As members of Congress and the Obama Administration hammer out the details of the economic stimulus package, a debate has erupted about “Buy American” provisions in the legislation. Whatever the outcome, the concept, “Buy American” is a muddled anachronism in today’s world. The very term does injustice to ensuring that working Americans get a fair share of the economic pie in the coming years.
Back in the Old Days
The notion of “Buy American” dates back many years to an era when American cars were made in America, the U.S. steel industry was robust and consumers could buy clothing, televisions and household goods without giving a second thought about where the products were made. China was kept in the dining room, Japanese made products were the laughing stock of consumers and most Americans couldn’t find many Southeast Asian countries on a map. But the very definition of the term was and remains a moving target. The world as we knew it then has disappeared, replaced with one where most consumer products are made in those very places we laughed about or vaguely knew existed.
When Good Is Bad and All is Unclear
What does “Buy American” mean exactly? Consider the following possible definitions:
- Buy American branded products (Ford cars, General Electric light bulbs, Levis jeans).
- Buy from or do business with American companies (Bank of America, Stop-And-Shop, Verizon).
- Buy goods made by American workers.
How we choose to define “Buy American” gives us very different answers with each definition posing a separate set of problems.
Backers of the Buy American provision in the current Congressional legislation make a simple argument. “If we’re going to try to create American jobs, we need to direct stimulus money to American firms,” says Scott Paul, executive director of the Alliance for American Manufacturing.
Unfortunately, Mr. Paul mixes his terms a bit and herein lies the problem. It’s worth noting that the House version of the bill would require that:
None of the funds appropriated or otherwise made available . . . may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron and steel used in the project is produced in the United States.
The provision could be waived if . . . it would be inconsistent with the public interest; [or] iron and steel are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or inclusion of iron and steel produced in the United States will increase the cost of the overall project by more than 25 percent.
The provision would apply to airports, bridges, canals, dams, dikes, pipelines, railroads, multiline mass transit systems, roads, tunnels, harbors, and piers.
The Senate bill would go further, extending the domestic content requirement to all manufactured goods used in infrastructure projects. Neither bill makes any mention of using products from American companies. However, this is the way many observers tend to define the term.
Let’s take a moment and look at automobiles. Today, we can hardly argue that American automobiles manufactured by Ford, GM and Chrysler are made 100% in America. “In model year 2006, vehicles built by foreign-owned car makers at assembly plants located in the U.S. and Canada for sale in the U.S. had 66.2% domestic content. This level is only slightly below the 79.4% recorded by the Detroit Three. Furthermore, the gap in the level of domestic content between foreign-owned carmakers and the Detroit Three has narrowed substantially since 1997, when foreign-owned car makers had only 52.5% domestic content compared with 85.7% for the Detroit Three.”
However, even the proponents of “Buy American” make the mistake of using the “Buy a Chevy” argument in supporting their position.
So here is my question: Does the notion of “Buy American” make any sense in the 21st century global economy?
Buy American: An 8 Track Tape in an iPod World
The first question in my mind is to understand what “Buy American” language really means. As it applies to 
the purchasing of iron and steel, the legislative definition noted above is adequate. However, it becomes muddled when applied to other manufactured goods.
The argument that we should support American companies with this legislation fails. By and large, the companies we speak of here are publicly traded global businesses. They gave up on the American worker for the most part decades ago. Listening to their trade association flaks on this issue, “Buy American” is ridiculous. Outside of steel, most U.S. manufacturers would be sidelined if a full-blown domestic content provision were to be enacted.
Moreover, U.S. companies are no longer U.S. owned in the strictest sense. A quick look at the institutional ownership in most public companies reveals a mishmash of foreign and domestic shareholders.
Create Jobs Not Rhetoric
This then takes us to the real question, which is whether or not a provision of the economic stimulus legislation should be included that protects American steelworkers. The banking industry has certainly received protection from Congress. There is a certain measure of fairness in supporting the domestic content provision.
Protecting American steelworkers to the degree that Congress has protected American executives is the right thing to do. However, framing the debate in this antiquated patriotic rhetoric is counterproductive. The time has come for those who support the notion that American workers deserve something other than the shaft that they have received for the last 25 years to come up with a better way to bring some balance to our economic system. This will require more than a policy slogan susceptable to an intellectual attack. Retooling our thinking about the importance of all Americans, not just those with the means to wield power in Washington, is the key.
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