Biden’s ‘Buy American’ Program Is a Delusion

By Augustin Forzani

Friday, February 17, 2023

 

There is no need for a “Buy American” program, much less an infrastructure plan.

 

In his State of the Union address, President Biden doubled down on his strategy for his ongoing infrastructure plan. He will require U.S.-made inputs in all public works. Among the arguments in favor of the policy, two in particular state that this strategy will create jobs and also protect America against foreign goods that pose a national threat.

 

These two arguments are wrong. The Buy American program will neither create jobs nor enhance national security. It is possible to improve the U.S. economy without an infrastructure plan, that is, without having to invest billions of taxpayer dollars.

 

The French economist Frederic Bastiat explained why public works do not create jobs:

 

The state opens a road, constructs a palace, repairs a street, or digs a canal; in doing this it provides work for certain workmen, that is what is seen, but it deprives certain other workmen of employment, and that is what is not seen.

 

The state needs to collect taxes to build infrastructure. But the dollars collected could be used for something else if there was no infrastructure plan. For example, people could buy other goods and services, providing employment for other people. That is why public infrastructure only shifts jobs from one task to another. It does not create them out of thin air.

 

The second argument in favor of the Buy American program has to do with national security. In purchasing foreign goods, the U.S. allegedly “depends” on other countries. What would happen, the argument implies, if those countries declared war against America? Here again, Bastiat illuminates how misleading this argument is. He remarks that “commercial” dependence is mutual. The U.S. depends on foreigners as much as foreigners depend on the U.S.

 

Isolating the U.S. with the Buy American program because of an expectation of war actually increases the chances of war. Counterintuitively, cutting commercial ties makes it easier for another country to declare war, since now it would have less to lose. If two countries have strong commercial relations, they would each lose much money by starting a war, as trade between them would end.

 

It’s also the case that trade with American friends and allies helps strengthen those ties, should conflict arise in the future. It’s one thing to preclude trade with sworn enemies, such as Iran. It’s another to preclude trade with Canada, Mexico, South Korea, Japan, the U.K., Germany, and India. By excluding every other country on earth, “Buy American” rules even make relations with friendly countries more difficult than they need to be.

 

Finally, it could be true that the U.S. needs an overhaul of its roads, railroads, airports, and so on. That could make the U.S. economy more efficient and reduce costs. However, government-funded infrastructure is not the only way to accomplish this goal. Bastiat’s suggestion? Reduce tariffs.

 

Inefficient ports and clogged highways do make it more expensive to transport goods from abroad. But every day, tariffs increase those same costs, purely through government action. In other words, public infrastructure spending will attempt to reduce part of the costs of goods and services that are already higher than they should be due to the government’s tariffs. Cutting the tariffs would reduce costs right away, with no need for years-long government construction projects.

 

It is a delusion to believe that the Buy American program is needed to create jobs, increase national security, and make the U.S. economy more efficient. Jobs will not be created, only diverted. Cutting commercial ties will increase the chances of war and introduce obstacles to American alliances. Instead, we should encourage lowering or eliminating tariffs which would improve the U.S. economy and avoid wasting billions of taxpayer dollars. Politicians are deceiving people with the usefulness of the Buy American program. As the great Bastiat wrote, “To be fooled by others is already not very pleasant, but to use the huge system of representation in order to fool yourself is to fool yourself twice.”