The Recession

GOP Rep. Dreier Says 'Buy American' Causes One Big 'Mess'

| by Heritage Foundation

By Rep. David Dreier (R-CA)

When it comes to legislative PR, it doesn’t get much better than “Buy
American.” What could possibly be more patriotic than buying American-made
products? During tough economic times, mandating that government contractors use
only goods with the Made in the USA label doesn’t just sound like good policy,
it seems like plain old common sense. We all want to create American jobs and
promote American manufacturing.

So when a dramatic expansion of Buy American regulations was included in the
stimulus” bill, it may have sounded like a great idea on its face. The
challenges with this policy only become apparent when we look beyond what sounds
good and examine how these provisions actually work in the real world.

While federal agencies are accustomed to and equipped to deal with the
substantial bureaucratic red tape that comes along with complying with the Buy
American Act, few states and no local governments have any experience with the
administrative and legal implications of these complicated regulations. The
resulting confusion and uncertainty have caused a number of state, county and
municipal projects to grind to a halt. In many cases, project managers have had
no choice but to shut down badly needed construction and infrastructure projects
while the lawyers work out the mess. Even those projects that have resumed work
have faced escalating costs.

Delays, cost increases, endless legal reviews – this is the antithesis of an
economic stimulus. What’s more, the unintended consequences of the onerous new
regulations are having a compounding effect because they apply to entire
projects, even if the stimulus funding only accounts for a tiny fraction of
total funding. As the ensuing delays drag on, job creation is held back.

Furthermore, many American companies are finding themselves shut out of the
competitive bidding process. If a U.S. producer with facilities here in the
U.S., run by American workers, relies on a global supply chain for just one
small part of its manufacturing process, the manufacturer can be prevented from
competing for government contracts under the expanded regulations. Even those
products and companies that technically qualify are often shut out of
consideration, simply because fear of litigation has led many local governments,
unaccustomed to these confusing new regulations, to exclude them out of an
abundance of caution. When “Buy American” punishes American companies, something
isn’t working.

The greatest harm to American workers could come down the road, as our
trading partners begin to retaliate against us for putting these regulations
into place. 95% of the world’s consumers are outside of the U.S. It’s no wonder
that American manufacturing depends upon exports to grow and create new jobs in
the U.S. If our manufacturers lose access to those export markets, the result
will be more lost American jobs.

“Buy American” sounds like a great idea. But the reality is that in practice,
the expansion of Buy American has had an anti-stimulus effect on our economy and
our job market, has hurt American companies, and threatens to damage our ability
to support job creation through exports. Rather than imposing substantial new
regulations that stymie job growth and invite a trade war, Congress should be
jumpstarting our trade agenda, opening new markets for American producers and
paving the way for export-led job creation. That would be true economic