Economist Robert Pollin explains in this interview how government buying decisions can help boost U.S. manufacturing.
This should be a no-brainer: As much as possible, every dollar our federal government spends should help support American jobs and bolster the American economy. But that’s not happening to the extent that it can – and should.
There’s an opportunity to turn that around, though, and that is what brought economist Robert Pollin to Capitol Hill this week, where he pressed the case for how the federal government could use its buying power to strengthen U.S. manufacturing.
Pollin, who is co-director of the Political Economy Research Institute at the University of Massachusetts-Amherst, presented his new report, “Strengthening U.S. Manufacturing Through Public Procurement Policies,” at a briefing in the House Transportation and Infrastructure Committee hearing room.
That room was where the House version of a five-year surface transportation bill that was eventually signed by President Obama last week was forged. That roughly $300 billion bill is the largest measure to come out of the current Congress that could be used to bolster manufacturing jobs. It contains a “Buy America” provision that, if administered properly, could be critical in moving the economy to sustained full employment.
“The message is we have a tool, it’s on the books, it’s called ‘Buy America,’ focused on the transportation sector. It’s a way we can expand job opportunities [and] strengthen manufacturing,” Pollin said in an interview. “The tool itself has not been used adequately [and] there are some basic things we can do to strengthen it.”
Much of the report focuses on federal transportation spending, but its core findings apply more broadly. It criticizes current Buy America requirements as “too low,” says that monitoring and enforcement are lacking, and concludes that too many contracts escape even the meager Buy America requirements that exist because of administrative waivers.
Perhaps most significantly, the report challenges the idea that federal contracts, particularly in areas that involve manufacturing, should primarily go to the lowest bidder. The report instead endorses the idea that contracts should be awarded based on which firm delivers the “best value” for the economy as well as for the government’s immediate bottom line.
Federal procurement patterns that favor lowest-bid contractors even with Buy America requirements suggest that “the broader benefits generated by domestically based manufacturing projects are likely being undervalued,” the report says. Those benefits would include “strengthening innovative manufacturing firms in the U.S. as well as generating more jobs, better jobs, and better access to job opportunities, including for women, minorities and recent labor market entrants.”
Best-value contracting is a trend that is catching on at the municipal level, thanks in part to the work of grassroots organizations pressuring local and state officials to leverage government spending to create job opportunities to people in those communities.
The Los Angeles Alliance for a New Economy (LAANE) helped pioneer the U.S. Employment Plan in 2014 to get that city’s transit authority to require a Japanese light-rail car manufacturer to have American workers doing most of the manufacturing and assembly work. Since then, the Chicago Transit Authority has announced that it will evaluate local job-creation and workforce plans in deciding who gets a $2 billion contract for new rail cars. And Amtrak will also use the U.S. Employment Plan model in future Amtrak Acela cars.
Winning the ability to move these contracts runs against the culture that conservative lawmakers usually seek to impose, which only considers which firms offer the lowest bid without considering the consequences of a bid that is low because the bidder is depending on overseas products and low-wage labor.
Enforcing these contracts also requires vigilance. Advocates for American manufacturing were able to get written into the newly passed roads and transit bill, the Fixing America’s Surface Transportation Act, a requirement that the percentage of American-made steel and components used in buses and rail cars purchased with federal funds has to be 70 percent, up from 60 percent in current law. But the current 60 percent requirement is not being met, Pollin said, because of loopholes and workarounds. “If people think what they passed is a 70 percent domestic content requirement, at least make sure that it is at 70 percent,” he said during the briefing.
Also, “making sure that the monitoring is actually taking place” is important, he said, because many municipalities – and for that matter federal agencies – are not well equipped to police the Buy America standard, Pollin said.
But the effort to ensure that our tax dollars buy more than things like buses and rail cars – that they actually buy jobs, economic opportunity and a sorely needed revitalized manufacturing sector – is worth it.
“We’ve lost 5 million manufacturing jobs,” Pollin said, and a country that does not have a strong manufacturing sector “isn’t going to innovate” because manufacturing tends to drive the search for efficiencies and increased productivity. “The only way to accelerate productivity growth,” Pollin said – and to bring about the sustainable full employment we need – “is to accelerate manufacturing growth.”
That’s why among the top economic issues we debate during the 2016 election, both at the presidential level and at the state and local level, has to be the need to use our federal dollars more effectively to boost manufacturing and create good jobs.