NY Times: "Buy American" Is a Terrible Idea
It’s not surprising that Democrats in Congress could not resist adding a “Buy American” provision to the fiscal stimulus bill earlier this year. It might seem sensible (or at least politically useful) to ensure that taxpayer dollars would be used exclusively to support American jobs.
But as states and municipalities start spending stimulus money, the idea is starting to look as counterproductive as it should have looked from the beginning. It is sparking conflict with American allies and, rather than supporting employment at home, the “Buy American” effort could ultimately cost American jobs.
“Buy American” is a terrible idea. One that could make the global recession worse.
~NY Times editorial
MP: Amen.
16 Comments:
Wow. The New York Times is shocked to find that the leftists they champion are morons. What' next, a second look a Krugman's record?
I wonder if the new international status of their ownership has anything to do with it.
Hmm. Perhaps I should rethink my position favoring free trade now that the NY Times has come out in favor of it...
The Chinese stimulus packages have included many schemes to support their exporters. An example is that new Chinese factories are given incentives by the government to buy Chinese made manufacturing equipment. Is this an affront to free trade? Of course it is but the U.S. government is not paying attention or doesn't seem to care.
What the U.S. should be doing is not shutting out Canadian or Mexican producers. We have a very good trade relationship with these countries. If we had a competent, strong federal government they would not want to jeopardize this relationship. The Most Favored Nation concept would be revisited with a motivated U.S. government. We don't have this situation because we don't want to upset our borrowing arrangement for funding huge deficit spending.
We have no obligation to help other countries at a net cost to our own.
Keeping stimulus spending within your nation's borders is a bad idea for 2 reasons: (1) as Krugman said, it anger's trade partners and risks trade wars, (2) the spending is less efficient than if foreign suppliers are included.
Note that (2) is predicated upon being on the receiving end of stimulus efforts from other nations. For stimulus programs, the economy that is suppose to be stimulated is one's own. If everybody is stimulating and nobody is plugging leakage from the national economy, then neither should we.
But few are promoting stimulus programs and much counter cyclical social welfare spending tends to be local. So, looking at stimulus activity only, a "buy American" spec seems rational.
If even the NYT is starting to see the light, maybe there is Hope that people will start to see Obama for what he is -
and not like it.
sethstorm,
We have no obligation to listen to you at a net cost to our own sanity.
A bit OT, but still relevant to the stimulus issue:
Speaking of such locally used stimulus money, it's being used by Georgia to steal jobs from Ohio. See the case of the 60 million that was offered by Georgia to NCR; they kept Strickland in the dark until the deal was done. Now we know they used federal stimulus money to fund that tax abatement; nothing's being done to have that cash removed from Georgia's coffers.
I wonder how Japan, Korea and now China rocketed forward their economies, following none of the advice proffered by Western economists.
Yes, it has a lot to do with very strong cultures (work tethic, respect, low crime etc). But they never practiced free trade or liked much immigration.
Don Boudreaux is a champion on this issue (http://www.cafehayek.com/hayek/2009/03/free-trade-is-common.html).
Like he says, anyone skeptical of free trade must explain why political borders are economically relevant.
Benjamin:
South Korea, Japan, and China have all exprienced growth as they became more free, even if they have never practiced totally free trade or open immigration.
You go from less free to more free, you get growth.
Hope that helps.
Best.
Like he says, anyone skeptical of free trade must explain why political borders are economically relevant.
Quality control, given the lack of quality and the roadblocks against the manufacture of an alternative.
China has a long history of cutting corners in manufacturing; this occurring before, during, and after Mao.
"Like he says, anyone skeptical of free trade must explain why political borders are economically relevant"...
Poor Boudreaux, a very smart man, a man I enjoy reading but I don't think he gets out often enough...
History is replete with examples of why borders are economically relevant...
1:
"Political" borders - let me explain his logic. He asks the question, how is a good from Canada different from a good from America? We're saying that, because it is in a different country, it isn't as preferable to an American good. We're "losing American jobs," so we buy American.
But if that's true, why should we buy goods made from a different state? Isn't that hurting jobs in our own state? Shouldn't we prefer goods made in our own political border?
But if that's true, we should prefer goods made in our own city, because goods made in other cities help jobs there, and hurt goods here.
If that's true, we should prefer goods made by people in our own neighborhood...
Follow the logic: we should only prefer goods made by ourselves.
This, of course, is absolutely wrong.
It is now up to the opponent of free trade to prove that goods from outside America are different from goods from inside America. After all, we're engaging in trade, which is a positive-sum game. People just don't think that way. It's Ricardian Competitive Advantage.
"History is replete with examples of why borders are economically relevant."
But is it replete with examples of why we should buy from only our own country? How about some examples?
Hey Tom Church, you raise good, valid points...
"But is it replete with examples of why we should buy from only our own country?"...
I'm NOT a fan of Smoot-Hawley type thinking...:-)
Regarding examples though, think WWII...
This may be the first time the NYT has printed an opinion that I agree with. What is the world coming to?
Personally, I'm finding it a little humorous that the feds are having such a hard time finding ways to spend $800 billion without sending some of it overseas. I'm just saying, but tax cuts would have been focused purely in the U.S. Sure, some of it would be spent overseas eventually, but that tax savings would have been direct to U.S. companies and individuals. Keynesians sure like to make things complicated.
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