Government should ‘buy American’

By Leo Hindery Jr.,

Leo Gerard, Donald Riegle Jr.

Federal government purchases make up about 20 percent of the U.S. economy, yet the United States is almost alone among the major developed nations and China in not having a significant “buy domestic” government procurement program.

No single economic stimulus initiative would do more in the short and long term to resuscitate U.S. employment, especially manufacturing employment, and to materially reduce our economy-zapping massive trade deficit than a fair “buy American” program.

However, when even a fairly limited program was put forward in February as part of the economic stimulus plan, you would have thought that protectionist cowboys from the U.S. had attacked global motherhood and apple pie. Representatives of our major trading partners immediately began discussing among themselves how to respond to the United States' alleged “protectionist drive,” with China raging the loudest. And the usually credible Peterson Institute estimated that such an initiative would save or create a meager 9,000 jobs.

But out of a total U.S. labor force of 155 million, the correct answer has to be at least a couple million because we are talking about transitioning so much of the U.S. economy - most of $3 trillion in annual government purchases - to domestic-only origins.

Manufacturing industries represent just 11.5 percent of GDP; the number of people working in manufacturing account for only 9 percent of U.S. jobs; and we have run an average trade deficit in manufactured goods of $500 billion a year over the past five years.

The United States simply cannot prosper in the long term with less than 12 percent of its GDP coming from manufacturing.

It is naive and irresponsible to believe, as some in the administration do, that a service job is just as good as a manufacturing job. In fact:

l Compensation in manufacturing jobs was on average 15 percent greater than in non-manufacturing jobs in 2008 (Bureau of Economic Analysis).

l Service jobs do very little to help the balance of trade and mostly just move incomes around.

l Manufacturing has by far the largest multiplier effect of all job sectors, creating $1.40 of additional economic activity for each $1 of direct spending, 2.5 other jobs on average for each job in the sector (2009 Milken Institute).

For the vast majority of Americans, the gains in lower prices because of trade and cheap imports long ago began to be outweighed by wage losses.

Buy American is simply good, necessary, balanced and reciprocal economic policy.

Hindery Jr. is chairman of the Smart Globalization Initiative at the New America Foundation; Gerard is international president of the United Steelworkers; Riegle Jr., former Michigan senator, is a member of the Smart Globalization Initiative.