Federal government purchases make up about 20% of the U.S. economy, yet the United States is almost alone among the major developed nations and China in not having a significant "buy domestic" government procurement program.
No single economic stimulus initiative would do more in the short and long term to resuscitate U.S. employment, especially manufacturing employment, and to materially reduce our economy-zapping massive trade deficit than a fair "buy American" program.
However, when even a fairly limited program was put forward in February as part of the economic stimulus plan, you would have thought that protectionist cowboys from the U.S. had attacked global motherhood and apple pie.
Representatives of our major trading partners immediately began discussing among themselves how to respond to the United States' alleged "protectionist drive," with China raging the loudest. Editorials overly influenced by the nation's self-serving free-traders hit several newspapers across the country, with the New York Times warning that "rather than supporting employment at home, the 'Buy American' effort could ultimately cost American jobs." And the usually credible Peterson Institute estimated that such an initiative would save or create a meager 9,000 jobs. But out of a total U.S. labor force of 155 million, the correct answer has to be at least a couple million or more because we are talking about transitioning so much of the U.S. economy -- most of nearly $3 trillion in annual government purchases -- to domestic-only origins.
In his first inaugural speech, President Franklin Roosevelt said that the nation's greatest task was "to put people to work." At the time, 13 million Americans were unemployed, and the economy was much better balanced between manufacturing and services.
Now, however, there are nearly 30 million effectively unemployed Americans, according to Bureau of Labor Statistics figures for July. Manufacturing industries now represent just 11.5% of GDP; the number of people working in manufacturing account for only 9% of the jobs in the country; and we have run an average trade deficit in manufactured goods of more than $500 billion a year over the last five years.
The United States, with its enormity and geographic diversity, simply cannot prosper in the long term with less than 12% of its GDP coming from manufacturing. And because federal government purchases are strongly weighted toward manufactured goods, "buy American" would be a significant immediate boost to manufacturing's regeneration.
