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"Buy American" Is Smart, not Stupid

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John Stossel's blog article on WorldNetDaily on November 1, 2011, "The stupidity of 'Buy American,'" is based on a premise so fallacious that one wonders how a usually intelligent commentator like Stossel could have been taken in by it.

The premise is that "we should buy things where they're cheapest. That frees up more of our resources to buy other things, and other Americans get jobs producing these things," according to the explanation of why "Buy American" is "nonsense" by economist David Henderson of the Hoover Institution.

First of all, "buying things where they're cheapest" isn't always the best decision in where to spend your money -- the old adage "you get what you pay for" is more often true. Most of the everyday items that people buy today at "big box" and other retail outlets are being manufactured in China and other countries in Asia.

What do you get for your money when you buy products that are made in China and other Asian countries? Clothes and shoes that don't fit or fall apart, toys that choke or strangle children, baby buggies, strollers, and cribs that maim or even kill, household items that either don't work properly, cause fires, and explode, and tainted food. The U. S. Consumer Protection Safety Commission's website provides a monthly list of products that have been recalled, and month after month, more than 90% are made in China. For example, there have been eight recalls thus far in November, and seven of the eight products were made in China. In October, there were 21 product recalls: 12 were made in China, two were made in Taiwan, two were made in Vietnam, two were made in Mexico, and three were made in the U. S. The products ranged from glass bowls and toys to tents, battery packs, and baby strollers.

Recently, a Senate Armed Services Committee investigation led by Sens. Carl Levin (D-MI) and John McCain (R-AZ) reviewed more than 100,000 pages of DOD documents and found that U.S. Department of Defense had purchased counterfeit electronic parts (defective and with "back doors") from China in 1,800 cases, running to more than 1 million parts.

Second, buying cheap goods that are made offshore only creates American jobs if you use the money to buy American products. If you just buy more products made "offshore," you don't create any new American jobs. About the best it does is keep people who work in wholesale and retail employed. That's why tax rebates and refunds haven't created the jobs that were expected. Consumers used the extra money to pay down debt, add to savings, or bought the everyday products that are now made mostly in China.

Why does it matter where products are made and why is it smart to "Buy American?" A report released in April 2011 titled, "The Importance and Promise of American Manufacturing, Why It Matters if We Make It in America and Where We Stand Today," co-authored by Michael Ettlinger and Kate Gordon of the Center for American Progress provides the answer to these questions. The Center for American Progress is a nonpartisan research and educational institute dedicated to promoting a strong, just and free America that ensures opportunity for all.

The authors opine that "Manufacturing is critically important to the American economy. For generations, the strength of our country rested on the power of our factory floors -- both the machines and the men and women who worked them. We need manufacturing to continue to be bedrock of strength for generations to come ... The strength or weakness of American
In addition to maintaining our standard of living as Americans, there are several other important reasons why it's smart to "Buy American." They are:

Manufacturing is critical to our national defense -- American manufacturers supply the military with the essentials needed to defend our country, including tanks, fighter jets, submarines, and other high-tech equipment. The same advances in technology that consumers take for granted support the military, particularly soldiers fighting overseas.

The U.S. cannot rely on other countries to supply its military because their interests may run counter to its own. America cannot risk being held hostage to foreign manufacturers when it comes to products that are essential for its national security and the U.S. military. It is crucial that key components and technologies that are critical to the production of U.S. weapons and the related industrial capacity to produce such items be located within the United States.

Manufacturing supplies millions of jobs ─ Manufacturing jobs are the foundation of the U.S. economy and the basis for its middle class. Manufacturing provides high-paying jobs for nearly 12 million Americans.

Manufacturing Jobs Pay Higher Wages than Service Jobs ─ Manufacturing wages and benefits are approximately 25 - 50 percent higher than in non-manufacturing jobs.

In an opinion article in Industry Week magazine, John Madigan, a consultant with Madigan Associate, wrote "Jobs paying $20 per hour that historically enabled wage earners to support a middle-class standard of living are leaving the U.S... only 16% of today's workers earn the $20-per-hour baseline wage, down 60% since 1979. Service and transportation jobs, per se, cease to exist in the absence of wealth. Rather, they exist and thrive as by-products of middle-class incomes buying products and services."

Manufacturing Creates Secondary Jobs ─ There is a multiplier effect of manufacturing jobs that reflects linkages that run deep into the economy. For example, every 100 steel or automotive jobs create between 400 and 500 new jobs in the rest of the economy. This contrasts with the retail sector, where every 100 jobs generate 94 new jobs elsewhere, and the personal and service sectors, where 100 jobs create 147 new jobs. It is manufacturers who hire services such as banking, finance, legal, and information technology.

Manufacturing is the Engine of American Technology Development and Innovation
American manufacturers are responsible for more than two-thirds of all private sector R&D, which ultimately benefits other manufacturing and non-manufacturing activities. More than 90 percent of new patents derive from the manufacturing sector and the closely integrated engineering and technology-intensive services.

Manufacturing R&D is conducted in a wide array of industries and businesses of all sizes. The heaviest R&D expenditures take place in computers and electronics, transportation equipment, and chemicals (primarily pharmaceuticals.)

Manufacturing is an incubator for technology and science, which require proximity to facilities where innovative ideas can be tested and worker feedback can fuel product innovation. Without this proximity, the science and technology jobs, like customer service jobs, follow the manufacturing jobs overseas.

Manufacturing Generates Exports ─ The United States was the world's first-largest exporter until 1992 when Germany took over this position. Germany remained number one until 2009 when China surpassed it to become the world's top exporter, and the United States fell to being the third-largest exporter. The difference between the top three was small: Germany exported $1.17 trillion compared to the $1.057 trillion of the U. S., but China's exports were $1.2 trillion in 2009.

Manufactured goods make up more than 60 percent of the value of U.S. exports, double the level of ten years ago. While agricultural exports amount to about $50 billion a year, manufacturers export about that much each month. High tech products are America's largest export sector, and the European Union was the top importer of these goods, followed by Canada, and Mexico.

Manufacturing Supports State Economies ─ Manufacturing is a vital part of the economies of most states - even in those areas where manufacturing has declined as a portion of the Gross State Product (GSP). As a share of GSP, manufacturing was among the three largest private-industry sectors in all but ten states and the District of Columbia. Manufacturing is the largest sector in ten states and in the Midwest region as a whole. It is the second largest in nine states, and the third largest in 21 others.

For the past decade, manufacturing corporations paid 30 to 34 percent of all corporate tax payments for state and local taxes, social security and payroll taxes, excise taxes, import and tariff duties, environmental taxes and license taxes. Since many small manufacturers are not incorporated and pay individual taxes as sole proprietors, the tax revenue generated by all manufacturers is impossible to calculate.

In summary, it's smart, not stupid to "Buy American" because manufacturing is the foundation of the U.S. national economy and the foundation of the country's large middle class. Losing the critical mass of the manufacturing base will result in larger state and federal budget deficits and a decline in U.S. living standards. This, in turn, would result in the loss of a large portion of our middle class, which depends on manufacturing jobs. America's national defense will be in danger, and it will be difficult, if not impossible to maintain the country's position as the world's super power. "Buying American" will help ensure that American manufacturing survives and grows in the global economy.