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January 11, 2012

Use State 'Buy American' Rules To Promote Insourcing

-- by Dave Johnson

President Obama is hosting a forum on "insourcing" today. We need to bring jobs back to America, and restore our "industrial commons." One way to help move this along is for states to require "Buy American" in their procurement rules. This is legal and here's the big thing -- it saves states money.

In December Steelworkers President Leo Gerard wrote a strong post, Antidote For Stupidity Of Shipping Tax-Dollar-Financed Jobs Overseas, writing,

Amid prolonged, painfully high unemployment, ABC News Anchor Diane Sawyer for the past year tirelessly advocated a simple solution – buy American-made products. She clearly explained the reasoning: every American dollar spent on an American-made product helps create an American job.

Repeat and amplify: Every dollar spent on an American-made product helps create an American job.

Buy American Legislation

Gerard wrote,

Now there’s an antidote for California’s stupidity. It is legislation called the Invest in American Jobs Act. Championed by U.S. Rep. Nick J. Rahall, (D-W.Va.) and Senators Sherrod Brown, (D-Ohio), Bob Casey, (D-Pa.), and Debbie Stabenow (D-Mich.), it would strengthen existing requirements for buying American products when federal tax dollars pay for construction of highway, bridge, public transit, rail, water systems and aviation infrastructure equipment.


California Example

California decided to "save money" by purchasing Chinese steel to build the new Bay Bridge. Gerard writes about the disaster that brought to California. Never mind all the problems with the quality, the welds, the delays, and the problems overseeing the work that he described... Gerard also gets into the hidden costs to the state and country from the loss of business and the loss of jobs this caused:

Also, Schwarzenegger’s estimate that $400 million would be saved failed to account for the wages American workers lost, the taxes they would have paid, or the multiplier effect on the economy when workers spend their wages in their hometowns. In addition, Schwarzenegger’s estimate failed to account for the downside of hiring Chinese workers with American tax dollars, or in this case, bridge toll receipts. That includes unemployment compensation, Medicare fees and other costs borne by governments for joblessness.

The Investigative Reporting Workshop at the American University School of Communication included a story about the Bay Bridge project by two-time Pulitzer Prize winning investigative reporters Donald L. Bartlett and James B. Steele in a series called What Went Wrong: the Betrayal of the American Dream.

In their report about California sending the bridge work to China, Bartlett and Steel quote Tom Hickman, vice president of Oregon Iron Works in Clackamas, Ore., one of the American companies that tried to form a consortium to perform the Bay Bridge work. Here’s what Hickman said about the jobs California denied American workers and the work California denied his America company:

“These jobs are living-wage jobs and family-wage jobs. They provide health and welfare benefits, 401(k)s and pensions. Our facilities meet all of the environmental requirements, and it just is a very, very difficult thing to compete with the Chinese when you are really competing with the Chinese government (which subsidizes Chinese industry).”

Caltrans argued that no American company had the facilities to perform the work. Hickman said the consortium could have done it. But if government agencies like Caltrans continue to ignore the real costs of shipping work to China, American factories will continue to close. America lost 55,000 manufacturers over the past decade. If that doesn’t stop, at some point, America will forfeit the capacity to perform this kind of work.

Buying steel from another country proved to be a disaster for California every way you look at it.

Buy American Costs LESS

California "saved money" by purchasing Chinese steel to build the new Bay Bridge. In fact, the one government agency that built the bridge may have "saved money." But what about the other costs to government and the rest of us because of the jobs lost from not making that steel here? What about the lost taxes from the unemployed workers and the American steel companies that would have provided the steel -- and their suppliers ? What about the unemployment, food stamps, Medicaid, and all the other "safety net" costs that resulted? What about the loss of business to grocery stores and gas stations near the steel plants, and near all the suppliers that had to lay people off, and the lost sales taxes, etc?

When you add in the cost of losing jobs, factories, companies, industries and communities that result from decisions like this, you start to see that it really doesn't make sense to "save money" by buying things made elsewhere.

BART Buys American

The Bay Area Rapid Transit district learned a lesson from the Chinese steel debacle and last year introduced a Buy American policy. BART Adopts "Buy America" – First in U.S., Agency Says,

The Bay Area Rapid Transit district has become the nation's first transit agency to approve a "Buy America" policy, BART said.

The new Buy America Bid Preference policy, adopted unanimously by the BART board Thursday, "gives preferences to rail car manufacturers who create jobs in the U.S.A.," according to a BART news release Friday.

BART is preparing to award $3 billion in contracts for its new fleet of train cars, which the agency calls the "Fleet of the Future."

Buy American Policies

If we really want to start insourcing American jobs, then we should put our policies where our mouths are. "Buy American" provisions should be a mandate on federal, state and local government purchases, consistent with our trade laws. There is no reason our own government should be undermining American manufacturers. To accomplish this, our bottom line for federal procurement should be:


  • All federal spending should have "buy America" provisions giving American workers and businesses the first shot at procurement contracts.
  • New federal loan guarantees for energy projects should require the utilization of domestic supply chains for construction.
  • Our military equipment, technology and supply purchases should have increased domestic content requirements.
  • Renewable and traditional energy projects should use American materials in construction.

State-level spending should have similar requirements, and this panel will discuss these, and strategies to getting them in place.

Today many state-level procurement laws are very weak. As a result, a lot of tax dollars go to purchase goods made overseas instead of goods made in the USA. The impact of this often includes delays or cost overruns such as what happened with the San Francisco to Oakland California Bay Bridge, as well as the loss of jobs and revenue in the US.

The idea that national and state governments should "Buy American" isn't in any way a partisan issue. If you look at polling you find that Republicans as well as Democrats believe that at least now while we are in economic distress, and trading "partners" are selling to us but not buying from us, our tax dollars should be supporting American companies and jobs.

There is a reason countries like China are working so hard to get this business.

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.

Sign up here for the CAF daily summary.

Posted by Dave Johnson at January 11, 2012 11:31 AM


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