This economic nationalism is advocated by Trump and Biden, and it would weaken the U.S. economy.
This economic nationalism is advocated by Trump and Biden, and it would weaken the U.S. economy.
T rump and Biden are finding some common ground. Recently the president again justified his moniker of “Tariff Man“ by reinstating taxes on Canadian aluminum. Meanwhile, former vice president Joe Biden has released his Made in America plan, a set of policies intended to strengthen domestic manufacturing. Both candidates are claiming to be the real champion of the American workers — advocating government action to protect them from foreign competition.
Yet, this economic nationalism advocated by both men will really just weaken the U.S. economy.
From an economic perspective, perhaps Trump’s biggest faux pas has been his intense focus on reducing immigration. According to the National Foundation for American Policy, immigration will have fallen by half since 2016 by fiscal year 2021 — and while COVID-19 has certainly worsened this trend, the fact remains that the Trump administration had reduced legal immigration well before the current crisis.
Broadly, reducing immigration slows down economic growth. In fact, certain policy measures (such as suspending H1-B and other work visas until the end of the year) will directly interfere with specific economic nationalist goals of the Trump administration — such as creating jobs for Americans, bringing jobs back from China, and ensuring that high-tech and manufacturing firms headquarter in the United States.
Keeping high-skilled immigrants out of the country, for instance, will lead tech companies to relocate their operations where the best workers are rather than create jobs in the United States. A recent paper from the National Bureau of Economic Research found that restrictions on H1-B immigration predominantly led to the offshoring of jobs to countries such as Canada, India, and China. Research from Georgetown has shown that Canada is increasingly pulling highly skilled workers away from the United States.
There are practical, real-world examples of this. Duolingo, a tech company currently headquartered in Pittsburgh, is considering moving to Toronto thanks to the suspension of the H1-B program. That’s bad for American workers — after all, only 20 percent of Duolingo employees are on some form of visa. This move from the Trump administration would cost a city recovering from the decline in manufacturing employment its first billion-dollar startup.
Biden’s immigration policy would be a substantial economic improvement over what we currently have, but he still brings the same protectionist instinct in other policy areas. His Made in America plan focuses heavily on tightening “Buy American” rules for government procurement, and reaffirms policies such as the Jones Act — a distortive protection for domestic shipping — as part of his infrastructure policy. Policies such as these will unfortunately make the reinvigoration of American infrastructure and industry harder, not easier.
The capital stock of the United States, from private factories and office buildings to roads and bridges, is getting old. Increased investment would create jobs and boost productivity and economic growth. One of the ways to increase investment would be by improving America’s public infrastructure. However, Biden’s focus on “Buy American” provisions would make his infrastructure plan all the less efficient.
Infrastructure is already expensive in the United States, and existing Buy American provisions are one of the reasons why. An analysis from Texas A&M found that Buy American provisions raise costs to taxpayers by 12 percent. Under Biden’s proposals for procurement ($400 billion) and research and development ($300 billion), Buy American provisions could effectively reduce their value by tens of billions of dollars. In order to strengthen the national economy, we should be looking to get the most out of public investments. Using the most affordable materials, regardless of origin, would mean more construction and jobs per taxpayer dollar.
The Jones Act, which requires ships on U.S. waterways be U.S.-owned, crewed, and built, similarly hamstrings American growth. Not only does the Jones Act increase prices, it undermines domestic industry and energy independence. Thanks to the Jones Act, New England has to import natural gas, because the Jones Act mandates that only U.S.-owned ships can transport goods between sites in the United States, and there’s a serious lack of Jones Act–compliant ships that can transport natural gas. Meanwhile, the Jones Act has weakened the U.S.’s own maritime industry by raising costs: From 1950 to 2011, the U.S.’s merchant marine fleet shrank by 82 percent.
Improving America’s productivity, helping domestic manufacturing, and reducing the nation’s reliance on China are all valid policy goals. But if we want to achieve those ends, far too many of the solutions for which our presidential candidates advocate are ineffective at best and counterproductive at worst.