Thinking Citizen Blog — “Buy American!” Biden Out-Trumps Trump!

Thinking Citizen Blog — Tuesday is Economics, Finance, and Business Day

Today’s topic: “Buy American!” Biden Out-Trumps Trump!!!

For Biden, Trump did not go far enough with his “Buy American” policy and our new President has issued an Executive Order that would give that policy more teeth. And, apparently, this is just the beginning. The next, and bigger step will be the buy American rules to be included in the massive infrastructure proposal due out next month. Are these “Buy American” rules a good thing or a bad thing? Classical economics shouts “a very, very bad thing.” There is no economic axiom more basic than don’t make at home what you can buy cheaper from elsewhere. But classical economics is no longer in fashion — on the left or the right. As an historian whose specialty was the 1930s and 1940s, my bias is, nevertheless, in favor of the classical perspective. To, me “Buy American” sounds a lot like “America First” the group that led American opposition to entry into World War II. And don’t forget the role of tariffs in bringing about the depression that set the stage for that war. Experts — please chime in. Correct, elaborate, elucidate.

NO MORE WAIVERS, THE COVID SUPPLY CHAIN

1. “The previous administration did not take it seriously enough. Federal agencies waived the Buy American requirement without much pushback at all,” Mr. Biden said before signing the order. “That is going to change on our watch.” (New York Times, first link below)

2. “A senior Biden administration official said that one of the goals of the Buy American policy is to strengthen the US supply chain after the Covid-19 pandemic revealed weakness in the system for distributing medical supplies and safety equipment. The administration, he said, wants to make sure “we are never put in a position where we are reliant on countries who don’t share our interests to deliver critical materials through supply chain.” (ditto)

GOOD POLITICS, SLOWER GROWTH, RETALIATION

1. “Doubling down on already rigorous ‘Buy American’ rules could drive up the cost of government projects, undermining their potential to create jobs and spur economic growth.” (See second link, WSJ)

2. Will US trading partners retaliate? “US trading partners, who might have anticipated a more cooperative and less aggressive approach from this administration are being put on notice that the new sheriff in town is no less tough than the previous one.” (ditto)

3. “Good politics, awful economics” — Washington Post, third link below. These policies simultaneously “raise the average cost and lower the average quality “of everything the government buys.”

NB: What do polls say? 75% support Buy American. 48% strongly so.

CONTEXTUAL DETAILS

1. “About 97% of federal purchased are made by US firms, but most include foreign-made components.” (second link)

2. US auto makers source steel from Canada — often produced from US scrap metal — engine components from Mexico, and computer chips from Taiwan. Mr. Biden wants to make federal contractors like Ford and Caterpillar buy more domestic components.”

3. “But manufacturers require specific inputs and metal grades that are often only made abroad. Since the feds make up a tiny share of most US companies’ sales, it doesn’t make sense to overhaul supply chains to comply with Made in America rules.”

Biden Signs Executive Order Bolstering ‘Buy American’ Provisions

Opinion | Biden Out-Trumps Trump

Opinion | Biden’s ‘Buy American’ plan is good politics — and awful economics

The text of the order:

Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers | The White House

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