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How to keep jobs in L.A. (and in the U.S.)

Los Angeles is behind the curve in adopting a local preference ordinance, which would give local businesses an edge in landing city contracts. Washington should also act to keep jobs onshore.

September 14, 2010|HAROLD MEYERSON

It's taken awhile, but Los Angeles is at last beginning to do things that would help Los Angeles.

Last week, the mayor and two members of the City Council — Bernard C. Parks and Paul Krekorian — proposed a "local preference" ordinance that would give L.A. businesses a modest advantage over outside firms when bidding for city contracts. Modest, in this instance, is defined as 8%. If a company meets the city's definition of a local business, that company would get an 8% advantage on its bids for contracts. In the case of contracts awarded based on the lowest bid, the cost of a million-dollar bid would be listed as $920,000. In a "request for proposal" situation, if the city determines that a proposal is worth 100 points, that figure would be boosted to 108 points.

The proposed ordinance breaks no new ground in municipal governance. Cities and counties across the nation have enacted such laws. But at a time when unemployment has gone through the roof and shows little sign of descending, the cost to Los Angeles for not having such an ordinance has become painfully clear.

"Currently, the city of Los Angeles spends approximately 84% of its procurement dollars with businesses that are located outside of the city," Mayor Antonio Villaraigosa said last week. Because the city spends more than $1 billion every year on goods and services, that's a lot of faraway jobs for which L.A. taxpayers are shelling out. USC professor Charles Swenson has estimated that the ordinance, if passed, would bring 10,000 jobs to the L.A. area.

On one level, the ordinance confirms that Villaraigosa's primary focus has turned to jobs. After concentrating in his first term on an unsuccessful effort to remake the city's schools, and while currently mired in a battle with city employee unions over cutting the budget, the mayor has found one arena — the economy — where he may be able to carve out an undeniably positive legacy.

In the 2008 election, he steered Proposition R, by which Angelenos agreed to tax themselves to build mass transit, to victory. Now, by pressuring the Obama administration to make secured loans to accelerate Proposition R's massive construction projects, Villaraigosa soon may be able to take credit for creating more than 150,000 jobs in one of the most depressed local economies in the land. The local preference ordinance wouldn't have an impact of that magnitude, but it unquestionably would help in rebuilding the local economy.

But local preference ordinances raise a larger question: If it's OK — even routine — for cities, counties and states to encourage local businesses, and also routine for cities, counties and states to woo migratory businesses with tax abatements and sweet deals, why oh why is it not OK for the federal government to also help domestic industries in an economy that has gone global?

No one will accuse Los Angeles of protectionism if it passes its proposed ordinance, and no one is accusing Gov. Arnold Schwarzenegger of protectionism for trooping through China in the past week, trying to entice businesses to locate here. But when advocates for a national industrial policy, who view with alarm the decline of manufacturing to a scant 11% of the U.S. economy, call for Washington to enact policies that encourage industries to stay here and penalize foreign countries for illegally subsidizing their own companies or depressing the value of their currency, the conventional wisdom is to cry protectionism.

Indeed, when the U.S. Department of Energy devoted stimulus funds to wind farms, only to discover that the wind turbines were manufactured and assembled in China, we had no laws on the books with sufficient bite to keep our tax dollars from subsidizing Chinese industry. The deal caused such a ruckus that the Chinese manufacturer eventually felt compelled to cut a deal with the United Steelworkers (America's largest manufacturing union) to buy U.S. steel and to open a turbine-assembly factory here. But there was nothing compelling it to do so, and absent the steelworkers' efforts to publicize the problem, it's not likely the Chinese would have felt compelled to set up shop here.

As the economy has globalized, the most successful nations — China and Germany in particular — have done everything in their power to promote their own manufacturing sectors. They are the only two great powers to have weathered the Great Recession in good shape.

American cities and counties have practiced local promotion for years, and now Los Angeles looks to be joining their ranks. It's time for the federal government to heed the lessons of China, Germany and Los Angeles. To paraphrase the prophet Hillel: If we are not for ourselves, who shall be for us?

Harold Meyerson is editor at large of the American Prospect and a columnist for the Washington Post. He is doing a guest columnist stint on our Tuesday Op-Ed page.

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