posted by Mike Madison at 7:28 AM /
Commissioner Dan Miller is planning to introduce a "Buy American" resolution at the next Commission meeting. Here is the full text of his blog post on the topic. Dan writes,"While Mt. Lebanon is unlikely to receive any federal recovery funds absent such provisions, there is a chance that we could."
I think that what he means is this: Mt. Lebanon is unlikely to get any federal recovery funds at all. But if we pass this resolution, then there is more than a snowball's chance that it will.
I understand the political logic. The amount of money being disbursed as part of the stimulus package has unleashed the hounds of "I've gotta get mine" all across the country.
But I think that "Buy American" provisions are a bad idea in general, and I also think that there is no evidence that Mt. Lebanon has suffered so much in particular that it needs to position itself to receive bailout money. It's not a popular view, I'm sure. But I'm a free trader. The current economic depression involves global causes (read Krugman: the Chinese who invented fire; American bond traders then played with it), global consequences (a reverse butterfly effect: falling US demand has caused millions of Chinese workers to lose their jobs) , and requires global solutions (surprisingly, I can't find an article that describes exactly what those would be).
I think that what he means is this: Mt. Lebanon is unlikely to get any federal recovery funds at all. But if we pass this resolution, then there is more than a snowball's chance that it will.
I understand the political logic. The amount of money being disbursed as part of the stimulus package has unleashed the hounds of "I've gotta get mine" all across the country.
But I think that "Buy American" provisions are a bad idea in general, and I also think that there is no evidence that Mt. Lebanon has suffered so much in particular that it needs to position itself to receive bailout money. It's not a popular view, I'm sure. But I'm a free trader. The current economic depression involves global causes (read Krugman: the Chinese who invented fire; American bond traders then played with it), global consequences (a reverse butterfly effect: falling US demand has caused millions of Chinese workers to lose their jobs) , and requires global solutions (surprisingly, I can't find an article that describes exactly what those would be).
18 Comments:
Why not a “buy Mt. Lebanon” provision to encourage projects like the school board is about to undertake by engaging McPherson and Jacobson as consultants for the school superintendent search? A recent school board president has joined this firm as a consultant.
McPherson and Jacobson is a fine firm, they brought us Mr. Allison. But what about the firm that brought us Dr. Sable? As best I know, they are capable as well. That firm just completed another successful engagement; they took Mr. Allison home to Kansas.
It’s a small world after all!
And that's my point.
Mike:
I am pleasantly surprised to see that you and I agree on something. There is an extensive article on the huge change in the Chinese economy, in the February 16 issue of the Economist magazine. Like most Americans, I would like to be able to purchase quality products made in America. However, in the last 25 years both the unions and the management of the larger manufacturing companies have gone the same route as the steel industry formerly in Pittsburgh. The assumption was that regardless of what demands for wages and fringe benefits were made, the ultimate price was paid by the customer, so no one cared about the price, and since the customer had no other resource, they had to put up with second-rate quality. The manufacturing world has changed and we now have the ability to shop around the world. As a result, prices have come down and quality has gone up. When given the choice between American made automobiles and those made elsewhere in the last 25 years, it should not be a surprise that GM and Chrysler are in trouble. As someone who went through a whole series of Cadillac's, Buick's and Pontiac's in the last 30 years, I am not sure what soured me more; the shoddy workmanship, or the arrogance of the company. My Japanese Infinity may be the finest example of auto manufacturing that I have ever encountered. For many years my primary business was exporting American made heavy equipment. In recent years, the quality of workmanship and the indifference to other markets, has caused me to completely shift gears, to the extent that I no longer work with any American companies, either as suppliers or customers. These painful economic conditions however, have caused many American companies to reinvent themselves and strive for excellence in quality and service. I have no great desire to exclude American products or markets and I am looking forward to the revitalization of American industry. The white hot cauldron of competition will create excellence in American companies, not the patronizing "Buy American" attitude that assumes our equipment is second-rate, but suggests we should buy it anyway due to some perverted sense of patriotism.
Set ideology aside (and anti-union attitudes) and Buy American makes sense economically for BOTH America and our trading partners.
With all due respect to the blog hosts and James Cannon, I think a few facts might alter even the most feverent Free Trader's view.
By the way, I am one of those union guys and so no one has to go digging through files, I work for the United Steelworkers. But I also live in Mt. Lebanon and love our borough.
The facts are these. Dan Miller's resolution on Buy American is not about trade. It's about how best to utilize the infrastructure part of the Stimulus Bill passed by Congress. We have a $14 Trillion economy that is more open to imports than any other in the world. The Stimulus has about $100 billion directed at "shovel ready" infrastructure work that will create jobs and hopefully kick start our economy. Clearly $100 billion out of $14 Trillion does not threaten the global trading balance.
However, since we don't have the $800+billion we're spending on the Stimulus, we will borrow it from other nations. It is financial insanity to borrow (say from the Chinese), run it through our federal, state, and local governments and then purchase non-domestic goods and services that send that money right back outside the country. Not only don't we get any Stimulus out of the expenditure, but we might as well have not borrowed it at all, and saved the interest payment.
Secondly. Like the Flight Attendent that tells you to put the O2 mask on yourself before you try to save anyone else, we need to get America's economy going first. Once we do that, we'll be able to buy all the global products that we have been. But if America's economy continues to free fall, then not only will we be in disaster, there is no way we will buy anyone elses stuff either.
In other words, don't eat the seed corn and everyone will benefit from the harvest.
The Federal legislation has a Buy American provision in it. The state, county and municipal Buy American resolutions simply reinforce the law. Buy American provisions have been around for seventy years, and they are reasonable. Exorbitant cost differences are prohibited, if domestic sources aren't available you can go offshore, etc.... Mt. Lebanon isn't going to gain or lose any Stimulus money because we pass a Buy American resolution.
At some point I'd be happy to engage in a trade fairness debate, but this isn't the issue to tangle on that with. This is about getting us out of the hole we're in and doing a sensible thing.
Let's pull together on this one neighbors. Then maybe we'll be around to see if we can find common ground on some of the thornier issues we face.
thanks for this opportunity
Ike Gittlen
igittlen@usw.org
(if you need a physical address or phone number, email me and I'll provide it)
Mike, I don't see anything wrong with Dan Miller's provision. If need to build with steel - make sure it is American Steel. Ditto for the other materials. Below is the actual provision:
In recognition that federal economic recovery plan funds are soon to be disbursed, and in recognition of the efforts of the Allegheny County Council to pass and support a “buy American” provision regarding any possible discretionary spending and control thereof, Mt. Lebanon pledges the following:
(following text is almost identical to what was passed by County Council)
Section 1. That it will work to maximize the creation of American jobs and restoring economic growth and opportunity by spending economic recovery plan funds on products and services that both create jobs and help keep Americans employed.
Section 2. To purchase only products and services that are made or performed in the United States of America whenever and wherever possible with any economic recovery monies provided to Mt. Lebanon.
Section 3. To publish any requests to waive these procurement priorities so as to give American workers and producers the opportunity to identify and provide the American products and services that will maximize the success of our nation’s economic recovery program.
Section 4. If any provision of this resolution shall be determined to be unlawful, invalid, void or unenforceable, then that provision shall be considered severable from the remaining provisions which shall be in full force and effect.
You can call that protectionism if you want, but in times like these I think that even free traders like you and I can agree that we need to stimulate the US economy, not China's.
And James - you make several good points, including "The white hot cauldron of competition will create excellence in American companies" but then I disagree with you when you say that a buy American provision, during the a recession of this magnitude, is a "perverted sense of patriotism." When demand for American made goods is next to nothing it makes sense that this stimulus money goes into American companies that are paying wages to American workers. Do you really think this $800 billion that we are already borrowing from the likes of China, Japan, Russia, and the Petro states should go right back into the coffers of China? Heck no. Again, this is a stimulus for our economy, not theirs.
Ike and Chris largely affirm the reasons for my skepticism about "Buy American" provisions, whether here in Mt. Lebanon or in general. The skepticism has nothing to do with unions and everything to do with economics and politics.
It is tempting to assume that there is an easy way to keep "American" money in America and separate it from money that gets sent "overseas." It is tempting to assume that we can "fix" the American economy without paying attention to how to fix the worldwide economy. It is tempting to assume that the economic "stimulus" is unrelated to trade questions and that we can spend our way out of a depression without wondering about trade deficits. And it is tempting to assume that all of these questions have no geo-political implications.
In my view, all of these assumptions are mistaken.
On some of Ike's and Chris's more specific points:
American trade deficits (and the liquidity that they created in Asia) are a largely behind the current mess. Americans can spend $800 billion, but a lot of that money will end up both coming from Asia (because China has cash reserves that can be loaned to the US) and going back to Asia (because Asian countries have the manufacturing capacity that the U.S. no longer does). Ike calls that "insanity," but I don't agree. One, it's a necessity in light of the way that the world economy is now distributed, and two, laundering all that money through the American economy is not an idle act. The president hopes that it will engage the rest of the American economy which are linked inextricably with servicing and supporting both the goods we import and all of the people here who import and use them. (The president may be wrong, of course, though I and many people hope that he is right.)
Also, the very last thing that United States wants in geo-political terms is an unstable, underemployed, and angry China. We had some experience with this in the 20th century, and it wasn't pretty.
No one, least of all me, objects to buying American-manufactured or American-financed products, especially when buying American or buying local makes fiscal sense (as a taxpayer, I'd always like my governments to look for value) and environmental sense (glocalized food is a great thing).
Little to none of this has anything to do with Mt. Lebanon. Dan Miller's resolution, like many "Buy American" resolutions, is mostly rhetorical in nature. If these things have teeth, I think that they are bad ideas on economic grounds. If they don't - as Ike says, there are generous escape clauses - then they are bad ideas on political grounds. I understand that many governments, including the federal government, have had Buy American policies in place for decades. What was bad policy before is worse policy now, in my view. We should spend our collective energy on more productive debates. Specifically, America could do few better things to both improve its standing as a world leader and actually to improve the world than to reach out to workers suffering elsewhere and ensure that they know that this country cares for them, too, and not just about ourselves.
Talking about using bailout dollars is different than talking about typical, everyday commerce.
Once you start talking about using tax payer funds to stimulate the economy, you better be darned sure that the tax payers are getting as much of the economic benefit as possible.
Staying tightly wedded to free-market philosophy works as long as you are dealing with a free-market situation, but it would seem we are beyond that now.
If we were talking about a purely free-market situation here, I might agree with you that there should be no provisions that American companies get first priority. But the bottom line is that if you are going to use my future tax dollars to fund this recovery, American companies HAVE to be the priority. The only exception should be if no American company can offer comparable products and services.
I honestly have little idea what a "free market philosophy" means. I certainly don't hold to anything that resembles a "free market philosophy." Markets are manufactured, not "free"; they are manufactured by firms and by governments and by people. The question, on all sides of every economic equation (recessionary or otherwise), is what kind of markets we have, and what kind we want to have.
Separating our economic futures from the economic futures of people in other countries (whether those are Iceland, Estonia, or China) is neither possible nor desirable.
Specifically, America could do few better things to both improve its standing as a world leader and actually to improve the world than to reach out to workers suffering elsewhere and ensure that they know that this country cares for them, too, and not just about ourselves.
I disagree for a host of reasons. First, the Bill that was recently passed by Congress and signed by the President is titled "American Recovery and Reinvestment Act." It was not titled the "Help the beleaguered workers of the world Act" or the "The American Reinvestment in China act." With an already ravaged manufacturing base we need every penny of that Stimulus Bill to go towards American manufactured goods. I realize that it is unlikely that 100% of that money isn't likely to go into domestic goods but the higher the percentage the better.
And Mike, the root of the trade imbalance that you mention is two things - one is that we becoming more of a service based economy than a manufacturing economy. The second is the amount of oil and gas that we have to import from the middle east, Russia, and Venezuela. I don't think we can have sustained economic growth until we reverse the this trend, or at least lesson the imbalance. I for one believe that America has to maintain a higher threshold of domestic manufacturing if we are to remain a world economic power. America was not a world power until we started making things. Some will say that we are now a knowledge based economy, but with the number of engineers being cranked out by India and China I don't think we can put all of our eggs in that basket, either. We must have balance, and one area where we can both innovate and manufacture things right here in the US is the energy industry. If no longer have to import oil that means we are generating alternatives right here in the US. That means we are both innovating and we are building things. If our automotive companies want to make up for all their mistakes from the past 50 years they can do so by making fuel efficiency the center of everything they do. The Chevy Volt, if they ever release the darn thing, has the potential to put GM back on the map, and make the Prius look like a model T in terms of efficient vehicles.
It is nice to think that the economic crisis is all about us (the United States), but that assumption is the kind of myopic thinking that helped us get into this mess in the first place. The US and the selfishness of its government, its firms, and its citizens helped to cause the crisis, but we didn't cause it alone. And we can't cure it alone. Do you think that the folks in DC are ignoring how the stimulus package interacts with IMF and EU initiatives (if there are any)? God help us if they are.
Trying to grow domestic demand for domestically-manufactured goods can't fix our problems. We need to grow domestic demand across the board (for services as well as goods, whatever the source), and we need to prime the export pump, and we export services these days at least as effectively (and often more effectively) than we export goods.
It is nice to think that the economic crisis is all about us (the United States), but that assumption is the kind of myopic thinking that helped us get into this mess in the first place.
Myopic thinking? You have a way with putting words in one's mouth Mike. By the way, how is that high horse of yours doing these days?
I never said that the economic crisis was "all about us." Re-read my comments before lecturing please. The stimulus bill, the one we just passed is about us, the US, and stimulating our economy, not China's. China is spending half a trillion dollars on their stimulus plan, I highly doubt that the Chinese are too concerned with the laid off autoworkers in the United States. The bottom line is that I agree with Dan's provision and that when possible, we should buy US manufactured goods with the stimulus money. I understand globalization, the world is flat, yada, yada, yada, but right now I care more about putting American workers back to work than I do pumping up demand at the typical Asian sweatshop that pays $5 a day.
Lectures beget lectures, Chris. This thread and this issue is about politics, not economics, and the issue and the resolutions making their way into local government discussions were and are part of a campaign sponsored by organized labor that tends to take for granted the proposition that economy recovery is about helping American workers before helping others. (That sentiment is expressed earlier in this thread, and it's expressed in other email I received before I posted in the first place.) I think that proposition is wrong, and I think that it's short-sighted.
I have nothing against unions, but their mission is to protect their workers' jobs, to maximize their workers' wages and benefits, and to improve workplace safety and working conditions. Much of the time that agenda aligns with good policy that promotes the health of the worldwide economy, because those are questions of economics and economic justice. Here, I think that economic agenda has been subordinated to the political agenda that you rightly called protectionism, and I think that the result is bad policy.
With all due respect to all of you, the stimulus plan, whether it sends money to Mt. Lebanon or Timbuktu, is doomed to obnoxious failure. And seeking monies from it along the lines of "well if I don't get it somebody else will" is simply unethcial. That said, it's that kind of thinking that got us here in the first place, i.e. "I don't make enough money to buy that house. I know it and you know it but if the govt. says you have to lend me that money or else, I'm gonna take it!"
You do understand that there is a reason Hugo Chavez was so excited that BHO was elected President, right?
The group of economists below aren't exactly a bunch of right wing nuts like me. This sums up how they felt about the stimulus plan.
http://www.cato.org/special/stimulus09/cato_stimulus.pdf
I'd never call you a right wing nut, Bob, but for the benefit of other B-L readers: The Cato Institute is an aggressively ideological libertarian think tank. (I use that description intentionally, having read plenty of Cato's work in other contexts, long before the events of the last year.)
It is interesting how a difficult a time the "free trade" moonies are having with the Buy American approach to the stimulus. What was in that cool aide anyway?
I do want to complement the hosts and this blog site for ginning up the debate and conversation. Its about time we had a real discussion about how our economy works and how the global financial system works.
We are in a different world when it comes to trade issues. However, the idea that we should slavishly hold to totally open markets here at home, while our trading partners protect their markets and skew their currencies to strip huge economic segments away from our economy, does underlie our current economic crisis. The "free trade" idea has run us into a wall and also has left us without the wherewithal to pull out easily. We have to look at a trade system that allows trade (which is essential) but on a fair basis. Otherwise we will finish the destruction of our manufacturing sector and lose lots of our goods and services as well.
But this is a longer term issue. And I don't think that this debate has made the point that there are short term things we need to do to try to stop the free fall and other things we need to do for the longer term. The Buy American provisions of the Stimulus is a short term effort that is targeted and not a long term policy solution.
What our host and others are having a fit about is that the Buy American debate does open up debate about our ability to manufacture and our trade policies. They know instinctively that current trade policies can not stand the light of day. They have not worked and they need to be changed.
It is an interesting fact that since 1998 we lost over five million manufacturing jobs in the U.S. At the same time our annual trade deficit with China went from $18 billion to a current $266 billion. Most of those changes happened after 2000 when we allowed China Permanent Normal Trade Relations status and welcomed them into the WTO. In other words, we made a change in our trade policy that has hollowed out our manufacturing sector. Now, when we need those good jobs (and the savings and spending that people with good jobs allow) they are gone. We also have toxic toys, tainted food, clouds of airborne pollution descending on our west coast and the rise of an authoritarian power that is running around the world gaining allies with money they got from us.
So how is this free trade thing working for the world?
While the Buy American proposal by Dan Miller neither addresses nor will fix any of the larger trade issues, if it opens up the debate that's a great side effect. We're in a car wreck and there's no use pretending that our badly engineered steering mechanism's on trade didn't help put us there.
Ike Gittlen
igittlen@usw.org
"Moonie"? I'm not sure exactly what that means, but it's cute.
Three notes on the relationship among the current depression, trade policy, and manufacturing:
First, it's possible (and likely, in my view) that the direction of cause/effect runs from economic dysfunction to trade policy, rather than the reverse. American manufacturing has been on the decline for decades. Why?
Second, it's easy to stereotype and condemn the Chinese for making cheap, dangerous stuff and for destroying their environment in the process. No question: They shouldn't make dangerous stuff and shouldn't destroy their environment. But the U.S. doesn't have a spotless record on any of those scores. How do you think we became a global economic powerhouse in the first place? Given our own history, we should be careful in framing arguments on this score.
Third, praise for the manufacturing economy and (implicit) denigration of the service economy should put its class biases on the table, where they can be talked about. I do *not* mean that manufacturing = working people and service = upper-class people. There are plenty of working people in service industries and plenty of upper-class people in manufacturing. There is, however, a deep-seated and long-standing social recognition of the idea that "making stuff" (or "growing stuff") is the noblest and best way to make a life. Personally, I think that's a contestable proposition.
We are a long, long way from the "Buy American" question. I won't cut off the comments, because other people may find the topic interesting. But I need to move on.
This article enlightened me...
http://www.businessweek.com/ap/financialnews/D96D4SL00.htm
My point in adding that list of economists who were against that FIRST stimulus plan (the one that everyone has forgotten about already) was that the economists who comprised the list came from all sides of the political equation. If memory serves that list eventually grew to over 500. The bottom line is this. Government intervention into a primarily market-based system is always going to end up screwing things up far more than helping. It's either one or the other. What is so bothersome is that this is now 2009, not 1809. We have 200 years of history showing us the differences between what a market-based system can produce (USA) vs. what a government/socialist/communist system can produce (USSR, Cuba, Nazi Germany, etc. etc. etc.)
Outside of the family unit, mankind (or for that matter, animal-kind) doesn't exist well in a collective. Never has, never will. Painful as it may be, it's about the survival of the fittest. The sad thing is, Americans, even at the lowest end of the income scale, don't realize how truly well off they are relative to humankind over the course of history! There are very few who have to worry about food, clothing or shelter on a daily basis. And those that truly do should be assisted in one way or another by their family or the church or one of the myriad of private charities that exist for that purpose. The rest should use their God given talents and abilities to get their "stuff" together - and stop waiting on the government to figure things out for them.
Lectures beget lectures, Chris
I wasn't lecturing but you were misrepresenting what I wrote. I was stating my opinion and my reasons for supporting Dan Miller's provision. I thought that posting opinions while respecting the opinions of other commenters, instead of calling them "myopic", was the purpose of these comments. I haven't always abided by those standards but I am trying to do a better job of it.
Anyways, I offered up a potential solution to balancing our economy but it seemed you glossed right over that and read into something about unions. Our manufacturing base is never going to be anything close to what it used to be. I don't think Ike or anyone else on this side of the issue is naive enough to think it is. What we are saying, I think, is that we still need a manufacturing base here in the US. We need to have balance. If we retool the auto industry so that it focuses on fuel efficiency, if we can lift the burden of health care off of them(which a national health care plan would do), then Detroit will have a chance to compete, especially once oil prices start to rise again, and the lower costs of offshore labor is offset by the high cost of shipping.
Health care reform is another topic for another day but I do think that absent reform, particularly reform that includes a national insurance plan, we can say bye bye to any chance of restoring any of the manufacturing jobs we have lost to overseas markets. Right wing nuts will call Obama's plan "socialist", for sure, but then I would call them ignorant for mistaking his plan, which allows us to be Free to Choose between private insurance and public insurance coverage, for the single payer plans in Canada and Europe.
Chris, "lectures beget lectures" (and the myopic comment) referred generally to the presumptuous nature of the "Buy American" arguments. ("Of *course* we have to protect Americans and American jobs first," goes the argument, as if only the truly simple-minded and people with three eyes could disagree.) As I have read and received those arguments, they have been offered primarily by or on behalf of organized labor. I wasn't referring to you.
Post a Comment
<< Home