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Thursday, April 21, 2022 Leer en Español

Biden’s ‘Buy American’ Order on Steel Is Right Out of ‘Atlas Shrugged’

Forcing companies to purchase goods at higher prices isn’t a path to economic prosperity.

Image Credit: FEE composite | The White House (left); Talbot portrait of Ayn Rand (right)

For months now, the Biden administration has said they are taking inflation seriously.

Unfortunately, their actions seem to suggest otherwise.

The latest example is new requirements on source material used for projects built through the $1 trillion infrastructure package passed last year.

Federal guidance issued Monday requires that material purchased for infrastructure projects— bridges, highway, piping, broadband internet, etc.—must be produced in the US, according to the Associated Press.

Via the AP:

“Tucked into the bipartisan infrastructure package that became law last November was a requirement that starting on May 14 ‘none of the funds’ allocated to federal agencies for projects may be spent ‘unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.’”

The 17-page guidance, which allows manufacturers to seek permission to waive the rules if there is not enough domestic production or prices are too high, apparently is part of Biden’s effort to create jobs and reduce reliance on other countries, particularly China.

“There are going to be additional opportunities for good jobs in the manufacturing sector,” said Celeste Drake, director of Made in America at the White House Office of Management and Budget.

‘Miss Taggart, I’m Older Than You’

Biden’s economic plan is likely to backfire, at least economically. Indeed, the White House’s proposal sounds like something plucked right from the pages of Ayn Rand’s famous novel Atlas Shrugged.

People who read Rand’s magnum opus will recall the story’s central plot line involves meddling politicians dictating what type of metal can be used in the construction of an intercontinental railway, a project of great importance to the story’s protagonist, Dagny Taggart.

To save her family’s struggling business empire, Dagny decides to use a new resource—Rearden Metal—to complete the crucial Rio Norte Line. Jim, Dagny’s bumbling brother who is responsible for the company’s financial problems, is hesitant.

“The consensus of the best metallurgical authorities seems to be highly skeptical about Rearden Metal,” he says. “Whose judgment did you take?”

Dagny, an engineer who has studied metals, tells Jim she did not consult anyone, which prompts him to ask what she even knows about Rearden Metal.

“That it’s the greatest thing ever put on the market,” she replies, “it’s tougher than steel, cheaper than steel and will outlast any hunk of metal in existence.”

Jim is hardly convinced, but that doesn’t matter. Dagny is right. She knows it and readers know it. But Jim is not the problem.

The problem is other industrialists—competitors of Taggart Transcontinental and Hank Rearden (who manufactures Rearden Metal)—who conspire with politicians, labor unions, bureaucrats, reporters, and experts to prevent Dagny from using the best metal she can find at the lowest cost.

Newspapers run articles quoting experts who say Rearden Metal may not be safe. The State Science Institute issues a vague statement questioning the metal’s integrity. Unions organize boycotts.

All of this happens even though Dagny is simply trying to purchase the best metal she can find at the best price. She’s stunned to see politics and power are driving these currents, not science. Not sound economics. Not truth.

“”Miss Taggart,” Dr. Stadler, head of the State Science Institute gently explains to her. “I am older than you. Believe me, there is no other way to live on earth. Men are not open to truth and reason.”

Why ‘Buy American’ Is Bad for Americans

The White House’s “Made in America” project doesn’t just ring of Trumpism and economic nationalism. It sounds very much like one of the government initiatives in Atlas Shrugged. And just like in Rand’s book, the Biden Administration is forcing companies to purchase the iron, steel, and other resources that it prefers—not the best product at the best price they can find.

Now, there’s an obvious reason for this. “Buy American” polls well with voters, whether it’s Trump delivering the message or Biden. It’s no coincidence that both men won elections while campaigning on variations of the slogan, which actually goes all the way back to President Herbert Hoover, who signed the Buy American Act in 1933.

Alas; the Buy American Act didn’t help the US economy during the Hoover or FDR administrations—any more than Trump’s protectionist trade policies did.

Forcing companies to purchase goods at higher prices isn’t a path to a more prosperous society, which is why economists overwhelmingly disagree with the notion that protectionist policies generally and Buy American policies specifically have a positive economic impact.

Indeed, one of the reasons the United States became the wealthiest nation in the world is that the American system was built on free trade. Wisconsin and Montana are not allowed to impose tariffs on syrup imported from Vermont; Texas can’t force people to buy oranges made in Texas instead of Florida or California.

“One of the intended consequences of the 1787 Constitution was to turn the United States into a free trade zone,” George Mason University economist Don Boudreaux has explained. “One of the reasons for the United States’ enormous economic growth over the past two centuries and high standards of living is that we have total free trade within America.”

Indeed, free trade is the path to economic prosperity.

States can’t make themselves wealthy simply by slapping tariffs on goods from other states—any more than Biden can make America richer by compelling companies to purchase steel produced in the US.

One needn’t read Atlas Shrugged to see that.

  • Jonathan Miltimore is the Senior Creative Strategist of at the Foundation for Economic Education.