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'Buy American' will lose U.S. more jobs
Mark Perry, professor of economics at the University of Michigan, Flint.
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Tess Vigeland: Today the Obama administration announced 10 new projects designed to goose the $700 billion stimulus package. The White House says more than 600,000 jobs will be saved or created. But the package still has that "Buy American" clause that caused so much controversy. And commentator Mark Perry says because of that clause, when it comes to jobs, it may be Americans who lose.
MARK PERRY: "Buy American" provisions make sense politically, because they create huge political payoffs for elected officials who protect jobs in domestic industries. But, economically, Buy American rules, like all forms of trade protectionism, make no sense at all, since research shows that for every job protected and saved, about two jobs are lost.
Why? Because Buy American provisions and tariffs protect inefficient domestic producers from more efficient foreign rivals. Take steel manufacturers. American firms that buy domestic steel are forced to charge consumers more. So retail sales decline, and thousands of jobs are then lost in countless industries that use steel as raw material.
And as American consumers and companies are forced to pay higher prices for products with domestic steel, they have less money to spend on other purchases. That's billions of dollars in sales lost to other industries, resulting in lower production and even fewer jobs.
Protectionism also provokes retaliation. This weekend, representatives of Canadian cities, upset with the "Buy American" rules, voted for "Buy Canadian" policies that could block American companies from bidding on city contracts. The inevitable result will be a decline in trade with our largest trading partner, and a loss of yet more American jobs.
Consider what happened in 1930 when the U.S. raised tariffs on 20,000 foreign goods despite the protests of more than 1,000 economists. Our trading partners fought back, and U.S. exports and imports fell by 70 percent, causing huge job losses here and around the world. In fact, some would argue that it was protectionism that helped to make The Great Depression so "Great."
Buy American provisions ultimately destroy more American jobs than they save. If we want the U.S. and world economies to recover from the recession as quickly as possible, we should end the "Buy American" rules.
VIGELAND: Mark Perry is a professor of economics at University of Michigan in Flint.
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How To Create More Jobs America - Survey Results
My recent survey produced a variety of ideas, but most of them had these common elements: replace the Internal Revenue Code with a simpler model, encourage businesses to increase employment, and insist upon tort reform everywhere.
It also brought two disturbing realities into focus: We are painfully apathetic (less than 1% of the people I contacted took the time to respond) and, although we have great problem-solving ideas, few to none of our ideas are included in any of the reforms being considered by Congress.
For those who participated, thank you again. I hope that you will appreciate how I've synthesized your thoughts and suggestions into the commentary. I also hope that you will find the time to address some of these issues more aggressively with blogs, networks, and elected officials.
Major changes are being proposed in six inter-related areas. All the dots cannot be connected in one article. Government revenue is cut in this article and the next without a hint about a replacement plan. I'll get to that later, and painlessly for all of us.
So how do we create more jobs?
What Congress, a long line of Presidents, and much of the population have lost sight of is the fact that even the dirtier businesses are job providers. They must be pampered, not pummeled; supervised and reined in but not tethered and broken.
Business income taxes are 100% inflationary; costs associated with employees (yes, even the minimum wage, which some suggest is the cause of our illegal alien problems) result in fewer employees hired. Period. Capitalism is not broken--- its success formula has been compromised.
Repealing the corporate income tax, and prohibiting any and all levies, fees, charges, and taxes on any form of business could instantly produce millions of job openings, lower prices, and create new business opportunities throughout the economy.
Repealing business income taxes would instantly make export products more competitive in world markets, as businesses reduce prices while maintaining profit margins. Greater profits should translate into growth in economic activity.
Finally, the elimination of these taxes would make all businesses run more effectively because there would be no need to spend money (or create losing transactions) just to cut the tax bill.
For the rest of the article, just Google: "How To Create More Jobs America".
Steve Selengut
http://www.kiawahgolfinvestmentseminars.com
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"
When the US says that no more textiles can be imported, Americans will not be able to clothe themselves. With no competiton, the American textile industry would come back with monopolistic pricing. There would be no incentive to improve the products being made because there would be no competition. The same goes for vehicles, refrigerators, televisions, computers, and everything else that we enjoy in this economy. Americans would wind up with two choices - take it or leave it - if they can afford it! "Buy American" programs cause other nations to take retaliatory measures such as increasing the tariffs on our exports to their countries. If we don't buy from outside the US, we won't be able to export either. Have you any idea of the number of jobs that are linked to exporting? I would dare say more than the number of jobs associated with imports!! Free-trade agreements have been pushed to open foreign markets to our exports. For example, look at NAFTA and the auto industry. The US allows vehicles to enter the US at 2.5% duty. Other countries have a much higher rate. Canada's rate for vehicles is 6.5%, and Mexico's duty rate on vehicles is being lowered - from 50% to 40%!! You see, it is easy to import from Canada and Mexico with the 2.5% duty that is collected, but to export vehicles into Canada and Mexico is prohibitive because of the rates of duty charged by those countries. Then NAFTA passed. Now, using the same rules, vehicles that qualify as "originating" can move from one country to the other at 0% duty. Which direction do you think has had the greatest increase in vehicle movement - into the US, or out of the US into Canada and Mexico? We live on a big, round globe that is surrounded by an atmosphere of competition. That competition cannot be removed by protectionist measures! If attempts to do so are successful, industry will grind to a screeching halt and the quality of life we enjoy in the US will deteriorate rapidly!
I agree with Mr. Perry but, not nearly for the same reasons. First let point out a statement he made: "...Because Buy American provisions and tariffs protect inefficient domestic producers from more efficient foreign rivals." Have you seen the products coming out of China and India with 1000s of recalls. Effiency is obviously not a strong point of some of our rivials. But, what people like Gunars Rauda is not a "Buy American" clause but, the smae advantages that our competitiors. This is the kind of bill Ms. Suzan Carroll-Ramsey out of Charleston, SC is proposing and hope everyone reads her comment here and go to her website ( www.naftz.org). It would also help if our government, instead of helping large companies did more to small businesses (there are programs out there to help) and helped small businesses get there innovations off the ground rather than to corporate giants. Protectionism is not the way, if that's the case, don't drive foerign cars, don't buy televisions or HDTV's or laptops cause I'm pretty sure there is a foerign manufactured part in there. Protectionism is just a politicial tool. We need to keep open markets, but level the playing field, this is what makes America thrive.
I disagree. With few exceptions, All countries, and even all individual US states must become isolationists, so that they may focus on what makes them special as a potential econmony, much as food sages are telling us to grow our food and eat what we can produce locally. We have never needed to focus on "States rights" more than in today's economic crises. Governors should be meeting monthly regionally, and each quarter on a national basis. The state of New York and its undue influence on Washington needs an end run strategy by the rest of the nation to correct the damage.
Are there any American jobs left to lose? Most manufacturing jobs have been exported. Service sector jobs have been getting exported for the last decade or so. How come there is such consternation when limiting executive pay is discussed, but there is little such concern when non-executive jobs are exported?
This is a stimulus package from the US for the US. Any other day, before or after this package is already spent on the free market. We are not going to piss away the stimulus to foreign countries. If US Company only buys steel from China, then that's their problem.
The statement(s) about losing "more American jobs" is misunderstood. Yes, in the long run, free trade will lead to more jobs, but this ignores what kind of jobs. Whenever we import more than we export, the result is exporting our standard of living. We got into our current mess via debt (of which, our trade deficit is just one part), so more debt isn't going to solve any problems.
The correct provision for not only stimulus projects but all governmental spending should not be buy American, but buy Democratic. By this I do not mean the Democratic party, but rather Democratic nations including many with very low costs such as Mexico and Liberia. The basic trade policy would be a free trade area of the democracies where any/all democratically elected governments that allow all nations with several basic features of a functioning democratic society (freedom of the press, regular elections with multiple parties, election observers who declare the voting fair, functioning independent judiciary ect) to receive privileged access to the US market.
Why is this a good idea? Democratic countries are on an even playing field. They are likely to not undercut us by cutting corners we can't cut (for an example see China with its 70 hour work weeks, slave like worker conditions and heavily polluting factories with no accountability). They are also likely to be responsive to citizens in a way totalitarian regimes are not. It would spur environmental progress by only dealing with nations where pollution has a meaningful social cost and also would raise the standard of living by encouraging democratic reforms the world over.
When we're undercut by China and other such countries its not on wages (since wages are largely offset by how much it costs to send goods from China to the US especially on large items) but on lax employee safety, workers comp and environmental laws. Only trading at favorable terms would change that and maybe even change nations like China in the process by shifting the incentives.
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