How do you make a dreadfully bad piece of legislation -- the nearly $900-billion so-called "stimulus" bill -- worse? Simple -- add protectionism.
The "Buy American" provision of the stimulus bill, which mandates the use of domestic iron, steel and manufactured goods even if imports are cheaper, makes our trading partners nervous. That created a problem for President Obama: "I think it would be a mistake ... at a time when worldwide trade is declining for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade," he said.
But some members of his party were elected on protectionist platforms, and they are not about to blow this chance to reward their union and industrial constituencies. What was Obama to do?
He did what old-style politicians always do: tried to have it both ways by resorting to vague rhetoric. He said he'd "see what kind of language we can work on this issue."
So is the bill protectionist or not? It sounds as though our trade agreements must be respected, but as The New York Times noted, "[I]n many cases it [a "Buy American" provision] is not considered a violation of trade treaties." Public Citizen's protectionist website, Eyes on Trade, agrees: Under its trade agreements, the United States has "always been allowed to do most if not all of what is in the stimulus package."
As long as it remains in the bill, the "Buy American" section will haunt us. Protectionism is poison. Prosperity means having access to the least expensive goods the world has to offer. When we save money buying something cheaper from abroad, we have more money to spend on other things or to invest. Laws that force us to pay more for things cannot make us wealthier.
Protectionist unions and firms say that a "Buy American" policy creates jobs at home. But that is misleading, because while protectionism does save some American jobs -- often temporarily -- the policy also destroys jobs at home.
It destroys jobs in two ways. First, when foreigners lose sales here, they have fewer dollars with which to buy American exports or to invest in the U.S. economy. Jobs in the export sector disappear, and the jobs that would have been created through the new investment won't be created.