More States Use Purchasing Power to 'Buy American,' Create Jobs

Local governments adopt preference laws for spending to promote manufacturers.

March 7, 2011, 4:30 PM

March 8, 2011— -- State and local governments, which spend close to $2 trillion annually on goods and services, are increasingly trying to leverage their purchasing power to favor American businesses and create jobs.

Twenty-one states had "Buy American" laws through 2009, according to the National Association of State Procurement Officials, and nearly every state has implemented preference statutes for buying from in-state producers, many added since the recession began.

In Minnesota, law enforcement agencies must buy uniforms and protective gear that's made in the USA, and natural resources officers can only ride all-terrain vehicles built in the state.

Illinois agencies in the market for plastic goods must favor companies that use by-products of Illinois corn. State contracts for printing services are given out first to companies that use ink derived from Illinois-grown soybeans.

North Dakota mandates that state office buildings can only fly American flags that were sewn together on American soil.

"They all are aiming to achieve the same thing: get that economic value out of public spending," said Stacy Mitchell, a senior researcher with the Institute for Local Self-Reliance.

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Most states provide exceptions to their rules, allowing purchasers to get their goods elsewhere if similar items aren't available in the U.S. And there's little indication the laws are rigorously enforced.

But Mitchell said the measures can make a difference, particularly as states broaden the use of preferences for state contracts, favoring local businesses even if their prices aren't the lowest.

"A pretty large share of dollars the state spends with local businesses go into local wages. The business is also sourcing some of the stuff it needs to operate from other local businesses. And so there's just more economic activity, more income, and that means more tax revenue," she said.

Critics say purchasing preference laws put taxpayers in a bind, forcing government agencies to choose from a limited selection of goods and services, some of questionable quality and many that could cost more than those found outside the state or overseas.

Legal experts question whether the laws run against international trade agreements and possibly violate the Constitution, which says only the federal government can regulate interstate commerce, though no legal challenges have occurred.

"Local preference laws distort economic markets, serve as a barrier to free competition, and increase procurement costs because of the need to verify that businesses or products qualify for a socioeconomic benefit," said Matt Grayson, a spokesman for the National Association of State Procurement Officials.

'Buy American' or' Export American'?

Some experts say the initiatives, while well-intentioned, are misguided and not forward looking since many goods are an amalgam of foreign and American made or assembled.

'"Buy in America' is frequently trapped by its focus on consumption, and in the long greater scheme of things, seeing America as a nation of consumers is not as healthy a place to be as seeing America as a nation of people thinking about production, innovation and exports," said Mark Muro, a senior fellow with the Brookings Institution.

"To the extent a state engages in bolstering the export standing of its firms, that might be a better, more powerful response," he said.

But to many of the state lawmakers behind the preference laws, it's ultimately about sending a message.

"The laws make all the different units of government think about buying local, and they should," said Minnesota State Rep. Tom Rukavina, who happily points out that he only wears underwear made in the USA. "It's taxpayers' money and a lot of these taxpayers depend on manufacturing jobs that are here in the U.S. and we're losing more and more of them."

Rukavina, a Democrat, sponsored a Minnesota law that bans the sale of any American flag not made in the U.S. -- the only law of its type in the nation. He said the law is important, but not necessarily for economic reasons.

"Whether state agencies are buying a safety vest made in Minnesota or a uniform made in Chicago, people need to think about this," he said.

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