In his inauguration speech, President Trump promised: “We will follow two simple rules: Buy American and Hire American.” The president will sign an executive order Thursday – titled “Strengthening Buy American Preferences for Infrastructure Projects” – that will further bolster these key pillars of his economic program.
Each year, more than 30 federal agencies award over $700 billion in federal financial assistance to more than 40,000 non-federal recipient organizations. This assistance comes in the form of loans, loan guarantees, grants, cooperative agreements, insurance and interest subsidies.
A more granular look at this federal financial assistance reveals that billions of taxpayer dollars fall through possible gaps in Buy American coverage.
Consider that, in the 2016 fiscal year, of the 265 listings in the Catalog of Federal Domestic Assistance for infrastructure or construction projects, more than 200 did not require Buy American considerations. These projects across 14 different agencies added up to over $45 billion of expenditures.
The Buy American executive order the president will sign Thursday will make progress in closing potential gaps in coverage.
This new executive order directs the head of each executive department and agency administering a covered program to “encourage recipients of new Federal financial assistance awards to use, to the greatest extent practicable, iron and aluminum as well as, steel, cement, and other manufactured products produced in the United States in every contract, subcontract, purchase order, or sub‑award that is chargeable against such Federal financial assistance award.”
The types of infrastructure potentially covered run the gamut from bridges, water infrastructure, and sewer systems to broadband Internet and cybersecurity.
By extending Buy American principles to more federal financial assistance programs, this new executive order further reinforces the Trump administration’s Buy American preferences. When taxpayer-funded spending is used to Buy American, Americans can reap the benefits in three ways.
First, Buy American programs create good manufacturing jobs at good wages and thereby help lift more workers into middle-class prosperity.
Second, according to ballpark estimates, about 20 cents on every dollar spent on Buy American tend to come back to the government in the form of taxes paid by corporations earning profits on Buy American projects, workers earning wages on these projects, and states deriving more sales tax revenues.
Third, Buy American spending can strengthen our manufacturing and defense industrial base, including the manufacturing critical to economic prosperity and pillar industries like steel and aluminum that are vital to national security.
This latest Buy American executive order is the progeny of Executive Order 13788, signed April 18, 2017. That executive order sought “specific recommendations to strengthen implementation of Buy American Laws, including domestic procurement preference policies and programs.” Thursday’s new executive order implements a key recommendation.
The earlier executive order also has significantly strengthened enforcement of our existing domestic preference programs by requiring a more judicious use of waivers – historically a major source of leakage of dollars covered by Buy American requirements.
Compared to 2016, waiver usage is dramatically down at agencies ranging from the Environmental Protection Agency to the Federal Highway Administration.
Spending on American-made products during the Trump administration has increased by $24 billion over the previous three-year average. At the same time, use of waivers to justify the purchase of foreign-made goods declined by 16 percent government-wide from the 2017 fiscal year to the 2018 fiscal year, resulting in a 10-year low in spending on foreign-made goods.
Together with tax cuts that stimulate investment; deregulation that makes U.S. manufacturers more globally competitive; and tough trade actions that level the playing field for American farmers, ranchers, and workers, Buy American policies are helping to rekindle optimism and prosperity.
As President Trump has said, “economic security is national security.” There is no better example of this than the benefits that Buy American, Hire American programs bring not just to our working families but also to our defense industrial base.
