed at America’s ailing economy should be spent only on American products. That sounds logical – and compassionate to US workers, who can use all the lovin’ they can get. But the “Buy American” provision of the megastimulus package winding through Congress makes little sense. Neither is it kind.

Christian Science Monitor, Editorial

Last week, the House passed an $819 billion economic recovery plan with the stipulation that all public projects funded by the bill (read highways, airports, mass transit, etc.) use only iron and steel produced in the U.S. of A. The Senate version goes further, to include all manufactured products.

The lawmakers’ thinking on this is understandable. They’re sensitive to the outrage that would come when it’s discovered that some federal monies will inevitably go to foreign goods, supporting foreign jobs. With an economy this bad, better take care of our own, they reason.

 Obama Caught Between World Leaders, Congress, U.S. Voters on “Buy American”

But the gain in US jobs will not be worth the ultimate cost.

For starters, the number of jobs generated by the House version will be tiny – about 1,000 steel jobs, according to a study this week by the Peterson Institute for International Economics. If the Senate’s broader version is adopted, about 9,000 US manufacturing jobs would be gained, according to the institute.

Now look at the loss side of the ledger. A “Buy American” provision is sure to generate retaliation abroad (threats loom already). If trading partners strike back on steel, the US industry could lose exports equal to or greater than the number generated by the stimulus.

If other countries choose to shut out only a small percent of American manufactured goods from their own government-funded projects, the US would lose 6,500 jobs. More extreme measures could cost 65,000 jobs.

Meanwhile, cutting foreign products from the stimulus bill means less price competition, more expensive public-works projects, and thus fewer of them to go around.

Further, the Buy American provisions violate US trade obligations (though one wonders whether auto bailouts and other rescue measures around the world will end up being legally challenged).

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One Response to ““Buy American” Sounds Good; Carries An Unbearable Down Side”

  1. Tom Awtry Says:

    Today we wonder where all of our jobs of gone (out sourcing), consider re-reading the aforementioned paragraph and contemplate what the answer could possibly be?

    Now China has decided it needs to shift gears from being an exporter of inexpensive, commercial products to more a higher level of manufactured goods requiring advanced technology.

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