Protectionism in a Depression

I have little to add to Becker's post, with which I agree. One does understand the support in Congress for adding "Buy American" provisions to the stimulus package now moving through Congress (the "American Recovery and Reinvestment Act of 2009," as it is called). Apart from the usual interest-group pressures, the goal of the Act, or at least the stated goal (for besides the goal of stimulating the economy, there is the goal of advancing President Obama's long-term policy agenda at an opportune time, by grafting the agenda onto the stimulus), is to increase employment, and that means employment in the United States, obviously. If suppliers say of broadband equipment receive a government order and satisfy it by buying the equipment abroad, the increase in employment (if any) will take place in the country in which the equipment is bought.

An appropriate solution to this dilemma is to focus the stimulus package on goods and services that are made in the United States. That is one more reason why, as some Republican senators are now urging, more of the stimulus money should go to construction, whether of roads or bridges or schools. True, some inputs into these products, such as steel for bridges, may come from abroad, but most are local, in particular of course labor--and there is a lot of unemployment in the construction industry. Indeed, government-financed construction, especially of transportation facilities, strikes me as the optimal Keynesian anti-depression program: the inputs are local, unemployment in the industry is great, our transportation infrastructure needs investment, improving it will confer external benefits (such as faster commuting and less wear and tear on vehicles), the costs can be eventually recovered, after the depression ends, in tolls and other user fees, and construction projects (especially repairs) can be commenced pretty quickly, especially if emphasis placed on funding state and local road and other infrastruture projects that have been interrupted or deferred by the states' depression-caused revenue shortfalls.

On the topic of sending stimulus money abroad, I think the big foundations, such as the Gates foundation (the biggest), should be strongly urged to redirect their extensive foreign charity to the United States at this time of depression. I am not suggesting that his projects should "Buy American," in the sense of buying U.S. products to give to foreign recipients of his charities. The point is rather that charity should begin at home when home is suffering. The bailouts and stimulus and other expenditures, over and above our already huge budget deficits, aimed at getting us out of our economic doldrums as fast as possible, are going to increase the national debt significantly and by doing so impose heavy costs for years to come. The foundations in the aggregate spend many billions of dollars a year, and the substantial portion that goes to fight malaria in the Third World or promote agriculture or family planning there could be redirected--not all of course and not all at once, because the programs induce reliance on the part of the recipients--to the United States to help get us out of our economic predicament without assuming a staggering further burden of debt. I grant that poor countries may be harder hit by what is a global depression than the United States, but I consider Americans' obligations to be primarily to Americans rather than to the inhabitants, however worthy, of foreign countries. I am also inclined to think that charitable giving abroad is so closely entwined with the nation's foreign policy objectives that it should be regulated by the State Department rather than left entirely to private choice.

I have little to add to Becker's post, with which I agree. One does understand the support in Congress for adding "Buy American" provisions to the stimulus package now moving through Congress (the "American Recovery and Reinvestment Act of 2009," as it is called). Apart from the usual interest-group pressures, the goal of the Act, or at least the stated goal (for besides the goal of stimulating the economy, there is the goal of advancing President Obama's long-term policy agenda at an opportune time, by grafting the agenda onto the stimulus), is to increase employment, and that means employment in the United States, obviously. If suppliers say of broadband equipment receive a government order and satisfy it by buying the equipment abroad, the increase in employment (if any) will take place in the country in which the equipment is bought.

An appropriate solution to this dilemma is to focus the stimulus package on goods and services that are made in the United States. That is one more reason why, as some Republican senators are now urging, more of the stimulus money should go to construction, whether of roads or bridges or schools. True, some inputs into these products, such as steel for bridges, may come from abroad, but most are local, in particular of course labor--and there is a lot of unemployment in the construction industry. Indeed, government-financed construction, especially of transportation facilities, strikes me as the optimal Keynesian anti-depression program: the inputs are local, unemployment in the industry is great, our transportation infrastructure needs investment, improving it will confer external benefits (such as faster commuting and less wear and tear on vehicles), the costs can be eventually recovered, after the depression ends, in tolls and other user fees, and construction projects (especially repairs) can be commenced pretty quickly, especially if emphasis placed on funding state and local road and other infrastruture projects that have been interrupted or deferred by the states' depression-caused revenue shortfalls.

On the topic of sending stimulus money abroad, I think the big foundations, such as the Gates foundation (the biggest), should be strongly urged to redirect their extensive foreign charity to the United States at this time of depression. I am not suggesting that his projects should "Buy American," in the sense of buying U.S. products to give to foreign recipients of his charities. The point is rather that charity should begin at home when home is suffering. The bailouts and stimulus and other expenditures, over and above our already huge budget deficits, aimed at getting us out of our economic doldrums as fast as possible, are going to increase the national debt significantly and by doing so impose heavy costs for years to come. The foundations in the aggregate spend many billions of dollars a year, and the substantial portion that goes to fight malaria in the Third World or promote agriculture or family planning there could be redirected--not all of course and not all at once, because the programs induce reliance on the part of the recipients--to the United States to help get us out of our economic predicament without assuming a staggering further burden of debt. I grant that poor countries may be harder hit by what is a global depression than the United States, but I consider Americans' obligations to be primarily to Americans rather than to the inhabitants, however worthy, of foreign countries. I am also inclined to think that charitable giving abroad is so closely entwined with the nation's foreign policy objectives that it should be regulated by the State Department rather than left entirely to private choice.