By Kevin D. Williamson
Tuesday, January 26, 2021
President Joe Biden has a brilliant plan
for government spending: doing less
with more.
As anybody who has lived through the
newspaper bloodbaths of the past few decades can tell you, the usual advice
from the corporate consultantweasels is that we do more with less. But the
Biden administration intends to set that maxim on its head, building directly
upon some of the worst economic thinking of the previous administration.
The Biden administration is going to be a
lot more like the Trump administration than you may have been expecting,
especially when it comes to “America First” business policies, which are
corporate welfare in patriotic drag. To wit: Biden’s executive order expanding
on the Trump administration’s buy-American procurement rules.
The rules developed under the Trump
administration have not exactly been sitting there for years, growing outdated
— the rules were finalized on the day before Donald Trump left office. The new
rules developed under the Trump administration raised the “domestic content”
requirement for most products from 50 percent to 55 percent — and raised them
to 95 percent for goods made mainly of steel or iron; ended an exception for
commercially available off-the-shelf iron or steel products while continuing an
exception for fasteners such as nails and screws; and, most significant, they
jacked up the “price preferences” for domestic goods.
The last of these, the “price
preferences,” are what really matter most. Washington doesn’t just order
federal agencies to source products from U.S.-based providers — instead, there
is a complex system of procurement rules that favor domestic producers unless
the imports are a great deal less expensive. Price preferences specify how much
more government will pay for the same goods provided by a U.S.-based company
when they could be had at a lower price from a non-U.S. firm. Under the
Trump-era rules, which are now the Biden rules, the U.S. government will pay as
much as 20 percent more for goods procured from large firms and as much as 30
percent more for goods procured from small businesses.
That’s how you jack up procurement
expenses in one easy step. You don’t just go local — you pay more. Sometimes,
you pay a lot more.
Biden is, to no great surprise, receiving
some encouragement in this from members of Congress whose districts are home to
firms that would benefit from being able to charge higher prices. For example,
Senator Sherrod Brown (D., Procter & Gamble) and Representative Kathy
Manning (D., Honeywell) are pushing the Biden administration to ramp up
personal protective equipment (PPE) purchases, contracting for big purchases
directly from favored domestic manufacturers. This is the denouement of one of
the year’s most predictable business stories: When the coronavirus emergency
first hit, the economy was shut down and PPE purchases skyrocketed — you
couldn’t get your hands on an N95 facemask there for a while. And, so,
everybody and his uncle got into the PPE business, and, now that the
panic-buying has subsided, there is a glut in the market. “Regrettably, we have
too many manufacturers in our states and across the nation that have capacity
but no orders,” the Democrats said in a letter to Biden.
If only there were some ingenious
mechanism by which supply and demand could be coordinated in a decentralized
and non-politicized fashion!
Biden will now make the Trump arrangement
a little bit worse by making the rules murkier and the bureaucracy more
complex. As the Wall Street Journal
reports, Biden’s executive order “directs an increase in both the threshold for
local contents and the price preferences for domestic goods . . . but doesn’t
state specific levels.” It creates a new High Grand Mufti of Corporate Welfare,
who shall rejoice in the title of “Director of Made-in-America at the Office of
Management and Budget.” There will be reviews! And evaluations! And a new website!
There are appropriate times for domestic
preferences — you probably don’t want the Chicomms building your
nuclear-missile-guidance systems. The interaction of security with procurement
is one of the reasons why multinational free-trade agreements are often so long
— exceptions have to be carefully specified. But that kind of thinking gets
distorted very easily, especially if there’s a little bit of money floating
around: Witness Senator Marco Rubio (R., Florida Crystals) and his silly
insistence that subsidies for gazillionaire sugar barons are an urgent matter
of national security.
How, exactly, is this in the national
interest?
It is in the interest of those politically
connected firms that make more money thanks to protectionist procurement rules,
but that is offset by the fact that everybody else has to pay more — and the
people who are doing the paying are
Americans, too. And if we are paying more for nuts and bolts, that means less
money left over for other spending — and other investments. And why bother
trying to make your factory more efficient when you have a federally guaranteed
price cushion not enjoyed by your competition?
You don’t actually make the country as a
whole better off by overcharging Peter to overpay Paul. What you do is make
everybody worse off by inhibiting the normal functioning of markets, in which
the division of labor and comparative advantage work together to make the world
more prosperous by making the most of the necessarily limited resources we
have.
This isn’t a program to reinforce the
interests of American businesses and workers. It is a program to reinforce the
interests of American politicians, Biden first.
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