posted
'Buy American' - Sparks Fly by David Goldman Friday, January 30, 2009 provided by
A stimulus provision that bans the purchase of foreign construction materials for public works projects gets jeers from economists and European trade interests.
A debate is brewing at home and abroad over an economic stimulus measure that would require materials used in the program's infrastructure projects to be purchased from American companies.
In the $819 billion House bill passed Wednesday, the so-called "Buy American" provision would, with some notable exceptions, ensure that only U.S.-produced iron and steel be used for construction. It expands on a 76-year-old federal law. The Senate, which is likely to take up stimulus next week, would go even further, effectively requiring that any products and equipment be American-made.
"The Buy American provision will help stimulate our own economy," Sen. Byron Dorgan, D-N.D., who wrote the provision, told CNNMoney. "When taxpayer dollars are used, we should urge that money to support the things produced here at home."
The plan is already drawing opposition. The European Commission on Thursday said it might challenge such a move if it were signed into law. The proposal also appears to fly in the face of a G-20 agreement reached in November, when world leaders decided not to raise new trade barriers in 2009.
Furthermore, many economists argue that a Buy American provision could actually backfire, slowing economic growth instead of helping expand the American job market.
"It's not a good time to initiate protectionist measures in any shape or form," said Kurt Karl, head of economic research at Swiss Re. "It hurts growth, because if you force one side to go with domestic production only, then that precludes them from getting less expensive materials from overseas."
The economy is already reeling, and will soon enter the 15th month of a recession. Economists expect a Commerce Department report to show the U.S. economy shrank by 5.4% in the fourth quarter, the biggest decline in 26 years. But some think holding back trade could exacerbate the problem.
A major drop in trade could cause a 1% drop in gross domestic product, according to Karl.
"We believe it invites reciprocal restrictions on U.S. exports," said Peter O'Toole, a spokesman for General Electric, which gets half its of revenue from abroad. "When you take competition out, it drives prices up. We're in a globalized world - we can't turn back the clock."
Previous efforts have misfired. For instance, from 2001 to 2003, the Bush administration imposed several so-called "safeguard" tariffs on certain steel products from various foreign countries in an attempt to prevent U.S. steel mills from closing.
Foreign steel makers found other markets during that span, namely China and Middle Eastern countries. When U.S. demand for steel heated up again in 2004, steel prices skyrocketed by 48% in a year, according to the Labor Department.
Also, Buy American would set a bad precedent, say many experts, arguing that protectionist ideology of the pre-Great Depression era exacerbated the economic calamity of the 1930s.
"In the Depression, we had anti-trade policies that aggravated the global recession," said Karl. "It's not a good idea from an economic or stability view, but politically, many congressmen still see it as appealing."
Safeguards to Protect Taxpayers, Growth
A host of politicians believe the Buy American provisions have appropriate safeguards to ensure stimulus spending is not wasted on expensive materials and the U.S. economy does not suffer long-term consequences.
For instance, the bills both stipulate that if construction costs would rise by 25% or more due to the purchase of American-made materials, contractors could receive a waiver to purchase foreign materials. The bills also allow for a waiver if buying American is not in the best interest of the economy or taxpayers
"There is a broad public interest waiver, that ensures that if something is impractical or impossible, the administration can waive it easily," said Dorgan. "But to the extent we can, if we're going to use steel and other construction products, we want to buy ones that are manufactured here."
Rep. Peter Visclosky, D-Ind., who introduced the House's Buy American amendment that won unanimous support, did not believe that the mistakes of the Great Depression applied to this case.
"It's not protectionist - there are no tariffs or barriers being created," said a Visclosky spokesman. "It's about the U.S. steel industry running at or below 45% capacity, and the objective is creating jobs."
Dorgan also rejected the notion that the stipulation might cause an international showdown, arguing that the World Trade Organization does not regulate federal grant programs like those included in the stimulus bill, should it pass.
In the end, Dorgan said his support for the bill comes down to fulfilling President Obama's promise of creating up to 4 million American jobs.
"We face an emergency situation here - the country needs to put people back to work," Dorgan added. "If I'm going to be told that buying American goods hurts the economy, then I'm sorry, we have a disagreement on that."
Copyrighted, CNNMoney. All Rights Reserved
-------------------- Wise men learn more from fools than fools from the wise. Posts: 3827 | From: beautiful California | Registered: Sep 2008
| IP: Logged |
quote:It's not protectionist - there are no tariffs or barriers being created," said a Visclosky spokesman. "It's about the U.S. steel industry running at or below 45% capacity, and the objective is creating jobs
No, there are no barriers being created - other than the barrier that prohibits the purchase of foreign steel for these infrastructure projects!
Could we do more to promote a depression? We might as well Xerox the great depression playbook and follow it to the letter. We certainly seem to be duplicating all the mistakes of the past.
Posts: 1577 | From: Ohio | Registered: Oct 2007
| IP: Logged |
posted
Could we do more to promote a depression? We might as well Xerox the great depression playbook and follow it to the letter. We certainly seem to be duplicating all the mistakes of the past.
who told you that? limbugger or Hannity?
we have already departed from the mistakes of the past with the bank bailout...
you really do like to go about things you of which you know nothing.
the FACT is? the GOP congress, and Clinton removed the glass-stegal act which was put in place after the great depression to keep another form happening...
admit it, you'd rather see the country fall apart than have a non-"conservative" lead...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
| IP: Logged |
posted
here's the "conservative viewpoint in Sept:
Debating Paulson's Bailout: Win-Win for Taxpayers
By LAWRENCE KUDLOW,
Creators Syndicate Inc. | September 29, 2008
The single-biggest mistake in the Paulson bank-rescue-plan marketing effort has been the failure to explain clearly how taxpayers are going to recoup $700 billion used to buy toxic assets at auction in order to unfreeze the banking system. In other words, folks don't understand how taxpayers will be paid back, and may actually make profits, which will enable the new government debt to be erased after the Treasury bank-rescue is completed.
Here's the key point: Any loan package bought by the Treasury will be 100% taxpayer owned. Period.
Let's walk through this hypothetical for a moment. Through a market-driven auction, the Treasury will purchase some dollar amount — say $100 billion — of loans that banks will sell. The Treasury will then buy those loans at the prices that fill the auction, starting with the lowest prices and working up. Now, the Treasury will hold those bonds either to maturity or for a sale in the open market if rising prices in the market make that sale attractive. In other words, suppose the Treasury buys a bond package at 20 cents on the dollar. They hold it for a while, and if market conditions improve, they sell it for 50 cents on the dollar to some buyer, such as an investment fund, a private-equity fund, a hedgie. The Treasury will make the sale at the higher price in order to gain a profit for taxpayers.
I have been in conversation with leading House Republicans all day. And they understand these key points. Unfortunately, this understanding did not materialize in their original meeting with Mr. Paulson a few days ago. But now the actual reality is sinking in.
Another point: A Republican leader, Eric Cantor, has an excellent idea for a federal bond insurance guarantee for straight mortgage-backed paper, financed by private-sector insurance premiums. That will improve investor confidence in mortgage bonds and will make those bonds highly marketable. Importantly, senior Treasury officials have told me that Mr. Paulson will accept the insurance idea as an option in the final bill, alongside the ability of the Treasury to purchase distressed assets.
Sources also tell me that other conditions will be necessary to bring the House Republicans along.
quote:It's not protectionist - there are no tariffs or barriers being created," said a Visclosky spokesman. "It's about the U.S. steel industry running at or below 45% capacity, and the objective is creating jobs
No, there are no barriers being created - other than the barrier that prohibits the purchase of foreign steel for these infrastructure projects!
Could we do more to promote a depression? We might as well Xerox the great depression playbook and follow it to the letter. We certainly seem to be duplicating all the mistakes of the past.
You are wrong by several hundred miles, but at least you refrained from calling anyone lazy or a scumbag or a wacko. Thank you, we appreciate the effort.
Posts: 11304 | From: Fort Worth, Texas | Registered: Mar 2005
| IP: Logged |
quote:A debate is brewing at home and abroad over an economic stimulus measure that would require materials used in the program's infrastructure projects to be purchased from American companies.
Why is this a debate? We need to "stroke" OUR economy. The government should always use American products when they are available.
-------------------- "When you're in a hole, the first thing you do is stop digging." -H. Ross Perot Posts: 111 | From: Detroit | Registered: Jun 2008
| IP: Logged |
UBBFriend: Email this page to someone!
Printer-friendly view of this topic
