Buy America Is Not Protectionism

Posted by Frank W. Hardy Feb 7, 2009

Protectionism is the governmental act of shielding a national industry in a free market society. The US stimulus package exists not only in a non-free market atmosphere but also is designed solely for the United States. All American tax-payers must fund the package without options. There are no free market choices available to them and they do not have the opportunity to forego the purchase should they choose. They must partake without alternatives.

The package is not protectionist by design. It has one stated purpose – to stimulate the American Economy by, as stated by President Obama:

1. Increasing domestic job growth &

2. Free domestic consumer capital

Free markets allow market consumers to choose, for whatever reasons, between manufacturers. This stimulus package isn’t artificially limiting consumers’ choices by protecting US companies at foreigners’ expense. It has nothing to do with market consumers and their choice but makes the American tax-payer the consumer without choice.

The primary argument against Buy America is the package will be financed with debt purchased by other nations. The dispute makes an erroneous assumption that other nations won’t buy that debt.

• Only 38% of China’s US debt ($682 billion) is government securities but 47% of her GDP is exports ($489 billion a year to America.)
• Japan owns $578 billion of US securities and while the Yen is strong, Japan’s economy is also devastated.
• The UK owns $360 billion with a record low British Pound.
• The Euro and Rubble are at all time lows

The USA GDP is $14.3 trillion. She has a total $3.09 trillion in outstanding debt, with a current trade deficit of $790 billion. Her total indebtedness is 27% of her annual GDP – the best on the planet. If nations don’t buy the world’s largest consumers’ debt they won’t develop their economies.

References:

http://www.ustreas.gov/tic/mfh.txt

http://www.census.gov/foreign-trade/statistics/highlights/toppartners.html