Would you believe that both former President Trump and President Biden agree on something? It is the old bromide of “Buy American”.
Trump’s economic policy was a belief in mercantilism that had not been in vogue since the 17th century. His tariff man schtick ended up increasing our balance of trade deficit with China and paying subsidies to American farmers to make up for lost business.
Biden’s local preference edict is more ingrained in 1930s smokestack policy and the old AFL-CIO affiliation between the Democrats and the supposed working man. Mr. Biden may have won the votes of the union bosses, but he was solidly ignored by the rank and file.
Trying to have a policy about only using American content in federal contracts doesn’t work. Forgetting about our commitments to the World Trade Organization (WTO), narrowing the number of vendors the government can use drives up costs. The fewer companies that can compete the higher the cost.
An argument can be made that by putting Americans to work instead of Chinese or Germans should be a goal of government. I agree that a top priority should be full employment for our citizens. The best way to do that is by widening economic choices not narrowing them.
This idiocy is non-partisan in scope. President Obama proposed the same thing in 2009 and Mark Perry from the University of Michigan claimed that for every job created two would be lost. As soon as the Obama rule that American steel must be used in government projects was announced; Canada imposed its own “Buy Canadian” edict resulting in a loss of American jobs.
Between 2015 and 2019 97% of federal contracts were awarded to American firms. The other 3% were mostly international contracts that were mainly for the military for services at bases overseas. That would seem to indicate that Obama, Trump, and Biden are looking to solve a problem that doesn’t exist.
The United States should be a beacon of free trade and unencumbered markets. Trying to limit economic competition only results in inefficient companies and technologies. No need to innovate if you are guaranteed the business.
There is nothing wrong with competition. Good companies thrive on it. Relying on artificial barriers will cripple our future and we will have fewer jobs as a result. Do some other countries undersell our industries through their government subsidies? The answer is yes. The same economic principles apply to them as to us.
If we can buy a widget for less than it costs America to produce, then we have purchased the widget at an acceptable discount. What have we given in return, a piece of paper that has only intrinsic value? The only way it can be redeemed for something valuable is by the overseas company purchasing a good or a service from America.
Some would argue that if we buy that widget from another country, we will have no widget makers here. That may be a valid point. There could be a couple of actions that Americans could do. One they can open a factory and figure out how to produce the widget cheaper than the competition. If that isn’t possible then that foreign widget maker will continue to pile up lots of IOUs that must be used to buy something from America ultimately.
The best way to have a “Buy American” policy is to let the market implement it not government fiat.