The Right-Wing/Ignorant Talking Point Against Buy America Laws

by: David Sirota

Sat Jan 31, 2009 at 20:18


Commenter Max Berger gives us a pure form of the right-wing/ignorant argument against Buy America laws:

Dude, com'on. This argument is so silly. If the government can get a better value for their money from buying from foreign firms, why would we want them paying more for "American" made products? Proponents of government spending should take special care to insure that government tax dollars are used as efficiently as possible...

Two very easy points that debunk this line of argument:

David Sirota :: The Right-Wing/Ignorant Talking Point Against Buy America Laws
1. I've cited Businessweek's cover story a few times, and I'll cite it again just in case you haven't read it. When our government spends money in the country, it creates an economic ripple effect/multiplier effect in our country, even if the price of a given domestic-made good is higher. Say we pay an astronomical 30% higher for a good made in the United States. Well, that money pays someone a wage, and that wage is pretty likely to get spent in the country. That wage is also taxed, which means the government recoups some of the revenue. Now, let's say we pay 30% less for a good made in China. We may save a little money, but the money we've spent just left the country with no ripple effect whatsoever. As Businessweek shows, if we allow that kind of "leakage" in stimulus spending, we'll likely undermine the stimulus package's effectiveness.

2. I've said it before, and again - I'll say it again: The Buy America laws include specific provisions allowing the President to waive them if the price of the goods in question are more than 25% more expensive in the United States than on the international market. So even if you subscribe to the right-wing/ignorant argument against Buy American laws based on higher prices, there is a safety valve to address your concerns.

The one thing Max Berger has right is that "proponents of government spending should take special care to insure that government tax dollars are used as efficiently as possible." Indeed they should - and a basic, grade-school level understanding of economics shows that the way to do that is to support Buy America laws.

This has been another episode of Economics 101, and Why Right-Wing Economic Arguments Are Ignorant.

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The Right-Wing/Ignorant Talking Point Against Buy America Laws | 77 comments
Ripple Effects (4.00 / 3)
First of all, perhaps a better term for "ripple effect" is "multiplier effect."

Second, there are actually multiplier effects when spending on foreign goods and services. It's just that those multiplier effects are muted, ceteris paribus. But the effects are not zero.

Third, I'm not wild about the hard 25% waiver cap, and the reason is that often a U.S.-based supplier will price at 24.99% above international price, at least if that U.S. supplier is the sole remaining domestic supplier. However, there's an easy solution: a random draw.

Imagine you have, say, 50 numbered balls in a basket, each numbered 1 through 50. The bids come in, and let's suppose that the lowest priced (but still qualifying) U.S. supplier is 5.01% above best international price. The bid authorities now conduct a random draw: if balls 1 through 5 are drawn, the international company gets the bid. If not, the U.S. company gets the bid. So for a bid that's 5.00 to 5.99% above international, the U.S. bidder still has a 7 in 8 chance of winning. Every percent above that results in lower and lower odds of winning the bid. If the best U.S. bidder is 49.99% above best international price, there's a 2% chance the U.S. bidder will still win. At 50% or more, there's a zero percent chance.

So, under this simple "tie breaking" scheme -- which doesn't require the President of the United States to do anything -- U.S. bidders still have ample incentive to bid as low as possible, offering taxpayers value, while there are also still strong "Buy America" forces in place. Simple and effective, yes?

Lastly, "Buy America" qualifications are notorious for having way too many loopholes. What does it mean to be "Made in the U.S.A." now? I think that definition needs to evolve to a simple metric: U.S. employment. Let's suppose it's a $50M bid, for example. How about simply looking at the percentage of that bid paid directly and downstream (via subcontractors) to (legal) workers, in the United States, in total compensation (subject to a per-employee measurement cap of $100K inflation-indexed, so that the measurement isn't skewed toward executive compensation)? Those that have the highest U.S. worker compensation percentages among all bidders are "American." If your company's bid is more than, say, 2 percentage points above the next highest bidder's U.S. compensation metric, then you are the sole "American" bidder -- and go into the lottery as the sole American bidder. Again, pretty simple stuff -- and anybody bidding on government contracts should have a very good idea of the labor required, because they've already calculated that in their costing.

hmm (4.00 / 3)
When our government spends money in the country, it creates an economic ripple effect in our country, even if the price of a given domestic-made good is higher. Say we pay an astronomical 30% higher for a good made in the United States. Well, that money pays someone a wage, and that wage is pretty likely to get spent in the country. That wage is also taxed, which means the government recoups some of the revenue. Now, let's say we pay 30% less for a good made in China. We may save a little money, but the money we've spent just left the country with no ripple effect whatsoever.

This is broadly accurate, probably, but in some ways it doesn't make much sense.  What would make sense is not a broad "buy american" mandate for public investment but something targeted by industry (i.e. an actual industrial policy) so that when and where it makes sense, regardless of cost, to subsidize particular industries, the government will do so (whether for flag manufacturing or for wind power).` Whereas for items that are not industrial priorities for the country, it should figure out what it wants to do (which may or may not include buying from within the u.s.).

I still think "Buy American" is a grossly f@#ked up way to frame this argument, though.  Oh well.

Before Somebody Criticizes You.... (4.00 / 1)
....Saying that somehow government industrial policy is un-American, wrong. The United States Government has lots of industrial policy already in place, in particular for defense-related industries and agribusiness.

That said, I think my "balls in a basket" idea (see above) would be a very good substitute for an actual industrial policy, even at the Pentagon, because it would accomplish the same goal while avoiding a lot of political interference and special interest shenanigans.

[ Parent ]
you should read "state planning in india" :) (4.00 / 1)
it's by partha chatterjee - it's an essay that talks about how a "technocratic" planning policy that's supposed to be outside of politics is impossible - that politics is always a part of things.

So in the end you just have to establish priorities, ring fence things, etc.  But that doesn't take away from t he fact that it would be good to start from an economic analysis that looks at what would happen with support for certain industries and penalities against others.  The reality, as you point out, is that the U.S. has a de facto industrial policy that supports a military economy, a car economy, privatizing ideology, etc. - but it's SO dominated by short term politics and political constraints and social and economic power that you rarely get any commonsense solutions like public financing for health care, a more effective system of managing elections, not skewing the economy so far to one sector [finance or military] that if that sector collapses you're screwed or you don't pay any attention to the rising social costs of a sector (e.g. domestic violence and warfare and diveresion of funding due to military spending).  It seems like a university or museum or even a dam would have less negative externalities for providing employment to people than a military base, just like an auto plant that produces electric cars would than one that produces gas-fueled fars.

it's ironic that this idea- that you can actually think about what direction you want things to go in - are somehow viewed as "socialist" in the u.s. when they're not necessarily - they're just about effective management of capitalism.

[ Parent ]
dr. a (4.00 / 1)
this is a better way of saying what i was trying to get at. thanks.
[ Parent ]
But Sirota doesn't take retaliatory measures into account (4.00 / 1)
Any policy that makes "buy american" a rule is very likely to be met by similar hurdles in other nations. For every buck additionally spent by the governement for US products only, you'll lose a buck in your export markets. Where is this reflected in  the ridiculous businessweek calculation???
[ Parent ]
IT'S A JOBS BILL!!!! (4.00 / 4)
What's the point of a jobs bill if the money is not spent on jobs?

I hope the Republicans continue that talking point... the American people won't like it...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!

but why does it have to go through private industry? (4.00 / 3)
why can't the government just set up public projects?
i know why it can't politically (in the short run, given what the politics are), but i'm just asking why that's not the demand rather than consuming the goods of private suppliers that are in the u.s..

there are many ways to provide jobs more directly.  it would be good to talk about some of them with the understanding that, yeah, you need a jobs programme not just "economic stability" whatever the fuck that means.

[ Parent ]
Exactly! If you want to keep more bucks in the country, invest in infrastructure. (0.00 / 0)
Simple solution for the problem, and doesn't come with the risk of starting a trade war.
[ Parent ]
Well, it does... (0.00 / 0)
...if you mandate where steel comes from...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
[ Parent ]
As I understand it, cheap steel from China is the problem.. (0.00 / 0)
..and its so cheap because its produced under conditions that pollute the environment and are unsafe for the workers involved. Good grounds for implenting a tariff on this product, even under WTO rules. So, why hurt everybody with "buy american" if there's a better alternative that will focus on the real culprit???
[ Parent ]
You make fair points Sirota BUT (4.00 / 2)
do you have to drip with that much condescension towards an OpenLeft commenter.  I have no idea if this guy is a major troll or whatever, and advance apologies if there's more to the story.  But if you were just trying to rip the guy a new one?  Yeesh.  I would have been much more amenable to your point if you had just said it plainly.  After I read that, I immediately looked at the comments to find some critique, since an aggressive/defensive-tone is often the product of concerns about an inadequate argument.

Anyways, just sayin'...

and (0.00 / 0)
I realize its none of my beeswax - you just struck a chord in me.
[ Parent ]
quixote (4.00 / 3)
Def not a troll (I use my actual, human name) and have been a long-time denizen of progressive blogosphere. Sirota might be my least favorite writer, for his ability to group together all who oppose him as Right Wing (I was briefly a union organizer and have work for liberal 527s).  
[ Parent ]
Right on. (4.00 / 2)
The tone at this place has been killing me lately.  I totally respect the continued critique of Obama from the left even when I disagree (and that certainly is not always), but sometimes the front-pagers (not all) use language that doesn't leave room for really any sort of constructive debate.

I've lurked around here and MyDD for ages - Matt and Chris were why I read MyDD and came over here when they first started (no offense to Jerome, but, well...).

But now I've noticed that I come here less and less.  I click the favorite button less often in expectation and more often with trepidation.

C'est.

[ Parent ]
What's killing me are all of the people who (4.00 / 3)
oppose anything that supports this country's industries or workers.  Just look around, you can see examples even here.  

We are the only nation willing to slit our own throats so that the very top can make even more money.  As Warren Buffet said, there is a class war and he's winning.  Despite the obvious poor state of the American people, some just refuse to admit that unregulated free trade, globalization, and banking are not good for America.    

[ Parent ]
What does this have to do with protectionist measures? (0.00 / 0)
European governments don't oppose spending moneys from their rescue packages on US goods, like CAT machinery or Cisco networking stuff. But, of course, they COULD implement rules that explicitly prohibit Euros from their emergency plans to be spend on US products. No problem. Tit for tat.

So, do you really want to start a trade war? Still not enough wars for you?
:-|

[ Parent ]
When the trade deficit says we're even, we're even. (0.00 / 0)
Until then, it is all a lot of hot air.  
[ Parent ]
Did the US complain about trade surplusses after WWII? (0.00 / 0)
Of course, not! The great international succcess of US products, especially in the 50s, 60s and 70s, established the US as the leading economy of the world. And even the trade deficit that has been ignored by s politicians for a long time now hasn't changed that. Of course, the US should implement policies designed to boost exports in order to reach an even balance again. Laws that support research and development and investments in more efficient production would be a good idea. But protectionism would be counter-productive. You don't want US industries to live in a bubble, you want them to become more competitive, right?  
[ Parent ]
That was obviously rectified, and now it (0.00 / 0)
obviously needs to be rectified again.  
[ Parent ]
What if every nation had this kind of policy? (4.00 / 3)
Suppose, following Sirota's logic, France, Germany and China institute "Buy French," "Buy German," and "Buy Chinese" policies.  They realize that they will have to pay higher costs for some of their government purchases, but they want the multiplier effect he describes.  Of course, some of those purchases would have gone to the US.  Now America is not getting the multiplier effect from the French, German and Chinese purchases.  In fact, everyone's costs have gone up.  Every one of the four nations is worse off.

I would have thought that part of the meaning of "left" was that we care not just about people who happen to live on one part of the earth's surface, but about people in general.  And, if I don't draw too much anger by pointing this out, the Chinese need jobs much more than we do.  Yes, even now.  Tens of millions of people have been lifted from utterly abject poverty to more livable conditions by industrialization in China.  Continuing that process should be one of the highest moral priorities for anyone who cares about humanity as a whole.  Especially if compassion for the poor is a value you hold: "poor" in China means a far lower standard of living than "poor" in the USA.

Before you accuse someone else of ignorance, think harder about the consequences of what you are proposing.  The Smoot-Hawley Tariff Act was billed as a way to save American jobs.  But when other countries retaliated, it substantially worsened the Great Depression.  If we undermine world trade by protectionist measures, we risk not only damaging our own prosperity, but also causing literal starvation in China and India.  Instead, let's strengthen trade so all nations can benefit.

They do (4.00 / 9)
Other countries subsidize exports and put all sorts of barriers to imports.  That was the US policy for much of the nineteenth century with the only dissenters being wealthy slave owners who liked cheap imports of European luxuries.  It was only with the huge need for exports (and the huge need for capital) generated by WW I that the whole thing started to turn around.  A hugely high tarriff like Benjamin Harrison's was too much but a pro-manufacture, anti-import policy went over pretty well.

Strengthen fair trade, OK. But the sort of crap deal that ships US jobs overseas so corporations can pay bloated salaries, stock options, and bonuses to CEOs and a few top henchmen and henchwomen is stupid and repulsive.  We sell our future for some cheap, often poorly made imports to be sold at non-union Wal-Marts.  We are so far from Smoot-Hawley, etc.  Get some balance and stop drinking that upper class propaganda kool-aid.

[ Parent ]
They don't. (0.00 / 0)
The few barriers that exist are based on rational arguments. For instance, EU citizen are right to be concerned about long term effects of genetically manipulated foods. We don't want this crap here, and especially we don't want to have it introduced throught the backdoor, as ingredients in other products, without the consumer being aware of this fact. You may think differently, fine, but you can't really denounce our right to decide for ouselves what's save for consumption. And still, the US reatliated for this by putting arbitrary tariffs on goods like Roquefort cheese. however, all in all only a small percentage of the trade between the US and the EU is subject to such tolls.

EU nations are producing at similar conditions as the US, and they spent hundreds of millions for their own econonmic rescue packages. Why should they allow the US export indstry to profit from these moneys, if the US implemnts the "buy american" crap? The public outcry here would almost guarantee retaliatory measures.

So, if the US has a problem with China, solve it with applying pressure on their government, and put tariffs on chinese goods. If you're dead serious, built a law that prohibits companies from outsourcing to communist nations. But be careful about collateral damage with other, fair trade partners. And, after all, have you ever heard of US jobs being outsourced to expensive France or Germany? I never heard that this is considered to be a major probem, there are too few examples where this makes sense.

[ Parent ]
Have you studied at all the trade policies of European countries? (4.00 / 8)
How do you think Germany retains its huge export market? They support their domestic industries and so should we.  
[ Parent ]
we are interconnected (4.00 / 1)
International trade is often posed on this blog as a detriment to working class Americans who otherwise would be able to get ahead. I think this argument is lacking on empirical grounds, but even more so on humanitarian grounds. What we're fundamentally discussing when we talk about trade is interaction between two peoples. Trading with other peoples is a way of connecting with them and creating shared interests. What is good for China and what is good for America are not so different now as they were even 10 years ago.

Furthermore, there are lots of other policies and changes that hypothetically serve as detriments to working class people that get less derision than international trade. For example, advancing technology has replaced far more manufacturing workers than international trade, but you don't see Sirota writing books about how the horrible robots are taking our jobs. Also, some economists argue that immigration lowers wages amongst unskilled workers and limits welfare benefits available to needy families and individuals, but you don't hear Sirota writing books about the lousy immigrants stealing our jobs.

Why Sirota is writing books on the lousy Chinese stealing our jobs is beyond me, but I sincerely hope that such a close minded, retrograde view of economic progress is given little credence in the halls of power.  

[ Parent ]
Wrong. (4.00 / 3)
Fair trade means work, among other benefits. One fair trade provision is, if you sell it here, you build just as much as you sell, in comparable value.

That was the American Canadian Autopact. Only rampaging conservatives would remove such a great trade deal. It meant that if 120,000 cars were sold in Canada, the companies that sold them had to insure that 120,000 cars, vans ,trucks were built in Canada, and vice versa.

There ain't no trade dampening in that. In fact you might remember that US/Canada pushed vehicles across the border in both directions at great speed and volume.

--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

[ Parent ]
Sry, but you misunderstand fair trade policy (0.00 / 0)
Afaik fair trade doesn't mean that every buck spend for a foreign good HAS to be met with a buck this foreign country spends on your goods. Instead, it means that the conditions for producing goods have to be fair. Especially, workers in all countries should be able to maintain a sustainable livelihood. For details, check Wikipedia:
http://en.wikipedia.org/wiki/F...
[ Parent ]
We are interconnected, and its a one way street out of here (0.00 / 0)
to everywhere but here.  If the trade deficit doesn't demonstrate what is wrong with this country, nothing will.  
[ Parent ]
I find it funny that people suddenly get all misty eyed over the world (4.00 / 4)
working class when talking about international trade agreements and monetary policies that serve to create entire generations of sweatshop workers with no ability to form unions or raise their own standards of living just so a multinational corporation can artificially keep profits high and wages low.

The group myopia of how these trade agreements are not lifting people up in the most efficient way, but rather driving global wages down and returning our society to a gilded age of laissez-faire boom-bust capitalism is astounding. Something tells me these people don't have to worry about losing a job that provides for their family nor do they have to worry about working in one of the wondrous new factories in China for 20 cents an hour.

[ Parent ]
and, one might add (4.00 / 1)
They shed nothing but crocodile tears for the working people of their own country.

Crocodile tears like the "retraining" horseshit that was peddled by Clintonian apologists for years and is still being pedaled today by many in the Obama administration.  How can you talk "retraining" when those being let go as in the high-tech industry were overwhelmingly highly trained and experienced?

Are you offering anything other than a treadmill to the bottom?

sTiVo's rule: Just because YOU "wouldn't put it past 'em" doesn't prove that THEY did it.

[ Parent ]
Nonsense. (0.00 / 0)
That's just a prejudice. German companies simply invest much more time and efforts on building up export. Our domestic market isn't anywhere as huge as the US one, so they have to. And even though Germany is successful in exporting goods, this is only one part of financial interactions with other countries.

Of course, there is also trade of service , transfer of walth, and other transactions, and those can be found in the balance of international payments. And this balance provides a picture that's a bit different from the onesided trade balance, that includes only goods. And that's not surprising, since we Germans love to travel to foreign countries and to spend our Euros there. Sadly, the US doesn't profit as much from German holidays as they could, because they simply exclude too many people from entering their nation.

I have an example for that: The 30 year old daughter of a neighbor, of polish origin, working in tourist services, didn't get a tourist visa, and so she can't travel to Florida. Apparently, either the embassy is cncerned about her maybe trying to work illegally in the US, or a visit to Cuba one year ago is the problem. Now she's thinking about spending her money on holidays in China. Well, Yankees, that serves you well! Where is the change in those ridiculous regulations that hamper the Us tourism industry? Before you consider such one sided rules like "buy american", maybe you should first do your homework and bemore inviting for foreigners, willing to spend their hard earned cash in your country!

[ Parent ]
Good point! But, of course, a "don' buy american" rle is more likely (0.00 / 0)
After all, our governments are not very eager to simply follow bad US precendent anymore. Why hurt other countries, and risk a trade war with them, when the US are the problem? Probably a simple "don't buy american" rule would be the likely solution. CAT, Ciscos and other manufacturers are right to fear this collateral damage. They would have to pay a price for US protectionism.
[ Parent ]
Check this out... (0.00 / 0)
Reminds me of Japan (0.00 / 0)
When we lived in Japan for 4 years, they use common frequented areas similarly (however some were privately owned but used for public transactions). For example, because Japan doesn't use checks anymore like we still do, you can't pay your utility bills via mail. You either go to the utility booths and pay cash, or you pay cash at any 7-eleven which are on just about every street corner. Also, most grocery stores and some banks allow you to do the same. You never pay a bill through the mail there, not even bank loans. When you take out a loan, banks only accept direct transfers from your account to theirs as payment, and their companies/govt only use direct deposit for paychecks. Takes the whole 'maybe' out of getting money from one place to another.
[ Parent ]
Thanks (0.00 / 0)
for adding a little flavor to the conversation...I've lived in Europe, but have never been to Asia...
[ Parent ]
CNBCism (4.00 / 3)
I hate how CNBCism "protectionism caused the great depression" has seeped into the progressive movement
It isnt in the progressive movement. (0.00 / 0)


--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky
[ Parent ]
Oh yes it is. (0.00 / 0)
I posted at diary at dailykos, Your stimilus dollars at work - in Europe, and got swarmed by people who objected to it.  Here is that very same Republican talking point.  
[ Parent ]
OK I missed where swarming at the dailychaos is what determines (4.00 / 4)
...progressiveness.

There are plenty of middlemuddles, bluedogs and republicans posting everywhere including right here. If you point to a pro-NAFTA article by a regular at The Nation, or at The World Social Forum or if Bernie Sanders, Matt Stoller, Chris Bowers or millions of others I woiuld agree that there is a high level of misunderstanding even among people who might be defined as progressives.

But really, political and economic debate is COMPLETELY debased in America. Just telling people you were studying Political Economy, or having a political science and economics double major would get you side ways glances as 'comniss' for all of the last 50 years. Or longer.

Second: the level of discussion around ensuring where money should be spent is at a reallly low level. That the Obama administration is this muddled, this late is depressingly unsurprising.

No one says 'no trade.' But lots of people say fair trade. Free Trade(TM) is a coercive set of negotiations by corporations to insure that value and market control passes to a very small group of people, and not to the general populations of either state. See this film:Life and Debt a very very funny accessible, shocking and explanatory film about the world effects of "Free Trade" Fair trade is like the OLD Canada / US Autopact, which stated that selling a car meant you had to build a car. Sell 100,000 cars, you have to build 100,000 cars. Massive trade flowed back and forth across the border for decades and supported the workers of the UAW and the CAW. Does everyone know that before NAFTA, trade with Canada was(and is) larger than the combined trade of Japan and Europe trade with the US?

No one should be fooled into thinking NAFTA, which hurt the U.S. badly, helped the populations of either Canada or Mexico.

Progressives support Fair Trade.

Progressives support the creation of local economic power, which means in even moderately sized states like Finland, an industrial sector. TBW does everyone understand, that massively state invested, social program filled and union rich Finland, not only has the WORLDS HIGHEST productivity rate, which is supposed to be hurt by all this social sanity [pinko-ism, liberalism, socialism] and it has a very comfortable living standard for its entire population.

Here's my favorite idea for keeping jobs in America. Retrofit every single house, apartment building, factory and shop so that it uses 1/20th of the energy it uses now for heating and cooling. Just try and export those jobs. Oh anmd it reduces the cost of living for the hot parts of America, and the cold parts of America, by what?? 20%? And how green is this?

--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

[ Parent ]
Daily chaos - how descriptive. (0.00 / 0)
My idea for a stimulus is to legalize and tax pot, end the drug war, and pass single payer national health care.   They couldn't export these jobs either and not a nickel would have to be spent on materials from overseas.  

Jobs in health care would explode, jobs in the private sector would expand because they would be more competitive without the burden of health care, and the taxes and savings from legalizing pot and ending the drug war would pump money into all levels of government.  

[ Parent ]
thanks for the name check (4.00 / 3)
I'm not bothered by getting called out on this point, because I think it's a useful pivot for discussion. As has been mentioned by several posters up-thread, no one really questions whether the government spending a dollar in the US creates more jobs than a dollar spending abroad all else being equal.

However, each dollar of government spending raises the question of whether the efficiency losses of buying more expensive American products are greater than or equal to the multiplier effects. For example, the saving created by buying less expensive foreign products (let's say staplers) could be used to invest in other kinds of government spending that we would prefer (for example hiring teachers). I think we can all agree that buying foreign staplers in order to be able to afford hiring more teachers is a good idea. As such, we should Buy American only in the cases where the multiplier effect is greater than the loss of efficiency.

As other commenters have noted, this cost benefit analysis is a substitute for straight-up industrial policy. We could just subsidize industries we thought were important if we were concerned about having those industries in the US. I think this is a fine idea, thought I suspect it is more complicated to pull off than it first appears. It is difficult to clearly outline what it takes to qualify as an American made product and there would be lots of lobbying on the part of foreign companies to gain exemptions that give them competitive advantages (look at what happened with southern Senators and the automakers bailout). That said, I think it's worth it to support American manufacturing of clean energy sources through a combination of taxes on carbon and subsidies for US firms. But that doesn't need to come in the stimulus if it can come from elsewhere.

The biggest problem with the "Buy American" argument is that it suggests other nations would be justified in following similarly autarkic agendas and limit their domestic spending to domestic companies. This beggar thy neighbor approach to fiscal policy is short-sighted and lacks a basis in the past 300 years of academic economics (though it fits fine with mercantalists prior to that point). As the article David cited goes on to argue, the US should be encouraging other nations to create similar stimulus plans to encourage demand and investment. In a globally interconnected market, it would benefit everyone if we all pursue fiscal stimulus and allow the money to find efficiencies wherever possible.

I think the Buy American argument is the logical conclusion of David's typical line of attack that seeks to tie all neo-liberal economic arguments (a bailout is necessary, free trade can be useful) to a policy of exploitation by the Right Wing establishment. Of course, in all of these cases there are ample examples of powerful and wealthy elites manipulating policy for their benefit and using neo-liberal arguments as an excuse. That said, I think David misses the mark too often by painting all who oppose him, even ideological allies who oppose him on empirical grounds, as co-opted by the forces of the Right Wing. I find this style of argumentation lacking in clarity of thought and depth of analysis.

Perhaps I'm expecting too much from a blog, but I've learned a lot from reading Open Left and MyDD and I hope for a higher level of discourse.  

also, i should add (4.00 / 2)
I don't consider myself either right wing, nor ignorant.  
[ Parent ]
Let's take your stapler example... (4.00 / 2)
Yes, a project would induce significant savings by purchasing foreign made staplers at lower prices, but think of the potential multiplier effect of an order of 100,000 staplers that must be made domstically.  A new plant may have to be built or an old one expanded (which creates construction jobs), more employees would need to be hired to make the staplers, American steel would need to be procured to produce the staplers, and on an on...

The multiplier effect would not only be greater than the savings, but there would be an increased outlay of capital which supports future production...

Protectionism is what built up the industrial might of the country in the 19th and early 20th century...  Considering how we're pretty much starting from scratch when it comes to manufacturing, it seems like a good way to go...

BTW, good argument... thanks for your comment! :-)  I doubt anyone would call you a right wing troll.

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!

[ Parent ]
multiplier versus savings (4.00 / 2)
Just follow this argument to the next step: once the government order is filled, that company will have to find a way to produce those staplers cheaper than they can be produced elsewhere. If they are subsidized by the government to produce them above market cost, as we're assuming they are in the example, then we can assume they aren't building in any new efficiencies that allow them to be cost competitive once the order is filled. If the firm expanded production to fill the order, they would have to close the new plant down after the order was filled. What is more likely is that a new plant wouldn't even be opened in the first place.  

Not saying the Gov shouldn't subsidize some worthy industries, but maybe not staplers (or whatever else is in the stimulus package). Some spillover is ok if it creates savings that is used more efficiently elsewhere.

[ Parent ]
And take your argument one step further (0.00 / 0)
"once the government order is filled, that company will have to find a way to produce those staplers cheaper than they can be produced elsewhere."

Considering how many engineers this country turns out, and our infrastructure advantages, I'd wager that the only reason that stapler could be produced more cheaply elsewhere would be because of labor costs right? And why are those labor costs so much lower in other places? Does China allow its workers to form unions and collectively bargain for wages? How about the pollution from the stapler plant? Does the cheaper plant have to take into account pollution control or its greenhouse gas emissions (which US plants will have to in the next 5 years)?

Why is it assumed that it is best for Chinese workers to be making products for a country half a world away at below poverty wages? Why not instead force China (through enforcement of labor and environmental standards) to develop its own domestic market (or a better regional market) by allowing its workers to buy their own freaking staplers? There are what, close to 3 billion people in E. and S. Asia? Seems like if the workers were able to have a decent standard of living, they would be able to actually be consumers who could afford their own products. But instead they are artificially kept in a wage-slave state so that their products can still compete with American factories half a world away. Sheesh if nothing else, free traders should be against this sort of process just because of the greenhouse gasses it takes to move all this crap from China over to here.


[ Parent ]
Misses the main question: Why hurt the EU, when your enemy is China? (0.00 / 0)
A "buy american" policy would hurt all imports, including those from nations that have similar conditions for workers as the US. So, where's the logic in hurting such fair trade, when the real problem is the trade balance with China? If you have a problem with those communist slave masters, apply pressure on their governments and implement tariffs on their products. But don't start a trade war with others, because there would be collateral damage in the US, too!
[ Parent ]
When was the last time (0.00 / 0)
sheffield steel was more competitive than gary steel? China is the problem here, these are materials that the EU is not competitive with US.
[ Parent ]
Looks like Corus and Thyssen Krupp are doing fine... (0.00 / 0)
so I don't really see your point.

However, if you agree China is the problem, why the insisntence on the "buy american" rule which would only lead to retaliations from the EU???

[ Parent ]
You're missing the point (0.00 / 0)
It wouldn't lead to retaliations from the EU. EU steel, iron, and textiles (are there any) do not compete with American steel, iron, and textiles. I have not heard of any complaints from the EU about the stimulus bill buy american provisions.

And by the way, even for the buy american provisions we do have, say for US govt cars, I don't see Germany complaining that the government fleet is all Chevy's and Fords. Probably because the entire German gov't fleet is all Mercedes and BMW.

The EU probably also wants to tread carefully lest they completely lose out to outfits like Boeing for multi-billion dollar military contracts.  

[ Parent ]
You don't know what you're talking about (0.00 / 0)
Opposition to stimulus plan grows"
After the House vote last week, a spokesman for Catherine Ashton, the European Union trade commissioner, said that "if a bill is passed which prohibits the sale or purchase of European goods on American territory, that is something we will not stand idly by and ignore."
http://www.iht.com/articles/20...

"EU steel, iron, and textiles (are there any) do not compete with American steel, iron, and textiles."
Where do you get that idea? Sry, but that's total nonsense.

"The EU probably also wants to tread carefully lest they completely lose out to outfits like Boeing for multi-billion dollar military contracts."
Airbus is doing very well, even without participating in that corrupt deal, thank you.

[ Parent ]
Are there economists who come down in favor (4.00 / 2)
of the Buy American plan?  I've not found one.  (Not that my view of economists is very high right now, mind you.)  

Max's point that people in the developing world are better off than they were 15 years ago is an important one.  Of course, they could have been even better off if the trade deals were better vis-a-vis protecting foreign workers from exploitation.  That said, they certainly are better off, and that should be acknowledged when we consider a more protectionist line.  (FWIW, that trade boosts the standards of living of those overseas is one of the principal reasons Krugman is, for the most part, a free-trader.)

I was glad that I read through the comments.  Were it not for that, I would have thought Max was a right-winger given the implicatures generated by the post.

[ Parent ]
Forgive me (4.00 / 1)
but right now I really don't give a rat's ass about the people in the developing world. I'm interested in keeping our own country from collapsing. At some point you have to concentrate on getting your own house in order before you start worrying about the people down the block.
[ Parent ]
You are forgiven, but disagreed with, strongly. (4.00 / 4)
Treating everyone fairly is a solution, and it works. I say this supporting a massive state effort to re-industrialize America, or whatever the post-industrial phrase would be for ensuring that productive economic power resides locally, everywhere.

Let me say while I know what you feel, supporting "American" corporations does not necessarily help Americans at all. Haliburton is a good example, and it moved to the United Arab Emirates just last year.

Supporting fair trade means transnational corporations cant use wage rates artificially lowered by killing union leaders and breaking up unions in China and Mexico, to drive American wages down.

--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

[ Parent ]
People in developing countries are better off (0.00 / 0)
at the expense of people here.  Impoverishing one people for another is zero sum gain.  I'm all for global citizenship, but I'm not trading my home for their mud hut.  

As an American with three grandsons who will need jobs in a few years, let me echo that I don't give a rat's ass either.  You may be a global citizen, but I am not.  I am an American and a Michigander.  I look into the eyes of the many displaced workers in our state every day, and I wish I could give them your job in America since you don't seem to care about it.  

[ Parent ]
Slave workers in China are better off? WalMart customers are suffering? (0.00 / 0)
Sry, but your argument totally ignores the consequences of unfair trade. Many workers in China simply exchanged the hard toil at their rice fields for hard  work at a sweat shop. Dunno if they are so much better off by that change. The capitalists who own the factories profit much more from this kind of trade. And it's US trade giants like WalMart who profit as well. And last but not least many US customers  saved some bucks, too. "Buy american" would create some jobs in the US, sure, but it would put a dire pressure on the budget of many US households, too. Even for US citizen, this wouldn't be a pure win/win situation.
[ Parent ]
Do you have any idea of how many Americans are unemployed? (0.00 / 0)
Do you have any freaking idea how many Americans are unemployable?  Do you have any clue as to the misery they are inflicting on welfare people through the TANF program just because they are poor and at the bottom of the food chain?  How could you be so out of touch with your own country and countrymen?  When you have to reach to slave labor for an argument that ought to say it all.  
[ Parent ]
Last time I looked, less than Germans. (0.00 / 0)
And actually. I'm not really overwhelmed by work right now, so you really don't have to teach me on the consequences of unemployment. At least we still have a safety net to prevent the worst. No slave labor here, even though outsourcing to China is a problem here, too. But nobody proposes that "buy German" would be the right solution for this.
[ Parent ]
What safety net? (0.00 / 0)
They have no health insurance.  They've been out of work and unemployment benefits for months.  Whatever UI extensions there are just happened.  They are losing their homes and filing for bankruptcy in record numbers not seen since the depression.  You tell me.  Would you rather be broke and unemployed in the US or in Germany?  
[ Parent ]
Exactly. Time for a change! (0.00 / 0)
The situation of the unemployed has to be improved in the US. The regular discussions in congress about extending the benefits for another six months is embarassing for the depressed people who suffer from losing their job. It would be great if Obama would implement a reform that preseves the dignity of the unemployed, and supports them actively in finding a new job.

But excuse me pls, what has "buy american" to do with this? Why do you want to hurt German workers?  

[ Parent ]
Uh, dkmich, did you notice I'm German? (4.00 / 1)
Do we have some kind of misunderstanding here?
:-/
[ Parent ]
Not fair quoting only part of my comment (4.00 / 2)
Mr. Sirota, I find it troubling you only posted the first part of my comment. The second two parts were as relevant as the first and I don't think you did a fair job of demonstrating my opinion.
You have the right to respond on the frontpage! (0.00 / 0)
This is OpenLeft policy. Sirota quoted your comment, singled you out in a negative way, so you have the rigt to prepare a response that will be posted as a frontpage story. Great way to correct some of the omissions of David's story, and set the rcord straight! Here's hoping you'll use that option.
[ Parent ]
I'd love to have a chance to respond (0.00 / 0)
I doubt I will be given a chance.
[ Parent ]
Prepare your response, and mail it to Chris or Paul. (0.00 / 0)
I'm sure they will publish it. After all, you obviously have some good points that would advance the discussion here.
[ Parent ]
Uh, of course, make it clear that this is a response... (0.00 / 0)
to Sirota citing you, so that the connection is established.
[ Parent ]
Are staplers even made in the US anymore? (4.00 / 1)
The Buy Only - insert name of local planet, continent, country, state, city, or neighborhood - Goods is silly in today's multnational corporate world.

Its protectionism. It has no intelligence to be buying things that have the most leverage one way or another.

Buying low tech, low margin products won't make much difference. Locally designing, manufacturing, distributing and buying materials and finished goods that are going to make our society dramtically more energy and resource effecient with less waste should be the no brainer.

Oh, and Max is pretty much the total opposite of a  Right Wingnut No Brainer....

Yes but (0.00 / 0)
"Locally designing, manufacturing, distributing and buying materials and finished goods that are going to make our society dramtically more energy and resource effecient with less waste should be the no brainer. "

You think that's what multinational corporations are going to want? They're going to follow the exact same model. Design and build solar panels for 10% of the price as in the US and ship them over here for us to use. Remember that all our high end electronics that were theoretically supposed to be the basis of our manufacturing sector once all those icky heavy industries moved over to China are also...built in China.

Until China allows its workers to bargain collectively for wages, we should not be subsidizing their model of economic exploitation.  

[ Parent ]
I'm sitting here stunned (4.00 / 2)
I'm sitting here hardly believing I'm seeing post after post argue AGAINST supporting American products, American JOBS, and what's left of our crippled American manufacturing base.

I'm, sorry, this is yet another topic where I part most strenuously with the political "left" and am left shaking my head in disbelief. If protectionism means keeping money in the US and supporting American workers and their products, then by God I'm a proud protectionist.

If arguing against Americans and American jobs is (0.00 / 0)
politically left, then I'm in the wrong place, too.  But I don't believe the people who are so casual about other Americans losing their jobs represent the political left at all.    
[ Parent ]
This article has convinced me to leave. (3.00 / 4)
I'm done with OpenLeft. Good Riddance.
Once again a knowledgeable commenter leaves because of Sirota (0.00 / 0)
Paul, Chris, how long are you going to tolerate David insulting commenters? He's a serial offender, and there isn't any improvement at all. What about "be excellent to each other"? Does this only apply to commneters???
[ Parent ]
Condescension (4.00 / 1)
"Indeed they should - and a basic, grade-school level understanding of economics shows that the way to do that is to support Buy America laws. This has been another episode of Economics 101, and Why Right-Wing Economic Arguments Are Ignorant."

David, this sounds really pathetic, and of course it's not true that a "grade school level understanding of economics" leads inevitably to your conclusion. (Where did you go to grade school that you studied economics, by the way?) By making such wild claims you come off as condescending, insecure, and arrogant, and lacking the chops to defend your actual argument.  In other words, many people reading those sentences were likely as irritated by them as you were by reading my previous one.

Please have some respect for your commenters.

job value (4.00 / 3)
The comments seem to equate foreign products equally with domestic ones. This is not the truth. Foreign products can compete only by labor exploitation. They do not rely on better aquision, better management, better access to market, less profit margin, better advertizing, more efficent production methods,etc.(they do have less enviromental overhead). The "free trade" of recent decades has greatly contributed to the decline of the majority in the U.S. As our purchasing power continues to decline, we will be less and less able to afford ANY goods regardless of where they are produced. The sweat shop factory nations can not sell much of their production at home due to low wages resulting in low purchasing power there. This is all the predictced result of the (now discredited} supply side scam of the last three decades. The answer is DEMAND side policies that raise the lifestyle of the producers both here and abroad. This includes "buy american" and pro union, as well as FAIR trade policies, and all other methods of using government to support people against corporate tyranny instead of against people as is the case now.  

Government by organized money is just as dangerous as government by organized mob..... FDR
Sry, but that's nonsense. (0.00 / 0)
"Foreign products can compete only by labor exploitation."
Did it ever cross your minhd that many foreign products may actually be superior to US ones? That production may be more efficient in other countries? I mean, to imply that EU nations can only compete with their products on the US markets by exploiting workers is really ridiculous, right?

Sry, but imhothe problem here seems to be that too many commenters only focus on the Chinese competition, without taking into account that "buy american" would hurt trade with all other nations, too. If there is a problem with the Chinese exploiting workers (it sure is!), then there are many much better ways of dealing with this. But "Buy american" is one of the worst solutions, that would come with much collateral damage.  

[ Parent ]
We need a troll rating for articles, too! (4.00 / 1)
Once again Sirota insults a commenter who simply made a determined argument against his points. If a comment here would slime a fellow user as a right wing ignorant, without offering any facts supporting this insulting view, it would be rightly viewed as trollish, and the user vote would make it hidden.

If David isn't able to tone down, as evident by him being a serial offender, we need a rating feature for frontpage stories to discipline him. This has reached a point where it isn't tolerable anymore. I propose the major OpenLeft bloggers should have a serious discussion about this!

Sirota's nothing but a demagogue (4.00 / 1)
Sirota seeks to be a leader of the less-well-informed "progressives" who are looking for easy answers to complex problems. He calls it progressive populism, but it's really just aggressive ignorance. Anytime someone whose educational and work background is in poly sci/journalism opines on economics, the red flag should go up. When he declares unequivocally "a basic, grade-school level understanding of economics shows that the way to [provide efficient government spending] is to support Buy America laws" without citing any real economist, then your BS detector should be going off.

To make his mark, Sirota apparently thinks he needs to attack anyone who disagrees and label them a heretic, a sellout, a crypto-conservative. (Another indication of the weakness of his arguments, by the way.) Why the people who run this site think it's a good idea to give him a forum, I have no idea. I fear it's because they actually believe his nonsense.

[ Parent ]
The Right-Wing/Ignorant Talking Point Against Buy America Laws | 77 comments
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