In his first State of the Union Address, President Joe Biden promised to strengthen Buy American policies: “When we use taxpayer dollars to rebuild America – we are going to Buy American: buy American products to support American jobs.” President Biden is likely to propose a further tightening of Buy American restrictions in his 2023 State of the Union address on Tuesday.
The Biden administration increased the percentage of domestic content required for products purchased with taxpayer dollars from 55 percent to 75 percent, and he issued an executive order making it harder to receive a waiver from Buy American requirements.
The immediate impact of these policies has been to inflate the cost of federal projects. According to the CEO of the Associated General Contractors Association, “Whatever minimal gains in domestic construction material production this new [Buy American] mandate might temporarily generate will be offset by the increased cost of constructing new projects, slower schedules to build those projects and the fact some key projects could be hamstrung from moving forward.”
Previous administrations understood how costly Buy American provisions could be. For instance, President Harry S. Truman observed that these policies “undermine our national strength.” President Dwight Eisenhower called them “unfair to the taxpayer.”
In addition to driving up the cost of federal projects, Buy American requirements harm competitive American businesses by encouraging foreign governments to adopt retaliatory “don’t buy American” restrictions. Officials in other countries have already floated reciprocal “Buy Canadian” and “Buy European” measures. In many cases, these are the very same U.S. allies that we should be trying to work more closely with to address our common concerns, especially with respect to the activities of Russia and China.
A better policy would be to eliminate U.S. and foreign government procurement barriers, ensuring that taxpayers and consumers get the most bang for our buck with respect to federal purchases and guaranteeing that American businesses don’t lose out on the ability to supply foreign governments with competitive “Made in the USA” exports.