The editors over at the New York Times have an interesting piece about the negative consequences of the Buy American provision in the stimulus bill. But first they want to explain why there might have been a good reason to put it in there:

It’s not surprising that Democrats in Congress could not resist adding a “Buy American” provision to the fiscal stimulus bill earlier this year. It might seem sensible (or at least politically useful) to ensure that taxpayer dollars would be used exclusively to support American jobs.

If it is the case that American taxpayers should only foot the bill for measures “exclusively designed to support American jobs,” then I suggest stripping the war supplemental bill of $108 billion for the IMF to stimulate lending abroad. That money won’t support American jobs and it has no place being in an emergency spending bill.

That being said, the New York Times makes very good arguments about why Buy American provisions are bad:

As states and municipalities start spending stimulus money, the idea is starting to look as counterproductive as it should have looked from the beginning. It is sparking conflict with American allies and, rather than supporting employment at home, the “Buy American” effort could ultimately cost American jobs.
Foreign and domestic companies that employ hundreds of workers in this country cannot bid for government projects because they cannot guarantee the American provenance of all the steel, iron and manufactured goods in their supply chain, as the provision requires. Others are scrambling to figure out whether American-made alternatives exist to replace their foreign inputs.

More importantly, foreign companies employing Americans in the U.S. are not happy about it. They see all this as protectionism and are trying to figure out how to respond. And as the New York Times rightfully notes:

An analysis this year by Jeffrey Schott and Gary Clyde Hufbauer of the Peterson Institute for International Economics in Washington estimated that “Buy American” provisions could “save” 9,000 American jobs — a tiny number compared with the 650,000 jobs supported by foreign government procurement of American exports.
Indeed, whether it is from the point of view of diplomacy or of job creation, “Buy American” is a terrible idea. One that could make the global recession worse.

The whole thing here.

Also, here and there we hear the news that the economy is giving signs of recovery. If that’s the case, can the administration really claim that stimulus spending is the source of the recovery when, as of today, only $37 billion have been spent?