Three Ways That “Buy American” Costs Taxpayers

In recent weeks, reports have indicated that the Trump administration is considering making significant changes to long-standing “Buy American” legal provisions. The administration is reportedly considering making it next-to-impossible for the federal government to procure critical healthcare supplies manufactured abroad, even if the foreign product is significantly cheaper than domestic products. In addition, federal agencies may face legal hurdles procuring medicines and medical devices produced in other countries even if these products aren’t manufactured at all within the U.S.

As a result of these policy changes, millions of Americans covered by healthcare plans sponsored by the Departments of Defense (DoD), Health and Human Services (HHS), and Veterans Affairs (VA) would face a far more difficult time getting access to the life-saving medications they rely on a daily basis. Given that roughly 80 percent of active pharmaceutical ingredients are produced overseas (mainly by U.S. allies such India and European countries), rapidly shifting supply chains would spell disaster for Americans struggling from COVID-19 complications.

The Taxpayers Protection Alliance (TPA) and other free-market groups are concerned that these protectionist measures will lessen the healthcare choices available to patients and cause unnecessary suffering. But these changes will also entail higher costs for taxpayers, as seen in areas of federal procurement already impacted by “Buy American” provisions. Below, TPA details 3 areas where these onerous procurement rules are already leading to increased taxpayer costs across the government:

1. United States Postal Service (USPS)

Over the past few decades, America’s mail carrier has accrued more than $160 billion in unfunded liabilities. USPS officials have repeatedly begged lawmakers for a bailout and infrastructure legislation introduced by House Democrats includes $25 billion in taxpayer dollars for the beleaguered agency. While the financial situation is not nearly as dire as bailout backers imply, the USPS certainly has a long run financial problem that will require systematic reforms to remedy. It certainly doesn’t help that the agency bounds itself to “Buy American” provisions whenever they have to make a major new purchase. Currently, the agency is the midst of awarding an estimated $6 billion to produce more than 180,000 new delivery vehicles.

While the agency is technically not mandated to follow “Buy American” restrictions, the Inspector General notes that the USPS, “prescribes a provision and clause for domestic preference when awarding supply contracts and has issued guidance for evaluating proposals offering domestic and foreign end-products in.” TPA’s 2019 report on the issue found that, should the USPS maintain that voluntary domestic preference, it could wind up costing taxpayers nearly $500 million over the next decade. As a first step toward reform, the agency should set aside its domestic preference and consider the lowest-priced, highest-quality trucks in its ongoing procurement process.

2. Government infrastructure projects

Unfortunately, domestic procurement provisions aren’t just limited to federal agencies. Jim Tymon, chief operating officer for the American Association of State Highway and Transportation Officials, notes that, “There are…requirements in federal law that require state DOTs and local transit agencies to buy American products as they construct infrastructure projects around the country.” Currently, the Illinois Department of Transportation is in the middle of a multi-year $600 million endeavor to reconstruct the traffic-plagued Jane Byrne Circle Interchange near downtown Chicago. David Schaper of National Public Radio notes that, “Just one recently completed fly-over ramp, from the northbound Dan Ryan Expressway, I-90/94, to the westbound Eisenhower Expressway, I-290, contains 6,900 cubic yards of concrete, 4.8 million pounds of structural steel and 2.5 million pounds of steel rebar. And all of those materials were made in the U.S., with much it coming from the steel mills of Gary, Ind., about 25 miles away.”

And since domestic-made steel is approximately 70 to 80 percent more expensive than steel produced abroad, domestic preference provisions will likely add hundreds of millions of dollars onto project costs. When taxpayers are forced to foot the bill for these expensive endeavors, domestic entrepreneurs are left with less investment income to expand their built-in-America businesses and hire workers across the country. There will always be transportation boondoggles, and House Democrats’ recently introduced $1.5 trillion infrastructure bill certainly won’t help matters. But at the very least, allowing for foreign procurement can keep taxpayer costs under control and allow for more sensible purchases.

3. Pentagon Contracts

Every year, the Pentagon issues approximately $300 billion in contracts with suppliers to procure everything from army boots to computer microchips. These costs add up quickly, particularly given the “Buy American” provisions that procurement staff is bound to. According to Pentagon spokesman Cmdr. Patrick Evans, “The DoD is required to Buy American first, as a general rule, under Federal Acquisition Regulation and Defense Federal Acquisition Regulation.” This requirement has led to a proliferation of bureaucracy, necessitating Pentagon staff to meticulously document where every small part of every machine or piece of equipment was produced.

In an interview with RealClearDefense contributor Sandra Erwin, former Pentagon procurement official Stan Soloway notes that Defense contractors must track the origin of each microchip component in the DoD’s sprawling computer systems, even though these contractors have limited visibility into the Pentagon’s supply chains. This detailed documentation is just the tip of the aircraft carrier when it comes to taxpayer costs. In 2018, the Government Accountability Office (GAO) reported that the Pentagon’s Defense Acquisition University had recently created a training course dealing exclusively with “Buy American” provisions.

In fact, 18,000 personnel completed this training in the first year alone, likely entailing significant instruction costs for the Pentagon (and thus, taxpayers). While the cost of this instruction wasn’t quantified by the GAO, the Pentagon has a well-documented tendency to spend beyond its means. And even when the Pentagon itself isn’t spending like a drunken sailor, Congress inserts earmarks into the DoD budget that reinforce bloated domestic procurement. In the FY 2020 Defense bill, for instance, TPA uncovered 785 earmarks totaling $16.1 billion. Cutting down on bloat will require barring these earmarks and also curbing “Buy American” provisions.

From USPS truck procurement to transportation boondoggles to Pentagon spending, “Buy American” provisions have achieved little at a gargantuan cost. It’s time to end, rather than double down on, these domestic procurement rules.