‘Buy American’ Is Irrational

By David Harsanyi

Wednesday, August 04, 2021

 

‘Buy American” is a comforting, government-prescribed populist policy that many voters embrace in theory but rarely in practice. When left alone, consumers buy the best products at the cheapest prices — say, a Toyota RAV4 (the best-selling car in the United States so far in 2021) or a cellphone (Samsung or an iPhone) — not only saving themselves money but then spending the difference elsewhere and growing the economy. Why would we compel the federal government to act any differently with taxpayer dollars?

 

The Trump administration tightened the domestic requirements necessary for manufactured goods to be considered “Made in the U.S.A.” from 50 to 55 percent (up to 95 percent for iron and steel). That was bad enough. Now, Joe Biden has signed an executive order promising to raise the requirements of “Made in America” from 55 to 75 percent by the end of the decade.

 

The Buy American rule is a tax on the American people, as all federal-government procurements — “products, materials, and services” — must now be made in the U.S. But it’s not only the cost of domestic sourcing that makes these policies — such as the trillion-dollar infrastructure deal now working its way through Congress — even more pricey, it’s the execution. Protectionism is incompatible with modern supply chains. Yes, a car rolling off the line in a southern plant often consists of parts from numerous nations, and the more sophisticated the product, the more difficult it is to determine if something is “manufactured in the U.S.A.,” “produced in the U.S.A.,” or “assembled in the U.S.A.” It’s an expensive bureaucratic proposition to deconstruct each product to be compliant with the law, and ends up as another tax on consumers.

 

Buy American regulations have been enforced with various degrees of vigor over the years — favored businesses have long been granted waivers to opt out, and dispensations have been given if buying American would be, vaguely speaking, “inconsistent with the public interest.” Biden has promised to crack down on enforcement and waivers, as well. That’s a tax. None of this is even to mention the retaliatory policies that are sure to come from trade partners. (I remember when trade wars were bad; like last year.)

 

As Reuters explains it, through Buy American, Biden promises to “harness the purchasing power of the United States government, the world’s biggest single buyer, to increase domestic manufacturing and create markets for new technologies.” The state helps create technology by fostering competition, not by decreeing terms and skewing the markets with debt-backed dollars. The notion that risk-averse bureaucrats or elected officials, driven principally by political considerations, have the knowledge or disposition to know which new technologies deserve to be showered with dollars is a myth. The only thing we can be sure of is how Buy American policies will fuel cronyism and union bailouts.

 

A Biden official also recently claimed that the president “does not accept the defeatist idea that automation, globalization mean that we can’t have good-paying union jobs here in America.” This is a false choice. Automation has been a boon for the American consumer and workers — as has the end of private-sector unions. Despite the endless griping of naysayers, the middle class is bigger and wealthier than ever before. The downside of creative destruction, automation, and international trade makes for strong emotional appeals, political ads, and good copy — and there are certainly genuine issues facing blue-collar workers — but the upside for the vast majority of Americans, who live richer lives due to the savings that trade provides, far outweighs the negatives.

 

And yet, policy debates are weighed down by a political obsession with saving antiquated “manufacturing jobs.” Economic populists such as Marco Rubio and Biden — who, rest assured, would never want their own children working on a factory floor — are running around romanticizing the 1970s as the halcyon days of lunch-pail economic security. The talking point demands that we “level the playing field” with countries such as Mexico and China, where the average worker makes, perhaps, around $8 an hour, with subpar housing, health care, cars, schools, etc. Let’s pray things are never leveled.

 

Populist technocrats like to disparage anyone who doesn’t share their enthusiasm for 19th-century mercantilism as “market fundamentalists” and slaves to “free-market orthodoxy” — as if Americans weren’t already functioning under hundreds of thousands of rules, regulations, and laws dictating commerce. Economic populism has failed for centuries, which is why the technocrats need to rebrand the effort every few years. It’s lazy. But it’s also very expensive.