This is the Cato Daily Podcast for Tuesday, June 6, 2023.

I'm Caleb Brown.

So-called Buy American Policies Harm U.S. Businesses, workers, consumers, and taxpayers.

It's a bad idea that seems to get killed over and over and comes back every time.

Cato's James Back is his author of the new paper The High Price of Buying American, available today.

Buy American, the notion that it is preferable for Americans to buy American or be compelled by statute to buy American, perhaps merely

cajoled to buy American by statute. This seems like one of these ideas that are economically sort of difficult to justify and yet we see them crop up in legislation over and over again and the arguments seem to be largely always the same.

Is that fair?

That is fair. That's precisely what happens. I have an interesting vantage point here in that I'm of course a former member of Congress

So I know how hard it is to stand before a local constituents back home and explain to them

by buying America, which sounds so patriotic, it's not the best thing for America. It's rather like the concept of

comparative advantage itself. It's counterintuitive. That's not a word I would ever have used in a town meeting back home, but it simply means that what seems supposedly obvious is not in fact correct and what's correct is that buying American has the effect of restricting competition and restricting competition whether it's domestic or foreign, always shrinks to the economy ultimately and thus shrinks our future.

So buying American is not really good for Americans.

Well let's want to understand what the argument is then generally, which is when you buy a product that was made in

America you're keeping US dollars in the United States, those dollars get turned over, and that's preferable to sending

those U.S. dollars to China or India or Bangladesh or somewhere where a product may have been assembled and then just shipped over here.

Well, let's look at this, Caleb, from several perspectives. First, from the perspective of the American taxpayer. We want to make certain that our

tax money is used in the wisest possible way. By acquiring that we buy American, we are increasing costs of what we purchase and therefore we are spending more tax dollars when the buy America provisions are a requirement of government purchases.

Also, when a government as it's starting to do now is telling businesses that they cannot obtain governmental

subsidies unless they buy American. That has the effect generally of

increasing prices.

So it's what amounts to an invisible tax on consumer purchases.

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