Why aren’t federal agencies helping to ‘Build Back Better’?
Polls continually show that U.S. consumers want to buy American-made products. In particular, Americans don’t want to buy from China, and they understand that buying “Made in USA” can support good jobs and economic growth at home.
Unfortunately, federal government programs often incentivize foreign manufacturing. That’s because the United States stands alone among the world’s major industrial nations in lacking a coordinated strategy to grow domestic manufacturing. In fact, the stated goals of many important federal agencies actually serve as a barrier to developing new supply chains in the U.S.
This lack of concern for domestic manufacturing is exemplified by the National Economic Council, the key White House body tasked with coordinating economic policy. Despite frequent presidential rhetoric — such as President Biden’s “Build Back Better” agenda and former President Trump’s pledges to “Buy American” and hire American — the NEC still lacks any mandate to rebuild supply chains at home.
A look at various federal agencies reveals few goals to reshore important production. For example, the Department of Energy’s Loan Program Office provides billions of dollars in loans for power generation projects throughout the nation. However, the DOE doesn’t specify where the resulting power grid infrastructure should be manufactured.
Similarly, the Commerce Department’s Economic Development Administration focuses on “innovation, emerging technologies, intellectual property — and data.” This betrays a glaring lack of concern for the production side of digital technologies. The EDA simply aims to “Strengthen IP protection” and “Advance Innovation.” However, R&D that the agency funds often ends up being manufactured overseas.
There’s also the recent CHIPS for America Act, which aims to stimulate domestic research and development for semiconductors. Unfortunately, the legislation fails to sufficiently require chipmakers to locate new production in the U.S. And that perpetuates America’s longstanding pattern of inventing groundbreaking technologies — like solar panels and computer chips — and then manufacturing them overseas.
The federal government spends roughly $600 billion annually on procurement. Spending that taxpayer money specifically on American-made products rather than imports could provide a huge boost for domestic companies. But too often, federal agencies simply purchase the cheapest possible goods, regardless of where they’re made.
Most industrialized nations take a different approach. They use government procurement to support their own factories. And they wisely try to sell their goods in the U.S. but avoid buying Americanmade products in return. For example, India maintains a 125% tariff on imports of cars and trucks — a policy it has used to build the world’s fourth-largest auto market. Virtually every car on India’s roads is made in India. In contrast, the United States imposes a mere 2.5% tariff on car imports. This allows multinational companies to build new auto plants in low-wage countries like Mexico and then sell cars very profitably to U.S. consumers.
Essentially, when policymakers talk about “boosting exports,” they’re missing the big picture. In order to rebuild domestic manufacturing, Washington must finally prioritize America’s home market — and help domestic manufacturers sell more products to U.S. consumers.
An analysis by the Coalition for a Prosperous America found that the domestic U.S. market for manufactured goods totaled $6.8 trillion in 2020. By comparison, exports totaled only $1.2 trillion in 2020. Exports simply pale in comparison to what U.S. manufacturers could gain from reclaiming more of their home market.
Unfortunately, U.S. manufacturers keep losing ground at home. Since 2002, America’s factories have lost 7.7% of their home market. Regaining that slice of the pie could add roughly $500 billion to U.S. manufacturing revenue and create millions of new jobs.
Fixing this will require a concerted, whole-of-government strategy. That means Washington doubling down on domestic procurement and insisting that federal agencies purchase goods from U.S. suppliers whenever possible.