‘America First’ or Biden First?

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How President Biden is planning to use leftover Trump administration ‘buy American’ rules to benefit himself politically

Doing Less with More

President Joe Biden has a brilliant plan for government spending: doing less with more.

As anybody who has lived through the newspaper bloodbaths of the past few decades can tell you, the usual advice from the corporate consultantweasels is that we do more with less. But the Biden administration intends to set that maxim on its head, building directly upon some of the worst economic thinking of the previous administration.

The Biden administration is going to be a lot more like the Trump administration than you may have been expecting, especially when it comes to “America First” business policies, which are corporate welfare in patriotic drag. To wit: Biden’s executive order expanding on the Trump administration’s buy-American procurement rules.

The rules developed under the Trump administration have not exactly been sitting there for years, growing outdated — the rules were finalized on the day before Donald Trump left office. The new rules developed under the Trump administration raised the “domestic content” requirement for most products from 50 percent to 55 percent — and raised them to 95 percent for goods made mainly of steel or iron; ended an exception for commercially available off-the-shelf iron or steel products while continuing an exception for fasteners such as nails and screws; and, most significant, they jacked up the “price preferences” for domestic goods.

The last of these, the “price preferences,” are what really matter most. Washington doesn’t just order federal agencies to source products from U.S.-based providers — instead, there is a complex system of procurement rules that favor domestic producers unless the imports are a great deal less expensive. Price preferences specify how much more government will pay for the same goods provided by a U.S.-based company when they could be had at a lower price from a non-U.S. firm. Under the Trump-era rules, which are now the Biden rules, the U.S. government will pay as much as 20 percent more for goods procured from large firms and as much as 30 percent more for goods procured from small businesses.

That’s how you jack up procurement expenses in one easy step. You don’t just go local — you pay more. Sometimes, you pay a lot more.

Biden is, to no great surprise, receiving some encouragement in this from members of Congress whose districts are home to firms that would benefit from being able to charge higher prices. For example, Senator Sherrod Brown (D., Procter & Gamble) and Representative Kathy Manning (D., Honeywell) are pushing the Biden administration to ramp up personal protective equipment (PPE) purchases, contracting for big purchases directly from favored domestic manufacturers. This is the denouement of one of the year’s most predictable business stories: When the coronavirus emergency first hit, the economy was shut down and PPE purchases skyrocketed — you couldn’t get your hands on an N95 facemask there for a while. And, so, everybody and his uncle got into the PPE business, and, now that the panic-buying has subsided, there is a glut in the market. “Regrettably, we have too many manufacturers in our states and across the nation that have capacity but no orders,” the Democrats said in a letter to Biden.

If only there were some ingenious mechanism by which supply and demand could be coordinated in a decentralized and non-politicized fashion!

Biden will now make the Trump arrangement a little bit worse by making the rules murkier and the bureaucracy more complex. As the Wall Street Journal reports, Biden’s executive order “directs an increase in both the threshold for local contents and the price preferences for domestic goods . . . but doesn’t state specific levels.” It creates a new High Grand Mufti of Corporate Welfare, who shall rejoice in the title of “Director of Made-in-America at the Office of Management and Budget.” There will be reviews! And evaluations! And a new website!

There are appropriate times for domestic preferences — you probably don’t want the Chicomms building your nuclear-missile-guidance systems. The interaction of security with procurement is one of the reasons why multinational free-trade agreements are often so long — exceptions have to be carefully specified. But that kind of thinking gets distorted very easily, especially if there’s a little bit of money floating around: Witness Senator Marco Rubio (R., Florida Crystals) and his silly insistence that subsidies for gazillionaire sugar barons are an urgent matter of national security.

How, exactly, is this in the national interest?

It is in the interest of those politically connected firms that make more money thanks to protectionist procurement rules, but that is offset by the fact that everybody else has to pay more — and the people who are doing the paying are Americans, too. And if we are paying more for nuts and bolts, that means less money left over for other spending — and other investments. And why bother trying to make your factory more efficient when you have a federally guaranteed price cushion not enjoyed by your competition?

You don’t actually make the country as a whole better off by overcharging Peter to overpay Paul. What you do is make everybody worse off by inhibiting the normal functioning of markets, in which the division of labor and comparative advantage work together to make the world more prosperous by making the most of the necessarily limited resources we have.

This isn’t a program to reinforce the interests of American businesses and workers. It is a program to reinforce the interests of American politicians, Biden first.