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Wednesday, April 12, 2017

Make Michigan Great Again

If restricting your household's consumption choices to your own high-cost household production would be bad, how could it be different for restricting choices to a city, state, or country?

Michigan senators have introduced the “Make It In Michigan Act.” If successful, “Make It In Flint/Detroit Acts” to follow next.

Well, not really. The democratic Michigan senators (Debbie Stabenow and Gary Peters) are actually co-sponsoring the “Make It In America Act.” But to help illustrate how economically nonsensical the “Make It In America Act” is, I’ve taken the liberty of doing some editing below of this recent news report:

GRAND HAVEN, Mich. — If it is going to be paid for by the American Michigan tax payer and used by American Michigan soldiers and others or spent on state government projects, it should be made here in the state too.

The “it” is anything purchased by the federal state government and the person promoting the Buy Michigan idea is U.S. Sen. Debbie Stabenow (D-MI). Sen. Stabenow was in the area Friday promoting more strenuous enforcement of the Buy American Michigan Act. The senator says the decades old policy allows for exemptions that she says are being abused and costing American Michigan companies cash and consequently American Michigan jobs.

Stabenow’s “Make It In America Michigan Act,” she says, would fix that.

“Make it In America Michigan is about saying American Michigan products first. You can’t use a waiver unless you evaluate the extent to which it impacts American Michigan jobs. We should be supporting Michigan startups,” Stabenow said. “If a government agency says well we don’t make it here in Michigan, well we can make anything here in our state. So let’s support Michigan startups to do the things to make sure that when we’re spending money, whether it’s defense or any other government agency, American Michigan taxpayer dollars should go for American Michigan products and American Michigan jobs.”

Stabenow announced her new legislation Friday at a manufacturing facility in Grand Haven.

U.S. Senator Gary Peters (D-MI) is a co-sponsor of the legislation. “Spending American Michigan tax dollars on products made by American Michigan workers helps create jobs in our state,” said Senator Peters. “I’m proud to join Senator Stabenow in introducing this commonsense legislation that will improve the enforcement of Buy American Michigan rules to help boost Michigan’s manufacturing industry and grow our economy.”

From an economic viewpoint, there’s really nothing materially different between a “Buy America Act” and a “Buy Michigan Act.” They both restrict choices based on goods crossing imaginary lines and impose higher costs on consumers and taxpayers. There’s also nothing economically or materially different from a “Buy Michigan Act,” a “Buy Genesee County Act,” a “Buy Flint Act,” and a “Buy City District/Ward No. 5 Act.” In all cases, those “Buy America/State/County/City/District Acts” give preferences to goods and services that are supplied by companies headquartered on one side of an imaginary line (national, state, county, city, or city district border) over those same goods and services, even when they are offered at lower prices, that might be supplied by companies headquartered on the other side of an imaginary line.

If restricting your household’s consumption choices to your own high-cost household production would be bad, how could it be different for restricting choices to a city, state, or country?Of course, the objective of any “Make It In Area X Act” is purportedly to support or increase jobs in Area X. But to support or increase some jobs in Area X through legislation that would likely impose higher prices on consumers and/or taxpayers in Area X would have to eliminate or reduce other jobs in Area X, most likely leading to net job losses. For example, suppose consumers and taxpayers in Michigan are forced to pay higher prices for food, clothing, gasoline, computers, road construction, building construction, etc. following the passage of a “Make It In Michigan Act” that punitively taxes products from out-of-state or gives special preferences to Michigan companies that are hired for government projects. Certain state jobs would be supported or created, but many more state jobs would disappear due to the loss of purchasing power from higher prices that would result from the “Make It In Michigan Act.” It’s just not economically possible to restrict choices and raise prices for consumers/taxpayers of Area X and make those residents better off and more prosperous. Common sense and economic logic lead to the conclusion that those residents will be worse, not better off, overall.

If you have any doubt that “Make It In Area X Acts” would reduce economic prosperity, consider the consequences of imposing such a policy at your own household level with the equivalent of a “Make It In the Jones Household Act.” If you understand that restricting your household’s consumption choices to your own high-cost household production would significantly lower your standard of living, then you should understand why a “Make It In Your Own Neighborhood/District/City/County/State/Country Law” is equally nonsensical and undesirable.

Update: I double dare Sen. Debbie Stabenow or Sen. Gary Peters to prove that they have any “Made in Michigan” clothing or shoes in their wardrobes.

Republished from AEIdeas.

  • Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.