Why 'Buy American' Is Not What We Need Now

The "Buy American" provision in the stimulus package, voted by the House yesterday, is outrageous. Trade wars are exactly what we need to make current Great Depression 2.0 a long term scenario.

In 1930, trade wasn't that important. Countries traded goods, but most production chains were localized in countries. It's absolutely different now. Processors are made in USA, memory chips and disks in Korea, optical drives in China, motherboards in Philippines, everything is assembled in China and a US-made operating system installed. Just raise tariffs a little bit and the final price can easily jump 50%!

Trade wars right now are basically collective economic suicide of the world. The chaos they can bring would be much worse than what we had in 1930. Everybody knows what followed. Do we want World War III as a result of Great Depression 2.0?

They are idiots and they don't know what they are doing.

Comments

[Steven Hansen]

i doubt any country would object as they all realize if the US cannot ignite its economy - they will suffer worse fates.

i would not get worked up yet as there would be little imported content anyway in the stimulus.

2009 Jan 29 04:02 AM

[Tradememe]

Quite true. The world economy is so inter-connected nowadays that a trade war does not really make sense.

However, if the stimulus is mostly government expenditure, then you can be sure that it will be targeted towards US products and services. But if the stimulus is mostly fiscal, meaning people getting more money in their pockets, then there is a good possibility that the stimulus will be used to buy imported goods.

2009 Jan 29 04:14 AM

[Moon Kil Woong]

If the US tariffed or blocked Asian trade we not only would have a recession, we'd have stagflation. Anyone proposing such a thing should think twice. The US can't instantly start producing everything it imports in a day with the same cost efficiencies unless you're willing to have most Americans accept a salary of about $1 a hour or $5 a day and the toxic waste that goes with electronics manufacturing.

2009 Jan 29 05:46 AM

[Fabien Hug]

I am personally in favor of protectionism just for the sake to avoid situations like the one described in constructe comment. I don't think that globalisation did any good to the US society as a whole. You certainly have more goods and you change goods more often (I lasted 5 years with my first Sony! walkman, try to do that with an Ipod!) but do you really better?
As for stimulus, if US taxpayer money is spent, it should absolutely be spent on US goods and services. Let the beneficiaries of the stimulus decide where they want to spend their money.
As for WWIII, maybe through an alliance domino effect. The biggest period of growth ever came after the biggest war ever and war is great when you win.

2009 Jan 29 10:02 AM

[biomedlives]

I believe that jobs in the U. S. are the key to getting the middle class, and the nation as a whole, out of the current economic rut. Thus I would back a stimulus package that aims at activities that inevitably involve American labor, like insulating homes or installing solar energy panels.

I would ask the free trade advocates again if they believe the long-running trade deficit is a problem and, if they do, what they propose to do about it.

2009 Jan 29 10:25 AM

[a. palmer jr.]

Buy American what? I can't think of a single company that makes something I would need, as far as manufactured goods go. Our companies helped the foreign companies get started, and even financed their own demise. I worked at the RCA plant early on when we showed the Japanese how to build a television set. I couldn't at the time understand why we were helping our competition and former enemy, and I still don't. I guess they were watching and listening because they still make them and we went out of business in 1998. Our manufacturing business had many problems but we would still be in business if we had been a little smarter and protected our processes and improved on them as we went along.

2009 Jan 29 10:42 AM

[Alex Filonov]

On Jan 29 10:25 AM biomedlives wrote:

> I believe that jobs in the U. S. are the key to getting the middle
> class, and the nation as a whole, out of the current economic rut.
> Thus I would back a stimulus package that aims at activities that
> inevitably involve American labor, like insulating homes or installing
> solar energy panels.
>
> I would ask the free trade advocates again if they believe the long-running
> trade deficit is a problem and, if they do, what they propose to
> do about it.

Trade deficit doesn't mean anything anymore. It's calculated based on physical goods only. When Broadcom or Nextel sell licenses to Samsung or Nokia, it's not considered export. When Microsoft sells Windows licenses to Lenovo, it's not an export either. A lot of US intellectual property sold is not counted in trade deficit figures. Ditto for consulting. Sometimes it's outright stupid. Windows in the box is an export for trade deficit figures, package of 100000 licenses to OEMs is not.

The only meaningful figure is a total money flow. For US it's positive. Yes, it includes foreigners buying Treasuries, so what? We owe China more than a trillion dollars, it's China's problem. If they thought that dollar would lose value, they shouldn't be buying.

2009 Jan 29 11:02 AM

[notsosmart]

this goes back to the transistor radio.invented here & given to the japanese.(who ran with it).there's not much made here anymore.try to go a week without buying an import be it product or food.a society cant exist for long on ponzi schemes & papering the world with phony AAA rated crap.

2009 Jan 29 11:03 AM

[n6532l]

The great wealth creation of the United States did not happen until we became a tariff protected economy in 1828 and lasted until we became a trade dependent economy in 1973. Since 1973 there has not been a single decade in which the Average Weekly Earnings of Americans rose. Before 1973, as far back as we have data, there was not a single decade in which real wages did not rise. Real wages increased during the 1930s in spite of the Depression. That is the impact of free trade. The declines all happened during free trade, the increases all happened with trade protections. Between 1828 and 1947 our tariffs seldom went below 30% and were as high as 62%. Behind that wall of protection America, and Americans, prospered. Tariffs will work again.

2009 Jan 29 11:25 AM

[sether]

the cow is out of the barn. Protectionism (tariffs) would work, if there was something to protect. Other countries have protected their manufacturing base without 'starting world war III' as we did in the past. Now it is long, long gone. Thank you globalist free-marketeers.

2009 Jan 29 12:34 PM

[Socialism cannot compete!]

"Trade deficit doesn't mean anything anymore. It's calculated based on physical goods only...The only meaningful figure is a total money flow. For US it's positive. Yes, it includes foreigners buying Treasuries, so what?"

Author is delusional. That's EXACTLY the problem!! We need to produce more goods, foreigners buying Treasuries is NOT economic production -- it's them lending us money.

2009 Jan 29 03:32 PM

[AmericanBlogster]

Are you crazy?! When America prospers, the world prospers. Right now, we need to protect American jobs. Just because we, as a people, choose to spend our dollars on American goods does not automatically mean a trade war or WW3 for that matter. We cannot allow China to have the entire wealth of the world! We cannot allow Mexico to take all the jobs. What sense does it make for companies to move jobs to an area that the pay scale does not afford them the ability to purchase the very products they make (or make components for)? You, sire, are very uneducated.

2009 Jan 29 04:10 PM

[Andy C]

I support the made in USA provision. When we lose manufacturing jobs our standard of living goes down. Ross Perot was right it's a race to the bottom. We need to buy the things our neighbors make to keep good jobs here. If you think your job is safe and can't be outsourced think again that's what the IT, customer support and engineering people used to think. You can still find American made products online Google "made in USA" plus whatever you need.

Buy American the job you save could be your own.

2009 Jan 29 07:54 PM

[Connectr]

One very good argument for protectionism is the US military manufacturers. These companies have been operating under a buy US made for decades, and though you can make arguments, is the world leader in defense technology.

2009 Jan 29 11:54 PM

[biomedlives]

I agree that a broader measure, like the balance of payments, gives a more accurate picture than the trade deficit. I agree with "Socialism..", however, that we should not include lending by China (and other countries) in the analysis.

I disagree with the statement that our debt to China is "China's problem." One of these days, we'll wake up to find out that the debt give China enormous leverage over us. It will be a more effective threat than intercontinental missles or naval power.

On Jan 29 11:02 AM Alex Filonov wrote:

>

2009 Jan 31 09:16 AM