Colin Grabow
Colin Grabow
Some Americans may be surprised to learn (or perhaps not, given trillion-dollar budget deficits) that a federal law requires the government to pay inflated prices for many of the products it buys. Passed in 1933, the Buy American Act (BAA) grants, with some exceptions, a significant price preference to US-produced goods and materials in federal procurements. By tilting the playing field against less expensive imported products, the law means the government must spend more money, and purchase fewer goods, or some combination thereof.
While government has never been a byword for efficiency, such protectionism makes it even less so.
Although the flaws of BAA protectionism have long been recognized, quantifying its damage is no easy task. That, however, hasn’t stopped a group of economists from taking a crack. In a recent paper, four economists attempted to calculate the law’s cost by constructing a dataset of federal purchases and then comparing the share accounted for by foreign firms to private sector consumption of imports.
Their finding: Buy American requirements have created up to 100,000 jobs at a cost of $111,500-$137,700 jobs. With production and nonsupervisory employees in goods-producing jobs averaging about $65,000 annually in wages, that’s hardly a stellar return on investment.
Even worse, this cost per job is likely to increase. While manufactured items have traditionally been required to have at least 50 percent of their materials of US origin to be considered domestic, that’s set to rise to 75 percent by 2029. The economists project this tightening of restrictions will create a further 41,300 jobs at a cost of $154,000 to $237,800 each.
For perspective, these 141,300 current and future positions (maximum) created by BAA protectionism amount to just 1.1 percent of the country’s nearly 13 million manufacturing jobs. Furthermore, such costly job creation comes amid concerns over a national labor shortage (including by manufacturers). » Read More
https://www.cato.org/blog/new-study-finds-buy-american-act-produces-high-costs-few-benefits
