Policy

Americans Overpay for Biden's 'Buy American' Plan

These rules drive up costs and distort markets while letting politicians claim credit for defending domestic industries from foreign competition.

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When the transit agency that serves Washington, D.C., replaced its aging trains during the last decade, it ended up paying about $400 million more than global averages—the equivalent of an additional 150 cars.

One major reason for the higher costs, according to economists with the American Action Forum who studied the D.C. Metro's procurement process, was a federal mandate first imposed in 1982. It requires that equipment purchased by federally subsidized transit agencies contain at least 60 percent American-made components.

Such "Buy American" rules for government purchases, which apply to a wide range of goods, have been around since the heyday of protectionism in the 1930s. They are political tools that drive up costs and distort markets while allowing politicians to claim credit for defending domestic industries from foreign competition. President Donald Trump expanded "Buy American" rules as part of his administration's attack on free trade, and President Joe Biden has doubled down on that misguided policy.

"The previous administration didn't take it seriously enough," Biden said on January 22, before signing a series of executive orders that restricted the process for granting exemptions from the government's existing "Buy American" rules and created a new White House office to oversee a government-wide "Made in America" push. In another order, Biden instructed federal agencies to "increase the numerical threshold for domestic content requirements for end products and construction materials," although the specifics will vary from item to item. Trump may have been more outspoken about his anti-trade views, but Biden likely will prove to be the more competent protectionist.

The cost of "Buy American" provisions can be significant. An analysis by the Peterson Institute for International Economics, a pro-trade think tank, found that "Buy American" rules on the books in 2017 cost taxpayers $94 billion that year—$745 per household.

These rules not only require the government to overpay certain vendors; they also distort the market in other ways. One potential government contractor might get an advantage over another because it makes widgets with 61 percent of the components produced in America instead of 58 percent. Favoring one over the other is purely arbitrary in an era when global supply chains mean everything from N95 masks to subway cars are the product of cross-border trade.

Overpaying for subway cars didn't make the D.C. Metro safer or more efficient. All it did was force riders and taxpayers to spend more for less. The same will be true of Biden's policies.

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  1. WMATA where I learned early in my career about the corruption of government forces. I learned how the extra requirements by government are easily skirted and have no benefit. Meeting with WMATA was always eye opening.

    1. This has to be like the 100th boehm article where I mention this…

      Why doesn’t boehm mention the labor unions? While buying trains with 60+% American parts may increase the cost, how much is that increase compared to the increase from inflated wages mandated by the Davis bacon act and various other pro union legislation? I’d be willing to be the increase in labor costs is larger than the increase in locally sourced parts.

      Also, if you could get rid of all the union coercion laws, like Davis bacon, throughout the supply chain the cost of the locally sourced parts AND the labor costs of the overall project would drop. Lowering the overall cost for the project, saving taxpayers millions of dollars, and helping lower inflation and the cost of living.

      1. My “pull a number from my ass” estimation is Davis-Bacon adds about 5% to a typical utility construction job. At least in this area. It depends on the project location. And how clever the project manager is.
        For our projects, Buy American is less of a cost thing (it does add but very little overall) and more of a “can I get that in a timely manner.” Slowing a job site down costs everyone money.

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        2. Firstly, you’re probably breaking labor law if Davis bacon only increases costs by 5%. I bid my labor (construction laborer class 1 in Pennsylvania) at an average of $20/hr on private jobs, but the prevailing wage is $52-$54/hr this year for public jobs depending on county. So over 2x my typical labor costs. Even when fenangling hours on the site and amount of workers, it’s pretty hard to make a doubling+ of labor costs only come out to a 5% increase.

          Secondly, it’s not just the labor on the project site itself. It’s the added labor costs throughout the entire supply chain.

          Thirdly, buying American means shipping goods with lots of trucks. And that means lots of fuel. As Biden Jack’s up energy costs the cost of LITERALLY EVERYTHING will rise. I’m sure it’ll be great for poor people when their necessities skyrocket.

          It’s almost like you’d think the democrats were trying to destroy the economy…

          1. Many of our jobs have both Heavy and Building aspects to them; provided it can pass the straight face test the funding agencies allow selecting the better fit.
            Equipment operator rates aren’t much higher for wage rate jobs. And contractors put their better crews on wage rate jobs so they get done quicker with fewer headaches.

            Much of the installed equipment does not have a Buy American requirement so not cost increase as a result.

            Other project costs include design, inspection and project management. None of those are affected wage rates.
            Your mileage may vary.

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            2. It seems you’re being intentionally vague because you work for a municipality or some entity that unions already have by the balls. There’s no way any construction contractor is paying even their best laborers a wage close to prevailing, which would be equivalent to a salary and benefit combination worth nearly $125,000 per year in my area. How many construction workers do you know making that? Right, none. So there’s no way increasing wages that much only increases your cost by 5% even with speedier work.

              You’re pulling numbers out your ass because if you looked at the real numbers you’d realize how much money you’re wasting and look like a dumbass.

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  2. As Koch / Reason libertarians, we evaluate a President’s economic record according to one metric — are billionaires (especially our benefactor Charles Koch) getting richer at an acceptable rate?

    Just 3 months after inauguration, it’s clear the Biden economy is a smashing success by that standard. Mr. Koch, for example, has earned nearly $6,000,000,000 this year. IOW Biden is doing exactly what we libertarians hoped for when we overwhelmingly endorsed him.

    #InDefenseOfBillionaires

    1. Yeah Koch is a notoriously fanatical Biden supporter, and whenever I talk to Democrats I only ever hear good things about Koch. /s

  3. Biden last week, “Our nation of slaves cost $15/hr (min wage).”
    Biden this week, “Stop buying foreign slaves!”
    Biden and the left every-week, “You don’t own you; [WE] and our Power-Mad party of Gov-Gun toting criminals own you!”

    1. …and if you TRY to create what foreign slaves make; We’ll throw the IRS, EPA, OSHA, DOL, and thousands of other Power-Mad bureaucrats, labor laws and taxes at you while [we] *force* you to pay to subsidize the freight of foreign commodities by threats of Gov-Guns. [We] Nazi’s (def; National Socialists) will do it all under the idiotic disguised excuse of “The Weather Changes” or “Racism” publicly promoted by T-as in Trillions of your labor dollars stolen from you by even more threats of Gov-Guns.

      You see; In the USSR your actions don’t produce ‘fairness’ or ‘justice’ results like mother nature and USA’s individual freedom intended. In the USSR the gang of Gov-Gun toting criminals TAKE whatever they want by ‘gangster’ power (i.e. Democracy).

      Democrats theology: Gov-Gun Power = Wealth
      Republicans theology: Value = Wealth

      1. Love the insanity. You should analyze your violence

        1. My dog barks once in a while too; but that kind of simplistic reaction wouldn’t doesn’t drive me to worship him as an almighty Gov-God savior.

        2. I thought you were dead, Hihn.

          1. He was just in rehab.

        3. If you don’t commit suicide you’re racist.

          1. Shut up traitor

    2. Point & Case: Let’s pretend I designed and make special-use drill bits for a living. After years of research and design the flippy corp in China steals the design. My next (as in RIGHT NEXT DOOR) neighbor needs my drill bits. To sell to my neighbor I charge.
      $15/hr for every ‘USA’ slave in my employ.
      50%+ taxes between income, sales, S.S., Medicaid (Socialist Policy).
      $4.99 for shipping.

      Flippy flop corp in China; Gets waivers on all taxes, Pays nothing for Research and Design, Get USA paid (subsidized) shipping and delivers my drill bits for $0.99. (!!!-Cheaper than JUST shipping next door-!!!).

      There’s only ONE way in which it costs more than 3-Times to buy something next door than to have it packed and shipped from half way around the world. A corrupt system using the *Power* of Gov-Guns to *force* it to exist.

  4. Rational self-interests is usually the best guide to policy, and market restrictions simply aren’t in the best interests of the American economy or the American people. The problem with buy American is that it’s bad for the American economy and hurts American consumers.

    1. Earlier in my career I was managing Porkulus projects for a state agency (I was doing other things too). This state happened to be ahead of the other 49. The mandate was to get Americans back working so we reviewed, approved and funded the projects quickly. Several years later, during a project audit, the federal employees flagged that we had not followed documenting a Buy American chain of custody per their guidance. Our final completion date was prior to them issuing the guidance. They failed to understand the relevance. They also praised another state (Connecticut?) for how they were adhering to this guidance with some of the projects that were just getting underway. I mentioned that ARRA was to get people back to work and that 3 years later to start projects seemed…slow.

    2. So, not defending a strict “Buy American” policy, but what do you think about the idea of issuing restrictions against purchasing foreign slave labor produced items? (Uighur labor comes to mind.) I suppose I can see an argument that upholding ethics like that should be left to individual companies and consumers, instead of the government, simply because of the slippery slope thing, but it feels dissatisfying.

      1. It’s worth considering, and there is certainly an ethical case for it.

        A big practical problem is that many (most?) products are made up of parts that are made up of other parts that are made up of other parts. So, you get into issues of tracing it all down and judging how much impurity you allow in a product.

        1. Ironically, it seems like the sort of thing I’d expect Democrats to be all over, since they are the more typical market for “fair trade” branded products. But then, as far as I know, that’s all privately done, so maybe there’s my answer right there.

      2. “What do you think about the idea of issuing restrictions against purchasing foreign slave labor produced items?”

        Americans who prefer not to buy products made in China should be free not to do so. Those Americans who care about their money, themselves, and their family’s standard of living more than they do about the Uighurs or the people of Hong Kong should be free to make their own choices, too.

        If you want to try to persuade more Americans to refuse to buy Chinese manufactured products, you should be free to do so. If other people don’t share your qualitative preferences, you should learn to live with that.

        If people are being treated like slaves in the United States, the people who are abusing them should be free to face a jury of their peers. However, the U.S. government can’t control working conditions in China, and using the U.S. government to inflict your qualitative preferences on your fellow Americans and forcing them to sacrifice their standard of living isn’t the solution. Remember, every dollar an American consumer saves buying Chinese manufactured goods goes to do something that consumer couldn’t do with that dollar if they had to pay more for the same stuff.

        Rights are the obligation to respect the freedom of other people to make choices for themselves, and the legitimate purpose of government in a free society is to protect our right to make choices for ourselves. The legitimate purpose of authoritarian government is to inflict some people’s qualitative preferences on those who don’t share them.

        If you want to force average Americans to sacrifice their standard of living for the benefit of people in China, then you might as well be a progressive–because using the coercive power of government to force us to make sacrifices for the benefit of other people is what being a progressive is all about.

        1. How far does that extend?

          “Genuine Uighur Leather Lampshades!”

          Would pushing a restriction on items made from the body parts of murdered ethnic minorities in China still be inflicting my qualitative preferences?

          It seems like a fairly cheap sort of libertarianism to only care about the rights of Americans.

          1. “It seems like a fairly cheap sort of libertarianism to only care about the rights of Americans.”

            Agreed. Which is the one of the big reasons I am pro-immigration.

    3. Agree 100%. Sadly an uphill battle to get Americans to understand that.

  5. No big deal.

    First, these wise people are spending other people’s money (and mostly money from other people who don’t “deserve” it).

    Second, Boehm analyzed the wrong economic equation. The actual goods or services have nothing to do with the money spent; its all about the cost of political advantage.

    “Buy American Votes!”

  6. Biden is doing exactly what a lot of folks said he would do. But, hey; he’s not tweeting about it, so no big deal.

  7. So what? Reason writers mostly only care about mean tweets. You could support small government, but you won’t when it’s against shallow fashion trends.

    1. “only care about mean tweets”

      Keep telling yourself this fairy tale version on Trump’s presidency.

      1. Which part of Biden’s presidency should libertarian capitalists prefer to Trump’s–excluding Trump’s tweets?

        1. Well bidens dog bit like 4 staffers and wasn’t put down. So maybe white retard will go with Biden is more humane to animals?

          1. Biden’s dog only bites black people. Racist dog.

        2. Biden’s press conferences were…conference was less combative than Trump’s were.

        3. Not much, but at least Biden isn’t trying to overthrow election results, whip up a crown to attack his own Vice President, and destroying his own political party.

          1. crown -> mob

            1. That’s a weird typo.

              1. Yes, it is.

          2. LMAO… “overthrow election results” that dumped 600,000 mail-in ballots running 94% in Biden’s favor in a SWING state.

            What is that; like “overthrowing” Biden’s USD (human labor) counterfeit printing press? Just ask the criminals in prison (70% Democrats) and they’ll tell you exactly what you just stated. It’s everyone else’s fault!

          3. “Biden isn’t trying to overthrow election results, whip up a crown to attack his own Vice President, and destroying his own political party.”

            So, we’re not talking about government policy, then?

            There is no policy or law from Biden and the Democrats that is better than Trump and the Republicans–that you can think of–which would be a good reason for libertarian capitalists to prefer Biden to Trump. Is that right?

            1. True. A lot of what was wrong with Trump was his horrible, reprehensible, sociopathic personal character. I know you don’t think that counts, but that is just your opinion.

              1. Who cares if Biden and the Democrats pack the Supreme Court, sacrifice our standard of living on the altar of climate change, raise taxes, squander trillions out of our future paychecks on stimulus for their favorite cronies, come after our gun rights, violate our withdrawal agreement with the Taliban, institute Medicare for all, and launch a war on conservative speech, etc., etc.?

                That’s okay so long as Biden has a good character?!

                All ethics begins with agency. Morality isn’t even possible without agency, and libertarian ethics, in particular, is all about respect for the right of individuals to make choices for themselves. Biden and the progressives, meanwhile, are all about using the coercive power of government to force us to do their will. The idea that someone could both be of good moral character and openly advocate using the coercive power of government to stop people from exercising their agency is ridiculous from a libertarian perspective.

                There are no moral authoritarians from a libertarian perspective. The garbage you’re referring to as character is actually about nothing but being fashionable. And In a world where being immoral is fashionable, being unfashionable may actually be a moral imperative–and probably is right now.

                Jeane Kirkpatrick had it that one of the important differences between authoritarianism and totalitarianism is that where authoritarians are mostly satisfied with the government controlling what we do, totalitarians insist on controlling what we think and how we feel. If there is any aspect of our agency at all that requires respect as a moral imperative, surely it’s what we think and how we feel.

                Biden, the progressives, and the Democrats are obsessed with controlling that. Biden and the Democrats are of awful moral character–and if being of awful moral character is fashionable, that doesn’t make it any better. Trump wasn’t entirely virtuous, from a libertarian perspective, but at least he was unfashionable. And even though he was wrong on some issues, Biden and the Democrats are wrong on every issue I can think of from a libertarian capitalist perspective–including their ethics.

                1. P.S. It appears that Biden has been using his son to peddle influence for a very long time.

                  A son of Democratic vice presidential candidate Joe Biden was paid an undisclosed amount of money as a consultant by MBNA, the largest employer in Delaware, during the years the senator supported legislation that was promoted by the credit card industry and opposed by consumer groups . . . .

                  MBNA’s consulting payments to Hunter Biden, first reported by The New York Times, followed his departure in 2001 from the company, where he had been an executive . . . . At the time Hunter Biden was receiving consulting payments from MBNA, he also was a Washington lobbyist at a firm he had co-founded . . . .

                  When the Senate Judiciary Committee approved the bill early in 2005, Biden, Dianne Feinstein of California and Herb Kohl of Wisconsin were the only Democrats to vote with the Republican majority. Biden also voted for the bill on final passage in the Senate, while Obama voted against it.

                  MBNA employees have poured more than $200,000 into Biden’s Senate campaigns over the past two decades, making donors working for the credit card company the senator’s largest source of campaign money.

                  —-CBS News

                  August 25, 2008

                  https://www.cbsnews.com/news/mbna-paid-bidens-son-as-biden-backed-bill/

                  Joe Biden is a scumbag politician, who has been a politician for more than 50 years. To call him a man of character is absurd. He’s a scumbag politician from central casting who was picked by Obama for being an insider with union ties and his fundraising acumen, and he only won the primaries because he presented himself as less of a social justice warrior and less of a committed socialist than his opponents. He is not a man of high moral character by any definition that makes sense to me.

                2. Very well put.

              2. So…mean tweets, and other similar stuff.

                1. She stepped on her own dick right there.

              3. So Biden’s rapes, fucks his own daughter, sells his office for profit, etc.. but you think he’s a great guy.

            2. to the left, asking for an audit of the election = “trying to overthrow election results”. and implementing new laws to make it harder to cheat next time = “trampling on voting rights”.

          4. Why would Biden overthrow election results that illegally installed him?

          5. Biden is destroying his own VP’s political career by putting her in charge of the border crisis.

  8. Is anybody missing trump yet?

    1. Is it still legal to miss Trump? I thought that was sedition.

      1. It’s ok to think it, but if you want say it, you have to use dog whistles.

        1. If enough folks say the miss Trump, congress will hold another impeachment hearing.

          1. If things get bad enough, they might.

      2. I heard Trump was a big spending Republican so libertarians shouldn’t vote for him.

        That was about 6.1 trillion in new Biden spending plans ago.

        1. Yet many progtards who post here insist republicans spend more.

          Progs are very stupid people.

  9. This article brings to mind a tale within a novel (Asimov or Heinlein?) which I read a few decades ago: A group of space-going investors were stranded on an uninhabited planet. They were there for five years before being rescued. During that time they all became filthy rich by trading their hats with each other.

  10. “When the transit agency that serves Washington, D.C., replaced its aging trains during the last decade, it ended up paying about $400 million more than global averages—the equivalent of an additional 150 cars.”

    What was that as a percentage? Not being intimately familiar with the cost of subway cars, I have no idea if that was a 1% overspend or 1000%.

    1. As of 2020, DC Metro had 1,318 cars in service.

      That extra 150 cars they would have had accounts for more than ten percent of their fleet. Not an insignificant number.

      (https://www.google.com/search?client=firefox-b-1-d&q=how+many+subway+cars+dc+metro)

      1. But the U.S. Gov-Gods would’ve STOLEN back 50% of those American Producers value; so the Gov-Gun toting buyers still would’ve been better off dealing in the USA. Within such narratives lies the deceit of a National Socialist country on it’s way to utter destruction/depression (as Democrats being in charge have a running record of creating).

      2. I suppose that would have been a fairly obvious search for me to perform, in retrospect. Thanks!

        1. Yeah. I remember when I would have had to go to the library and spend a couple of hours finding that information. You are welcome.

  11. Subway cars are 5000000 each typically. Source: I worked for a supplier of machinery for making rail cars.

    1. Speaking from a position of complete ignorance on the subject, that seems high. Even truck tractors are “only” $250k. Because they’re a specialty product with low volume?

      1. Average cost if a new (2021) DC Metro car is 2.52 million.

        Washington Post https://www.google.com/search?client=firefox-b-1-d&q=HOW+MUCH+DOES+A+DC+METOR+CAR+C0ST+TO+BUILD

      2. $400 million divided by 2.52 = 158.7 cars.

  12. The other issue with big stimulus initiatives is labor and material supply. There are not stacks of already designed projects, warehouses of building materials and barracks full of qualified contractors waiting for starting gun to be fired.
    You end up with sloppy plans, long waits for essential materials and lesser skilled workers. And since contractors are already stretched, they bump up the price (in addition to hikes for wage rate and Buy American requirements).
    PRE stimulus 2021, we have had a simple project bid twice where low bidder was more than double the 2019 price (plus 5% per year). Can’t speak for other areas of the country but it would be bad here.
    During ARRA, we hired several engineers to meet the workload that had to be let go after. And the projects that were more likely to have been instead done a few years later were done immediately. Leaving less work for the following years.

    1. Yeppers. I was developing project and funding for conservation grants during Obama’s “stimulus,” and had been doing so since the late ’90s. There are very, very few “shovel ready” projects of any kind of any significant size. Large projects generally require many partners and several funding sources. Delay of more than a few months in getting all the necessary pieces together often means a complete re-writing and restructuring of the proposal. It can get very complicated.

      There was one major project funded under Obama (in 2012) in the county in which I was working, for $200 million. They finally finished it about three years ago.

  13. More tears for the liberaltarians who voted Biden.

    1. Not at all. Every day when I check Charles Koch’s net worth, I know I made the right call.

      #LibertariansForBiden

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  16. it ended up paying about $400 million more than global averages—the equivalent of an additional 150 cars.

    Wait, wait, wait – you’re telling me the average cost of a train car is 2.5 million dollars?

    You have to either be fucking kidding or you’ve moved a decimal place somewhere.

    1. 3.2 million, by those numbers. 5 million according to rbike, above. Jefferson’s Ghost was saying that DC Metro only has 1300 cars total, so, I guess they’re a specialized product. It *does* feel high, but then, I’ve never tried to make one, either, so I could be talking out of my ass.

      1. The company I was supporting had a contract of $500 million for a hundred cars. It was not WMATA. My previous experience with WMATA would lead me to believe that they want what they think they need, regardless of cost. Those cars are manufactured inside and out with stainless steel. They need to meet a lot of safety requirements and are actually crash tested. Major manufacturers are Kawasaki, Nippon Sharro = Midwest. Kinki Sharro = California. Bombardier = Canada, Northwest. A few other smaller firms. The capitol requirements are pretty high to make a car. Lots of custom spotwelding equipment in very large buildings. The profits must be there as a lot of people where tooling up to make them 10 years ago.

        1. All stainless would definitely up the price. Custom machinery does too.

          Sweet, thanks for the info.

      2. Wow, I don’t know how I fucked up on the calculator that badly. Punched in 125 instead of 150, apparently. Not 3.2m, 2.666m instead. Yeesh.

    2. Haha. You must be kidding. I would’ve guessed twice that, at least. The state of WA pays $30k just to put up a sign on the side of the road. And that was 10 years ago. Probably twice that now.

      No wonder they want higher taxes. There’s just nowhere left to cut spending! Haha.

  17. All it did was force riders and taxpayers to spend more for less

    What part of ‘stimulus’ do you not understand?

    C’mon man!

  18. I fucked a moose once. I mean I was drunk and all, but I weren’t that drunk.

    1. Interesting story, Dee.

  19. Nice article. Information will be helpful for me.

  20. 2.1 trillion in stimulus, 1.9 trillion in infrastructure, 2.1 trillion for family leave and free community college…. pretty soon you’re talking real money.

    1. And another $300 million to cover the costs associated with renaming the country The United States of the Weimar Republic.

  21. Oh Why doesn’t boehm mention the labor unions? While buying trains with 60+% American parts may increase the cost, how
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    much is that increase compared to the increase from inflated wages mandated by the Davis bacon act and various other pro union legislation? I’d be willing to be the increase in labor costs is larger than the increase in locally sourced parts.

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