Federal ‘Buy American’ Rules Cost Over $100,000 Per Job Created
In a rare instance of agreement, Republicans and Democrats have converged on the idea that “Buy American” provisions should be expanded in order to increase American jobs. But a new paper finds that existing federal rules impose high costs on consumers.
A September 2024 working paper published by the National Bureau for Economic Research (NBER) found the Buy American Act has created more than 50,000 jobs. Just one catch: Each one of those jobs costs the economy more than $100,000.
The Buy American Act of 1933 (BAA) is a New-Deal–era law that prohibits the federal government from purchasing foreign-made goods. The BAA’s mandate comprises two principal requirements: first, goods must be manufactured in the U.S.; second, at least 50 percent of the cost of inputs for final goods must be domestic.
The NBER paper found that removing the BAA’s provisions would eliminate 100,000 manufacturing jobs, each of which costs the economy $130,000. Nonetheless, both the Trump and Biden administrations have expanded the BAA.
In a July 2019 executive order, the Trump administration directed the Federal Acquisition Regulatory Council (FAR Council) to “most effectively carry out the goals of the Buy American Act.” Specifically, the executive order proposed increasing the domestic content requirement from 50 percent to 95 percent for iron and steel products, and to 55 percent
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