When it comes to legislative PR, it doesn’t get much better than “Buy American.” What could possibly be more patriotic than buying American-made products? During tough economic times, mandating that government contractors use only goods with the Made in the USA label doesn’t just sound like good policy, it seems like plain old common sense. We all want to create American jobs and promote American manufacturing.
So when a dramatic expansion of Buy American regulations was included in the “stimulus” bill, it may have sounded like a great idea on its face. The challenges with this policy only become apparent when we look beyond what sounds good and examine how these provisions actually work in the real world.
While federal agencies are accustomed to and equipped to deal with the substantial bureaucratic red tape that comes along with complying with the Buy American Act, few states and no local governments have any experience with the administrative and legal implications of these complicated regulations. The resulting confusion and uncertainty have caused a number of state, county and municipal projects to grind to a halt. In many cases, project managers have had no choice but to shut down badly needed construction and infrastructure projects while the lawyers work out the mess. Even those projects that have resumed work have faced escalating costs.
Delays, cost increases, endless legal reviews – this is the antithesis of an economic stimulus. What’s more, the unintended consequences of the onerous new regulations are having a compounding effect because they apply to entire projects, even if the stimulus funding only accounts for a tiny fraction of total funding. As the ensuing delays drag on, job creation is held back.
Furthermore, many American companies are finding themselves shut out of the competitive bidding process. If a U.S. producer with facilities here in the U.S., run by American workers, relies on a global supply chain for just one small part of its manufacturing process, the manufacturer can be prevented from competing for government contracts under the expanded regulations. Even those products and companies that technically qualify are often shut out of consideration, simply because fear of litigation has led many local governments, unaccustomed to these confusing new regulations, to exclude them out of an abundance of caution. When “Buy American” punishes American companies, something isn’t working.
The greatest harm to American workers could come down the road, as our trading partners begin to retaliate against us for putting these regulations into place. 95% of the world’s consumers are outside of the U.S. It’s no wonder that American manufacturing depends upon exports to grow and create new jobs in the U.S. If our manufacturers lose access to those export markets, the result will be more lost American jobs.
“Buy American” sounds like a great idea. But the reality is that in practice, the expansion of Buy American has had an anti-stimulus effect on our economy and our job market, has hurt American companies, and threatens to damage our ability to support job creation through exports. Rather than imposing substantial new regulations that stymie job growth and invite a trade war, Congress should be jumpstarting our trade agenda, opening new markets for American producers and paving the way for export-led job creation. That would be true economic stimulus.
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