“Buy American”-Style Legislation Would Increase the Cost of Sunshine State Public Works Projects

By Colin Grabow of Cato.

"The problem with public works projects in Florida, some state politicians believe, is that they’re too cheap. That at least is one conclusion to be drawn from legislation under consideration in Tallahassee. Rather than purchasing iron and steel from whoever offers the best value, bills circulating in the Florida House and Senate would restrict state public works projects to only using those materials produced by U.S. firms.

It’s doubtful that politicians supporting these bills would limit themselves to only shopping at one store, so why should state public works projects only purchase iron and steel from one country?

Since U.S. manufacturers don’t always offer the best prices, such legislation would mean more expensive iron and steel. That’s no small thing for public works projects. The Pensacola Bay Bridge, for example, used two 800,000 pound steel arches that had a special coating applied in Europe for protection from the saltwater environment. Under the proposed bills, however, the foreign “application of coatings” is prohibited, and an already expensive project would have seen its price tag further increase.

Even supporters of the legislation tacitly admit that it will increase costs, with one provision suspending the U.S. iron and steel requirement if a project’s overall project cost would increase by more than 20 percent. But that would still lead to significant cost hikes. A 20 percent increase in the $427 million Pensacola Bay Bridge project, for example, would have meant $85 million in additional spending.

When projects become more expensive, that means either less money for other priorities like public safety and education, increased borrowing, or higher taxes to make up the difference. That’s the opposite of what Florida needs. State legislators should be seeking to maximize value from taxpayer dollars, not looking for new ways to fritter them away.

But perhaps this is all based on a misunderstanding. When pressed about higher costs, one supporter of the bill said that tax dollars should be invested in the American economy rather than sent elsewhere. That’s not how the international economy works.

Dollars spent on foreign products aren’t permanently exiled from the country, but rather return when foreigners use money from their exports to buy U.S. goods and services or invest in the United States. This back‐​and‐​forth exchange is what trade is all about. The more than $50 billion in manufactured products exported by Florida in 2018 and over 10 million international visitors to the state in 2019 would not be possible without dollars in foreign pockets. Imports help drive exports.

Restricting iron and steel expenditures to U.S. firms doesn’t mean a healthier economy, it just means getting less bang for Floridians’ collective buck.

So, who benefits here? U.S.-based steel interests are almost certainly enthused about the bill padding their bottom line, but it’s unclear they need the help amidst record profitability. And these kinds of corporate handouts shouldn’t count as help anyway, with such giveaways hardly preparing firms to thrive in a fiercely competitive marketplace. To be the best, U.S. steel and iron producers need to compete against the best—including foreign firms. Frankly, they should be insulted by such legislative set‐​asides which seem to assume that American firms can’t win contracts fair and square.

If supporters believe that set‐​asides for the iron and steel industry will bolster the state’s economy, they are sorely mistaken. Like all forms of protectionism, all these will do is raise costs and reduce purchasing power while coddling firms that instead should be forced to compete. Florida politicians should be trying to get maximum value from precious taxpayer dollars and doing more with less, not less with more."