President Joe Biden visited an operations facility in Lehigh Valley, Pennsylvania, Wednesday to boost his “Buy American” plan and promote American manufacturing.
Biden frequently talks about reviving domestic manufacturing, an industry that has sharply declined over the past 40 years.
Many would argue that investing in the manufacturing industry would enable job creation for American workers or perhaps stimulate economic growth by bringing manufacturing back to pre-1980 levels in the United States.
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However, investing and restoring the manufacturing industry is costly, inefficient, and puts American firms at a disadvantage compared to firms based in China and Mexico where production costs are significantly less expensive.
The U.S. manufacturing industry is thriving in the sense that technological growth, automation, and advanced forms of production have shifted the industry from low-skilled to high-skilled workers.
Manufacturing firms have gradually become capital-intensive and relied less on low-skilled, manual labor. This shift has moved American firms and workers forward and necessarily enhanced production and supply chains.
The movement of American manufacturing away from low-skilled labor has been economically beneficial. Manufacturing firms have become more efficient, which is evident through the increase in output and overall decline in manufacturing labor demand throughout the past several decades.
This is an economic gain for the United States.
The White House states that Biden will eventually require purchases using American tax dollars to comprise of 75% material made in the United States, a significant increase from the current amount of 55%.
Biden refers to this as “Make Buy American Real.” His attempt to enhance domestic manufacturing is inefficient and disadvantageous to American firms and workers.
Arbitrarily purchasing American-made materials solely because they were manufactured in the U.S. is wasteful, unresourceful, and counterintuitive. American materials should be manufactured if the U.S. has a comparative advantage producing those products compared to other countries.
The U.S. does not need to produce all products it consumes. Instead of randomly choosing the material requirement to be 75%, Biden should consider only products advantageous to American producers.
If Biden really wants to help the manufacturing industry, he would move away from manufacturing jobs that require low-skilled labor and instead consider specific investments in automation using high-skilled workers.
Additional manufacturing jobs that require low-skilled employment are outdated in the current U.S. economy and counteract the progress American manufacturing firms have already made where capital is used to increase output.
Biden’s statement also mentions the formation of greater domestic supply chains for production that allows us “access to critical goods during a crisis” and to “increase transparency and accountability” under the Buy American rules.
Biden wants to require producers to report the amount of American-made materials used in their products, and claims that this will “create good jobs and resilient communities.”
Biden’s unnecessary approach lacks any economic consideration to implement such guidelines. Forcing firms to use certain products goes against the underlying mechanisms of the free market.
Government-imposed constraints obstruct the market and can prohibit producers from choosing the optimal production materials based on price and quality.
Biden’s manufacturing plan does not “build back better” or help American workers. It wastes taxpayer dollars by investing in a declining sector of the economy.
Lowering taxes and encouraging business incentives and growth is a more reasonable approach to create jobs. Investing in an industry of the past is not.