Biden’s “Buy American” mistake

Trumpers persist in caricaturing President Biden as some kind of mentally defective fool. One Facebook graphic even denying that such a man could have gotten 81 million legitimate votes. While in the real world, Biden demonstrates what strong, sound, intelligent, honest, competent, sane and humanly decent leadership looks like, moving briskly to tackle unprecedented challenges and repair much of his predecessor’s damage to America. 

But Bidenism is not a cult like Trumpism. I don’t support his every stance.

For one thing, far too much of the $1.9 trillion Covid relief plan is earmarked for checks to people not really needy. Maybe that’s considered the price of political support for the rest. But I’d rather see more money going to those hurting most.

President Biden also proposes expanding regulations privileging American suppliers over foreign ones. That might seem like apple pie. But it runs up against World Trade Organization rules targeting discriminatory practices (against foreign vendors), to make trade free and fair. Trump, in his “America First” folly, tried to weaken the WTO. Not understanding how promoting free and fair trade globally benefits all countries, America included. 

A “buy American” policy sounds good for U.S. jobs. But The Economist recently explained that “by locking firms out of global supply chains and shielding them from competition it promotes inefficiency, destroying more employment than it creates.” The magazine cites one estimate that we actually lose 300,000 jobs. 

How so? Simple, really. If another country can make something cheaper (or better) than we can, we’re better off buying it from them and having our own workers instead make those things wecan make better or cheaper. That’s what economist David Ricardo called “comparative advantage.” Focusing our investment on our strengths, not our weaknesses. That makes us richer. 

Yes, buying cheap Chinese goods means fewer Americans employed making those things. But the savings to U.S. consumers enables them to buy more of other things — and that creates more U.S. jobs. And the trade also makes China richer, enabling Chinese to buy more stuff we export — creating yet more American jobs. Win-win. The beauty of global free trade.

President Biden (like others before him) seems bedazzled by the dream of “bringing back U.S. manufacturing jobs.” That’s so twentieth-century. In fact we manufacture as much as ever — but we do it with a lot less labor. That’s a good thing. U.S. jobs are not being lost to foreign countries so much as to improving automation and other technological advancements. That is, rising productivity.

At one time, almost the entire workforce was needed on farms just to feed everyone. Improved agricultural productivity freed most of us up, to work in factories instead. Thus we could produce food andmanufactured goods, making us richer. Now, another wave of productivity advancement similarly liberates us from factories, so more can be employed elsewhere, like in services. So we can produce food and manufactured goods and services. Another wealth gain. 

America’s future prosperity does not lie with metal-bashing smokestack factories, but high tech and services.

None of this is the economics equivalent of rocket science. “Buy American” is tired old-line Democratic stuff that reminds me why I used to be a Republican. But tragically that Republican party, with actual principles, that actually made sense, is long gone. At least Democrats are sane and sincere, not disingenuous and deranged. 

12 Responses to “Biden’s “Buy American” mistake”

  1. cocobiskits Says:

    So increasing buying from China so US citizens spend more in them, some how creates more jobs in US? Surely just more jobs in China? Not seeing the connection..

  2. Doug Weston-Kolarik Says:

    Spoken like a true, dyed in the Red Bureaucrat. Too many of our Americans will never “get richer” to buy the cheap Chinese products, that your weak argument states will create more jobs. Those supposed products they are buying are probably made in China, or Bangladesh, or Vietnam anyway. In today’s reality you can throw traditional economic theory out the fifty floor window.

    Take off your tie, put some jeans on and just go walk around the “real world”.

    Doug Weston-Kolarik LISW, PhD.

    On Mon, Feb 15, 2021, 7:39 AM The Rational Optimist wrote:

    > rationaloptimist posted: ” Trumpers persist in caricaturing President > Biden as some kind of mentally defective fool. One Facebook graphic even > denying that such a man could have gotten 81 million legitimate votes. > While in the real world, Biden demonstrates what strong, sound, i” >

  3. rationaloptimist Says:

    As explained — the money consumers save, buying cheaply from China, they spend on other things, often ones made in USA, creating jobs here. (And Chinese who get richer can also buy more US-made things, creating more jobs here.)

  4. rationaloptimist Says:

    To Mr. PhD — in fact, much of what U.S. consumer savings are spent on is SERVICES — which can’t be made in China or Vietnam!

  5. Don Bronkema Says:

    Here your proto-centenarian must split. All borders must open ASAP to people, goods, services & ideas to accelerate 22nd century, in context of UBIs, global blockchains, syntels, CRISPR-tots, neuro-chips, geogineering, Basa Luna, Colonia Martialis & ineluctable MMT [viz: last 8 Econ Nobelists + Piketty]. Recall: another 1859 CME [or mag-flip per 41 KYA] renders nugatory satellites, fones, computers, transformers & power-plants world-wide. 500M or so might subsist upon hand-tool horto & almanacs. Not only in Dar-es-Salaam would bwana say ‘gumbawa’ to the stars.

  6. Lee Says:

    COVID-19 checks for the well off are a problem only if the recipients don’t give that extra money to charities. On the other hand, means testing for those checks is a paperwork morass that is a significant burden for many needy people, and many will fall through the cracks.

  7. cocobiskits Says:

    If the manufacturing base is lowered in the US by buying foreign goods, the capacity for producing goods for China is lowered and creates a downward cycle. UK during the Thatcher years tried this and has created a dismal society where the wealth and resources have concentrated in the few to the detriment of the many, despite being in a close, favourable market (EU). The economic cycle for US is going to go the same way, unless there is another way. Even the new “green” business which should be led by the US/West is dominated by China so I am not sure where those goods are that are going to be wanted by China. Especially since that also have a lock on the ideas as well as the resources of the world. Evidence? The down grade of English as supported by the State. In other words they are saying we don’t need you any more. Now you need us….learn Mandarin to survive!

  8. Don Bronkema Says:

    Lee: papier-arbeit is indeed the incubus/succubus [450 BN PA for IRS admin/collect]–cast off forever via UBIs of 17 KPA CSI-adjusted. Vide: Alabama, Hamilton [Ontario], Finland & a dozen other polities. Only heartland puritanism, racism & von Mises, Ayn-Rand, Friedman supply-side excrement block the road to ecodise.

  9. Lee Says:

    There are two sides of the coin: increasing the total wealth that is produced, and whose hands that wealth ends up in. My general approach is to go for maximizing total wealth and, to the extent that that doesn’t benefit everyone, using redistribution so that the increase in total wealth is spread widely.

    So, yes let capitalism run its course, with goods and labor free to cross national boarders. (Though not pedantically. We’d want to be careful in those cases where goods are produced by the exploitation of labor or the environment. And we’d have to factor in national security concerns.) That will maximize the total wealth that is produced.

    Then there is the question of wealth distribution. We could try to analyze industry by industry who is losing out and make people prove that they are deserving, but the most effective way might be to simply look at each individual’s income. If you make more than a certain amount then you pay income tax at some tax rate for each dollar over that threshold. If you make less than the threshold then you receive money from the government, at that “tax rate,” for each dollar that you fall short of the threshold.

    If we do it right, we can eliminate many to all programs for the poor, replacing them with cash. Sure, there will drug addicts and others who cannot handle the cash and we’ll have to have a way to make those exceptions work, but the vast majority will benefit handsomely from determining how best to use their own benefits. And everyone will be happy about the wealth that a global free market is producing.

  10. cocobiskits Says:

    So automation has increased productivity and put the total number of well paying jobs down, thus increasing the wealth of the few, hiding the wealth in tax shelters so that re-distribution is beyond the writ of national governments. Even worse, governments off incentives to the wealthy to place a few jobs here and there, like dogs begging for crumbs. And don’t try to kid me that somehow capitalism will sort this out with some mysterious hand, and that corporate welfare is good but personal welfare is bad.
    If governments or anyone with power actually cared, we would be harnessing the untold potential of our populations by caring for them and investing those billiond of dollars into our comminties. And likely the only practical way is universal basic income.

  11. Don Bronkema Says:

    This proto-centenarian thinx your approach plausible, if refined w/a wrist-chip-d/loaded UBI for street-folk, per Stockholm. Meanwhile, all exputs must become reputs, sole thruput being infra-red detritus. O/wise terra finita. Moving along, Kardashoff-II Dyson-spheres are evanescent, no? Cultures at Karadashoff-III draw power from quant substrate to access white holes, no? One-second plunge demands energy = to solar total over 11 BNY. Respondent will entertain any proposal consistent w/constants of physics. Hurry, tho: the Reaper beckons!

  12. rationaloptimist Says:

    Coco, how to create wealth and how it gets distributed are two very separate issues — and it’s self-defeating to let concerns about the latter undermine the former. Freer trade makes the world richer. But I actually agree with you that a universal income is needed.

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