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Pro: Expanding buy American’ rule in stimulus bill is our only real hope for economic recovery

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Alan Tonelson
March 21, 2009
EDITOR’S NOTE: The writer is addressing the question, Should Congress toughen the buy American’ provisions in the stimulus bill?

The economy’s continued free fall despite literally trillions of dollars of bailouts, subsidies and tax breaks provided by the federal government is sending an unmistakable message: Greatly broadening the “buy American” requirement of the stimulus bill isn’t only desirable; it’s the nation’s only real hope for economic recovery.


Without at least imposing these requirements on all U.S. government procurement at the state and local as well as federal levels, President Obama’s stimulus efforts will fail for the same reasons that President Bush’s crisis responses failed—an almost exclusive focus on maintaining and reviving the nation’s levels of lending and spending.


Neither president seems aware that lending and spending can translate into genuine domestic growth, greater domestic employment, and a return to true national economic health only if they stimulate the production of goods and the provision of services by private business inside the United States.


Spending and lending that finance goods and services purchases from abroad only wind up stimulating growth, employment and economic health abroad. And when government does the spending, as with the stimulus’ infrastructure provisions, American taxpayers subsidize the resulting transfer of wealth and other economic benefits.


Moreover, unless enough private sector activity is sparked, the jobs created by government program are merely stopgaps. The consumption encouraged is illusory, too. It’s sustainable only as long as foreign lenders permit Washington to keep borrowing—the last thing a debt-strapped nation needs.


If American business supplied the vast majority of the goods and services it consumes, simple pump-priming could be the nation’s salvation without Buy-American programs.


In fact, today’s crisis wouldn’t have broken out to begin with. This production would have created many more durable opportunities for everyday Americans to earn much higher incomes, and freed them of the need to rely so heavily on debt to maintain first world lifestyles.


But the American economy nowadays is shot through with imports. In theory, major economic growth and durable private sector income-earning opportunities could result by greatly increasing U.S. exports relative to these imports. But the gap has been so big for so long—$677 billion last year alone, or $100 billion less than the stimulus bill—that the export boost America needs in time to save the day is completely unrealistic. Moreover, global growth is slowing rapidly, too, and most major U.S. trade partners are closing their economies even tighter. So export markets are shutting down.


Therefore, America’s only possible source of significant growth is the share of its own enormous market that has been captured by imports. Adjusted for inflation, imports made up nearly 17 percent of total U.S. consumption in 2008, up from 13.2 percent ten years ago. And these figures include services, which not only comprise some 75 percent of the private sector economy, but which still face relatively little foreign competition.


The import share has been much higher and rising much faster for the manufacturing industries that historically have created the best income-earning opportunities for the typical American worker, with the markets for even many advanced manufacturers featuring 50 to 80 percent import penetration.


In fact, if the share of U.S. manufacturing markets controlled by imports in 2006 (the last year for which government data permits these calculations) had merely stayed at its 1997 levels, and overall American growth rates remained the same, U.S. industrial output would have been $584 billion greater that year. And the economy would have been nearly 4.5 percent larger.


Today, the U.S. economy desperately needs this growth and the income-earning opportunities it creates. That’s why Buying-American—substituting domestic for imported goods, and rebuilding U.S. capabilities where they have been off-shored or decimated by predatory foreign trade practices—must become not only government’s strategy. It must become the rest of the economy’s strategy, as well.


Alan Tonelson is a research fellow at the U.S. Business and Industry Council Educational Foundation in Washington and the author of “The Race to the Bottom.” Readers may write to him at USBIC, 512 C St. NE, Washington, D.C. 20002.

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