By closing loopholes in the Buy American Act, the 21st Century Buy American Act will increase demand for U.S. manufactured goods and create at least 60,000 to 100,000 U.S. jobs. The Buy American Act requires “substantially all” direct purchases by the federal government (of more than $3,000) “be attributable to American-made components.” However, there are a number of exclusions or loopholes in the Buy American Act. The single largest is an exception for “goods that are to be used outside of the country,” and the 21st Century Buy American Act includes provisions to close it. In addition, current regulations interpreting the Buy American Act state that “at least 50 percent of the cost must be attributable to American content,” which can reduce net demand for American made content.
Related Article: How Does a Company Comply with New Buy American Rules?[p][/p]
Between 2010 and 2015, the “goods used outside of the country exception” was used to purchase $42.3 billion in goods that were manufactured outside of the United States, an average of $8.5 billion per year.1 The 21st Century Buy American Act would require most or all of those goods to be U.S. made, increasing demand for U.S. manufactured goods by up to $8.5 billion per year.2 Although labor markets have improved in the United States since the recession, there remains substantial slack and 2.6 million jobs were still needed to catch up with growth in the potential labor force in September 2015. I assume, based on recent research by my colleague Josh Bivens (Table 5) that wages earned by new manufacturing workers will support a macroeconomic multiplier of 1.6 in the domestic economy over the next year.3 I also assume, based on total GDP and employment levels in 2014 that a 1 percent increase in GDP adds 1.3 million jobs to the economy. Thus, the $8.5 billion increase in spending on domestic manufactured goods (with 100 percent domestic content) would increase GDP by $13.6 billion (0.08 percent), creating up to 100,000 new jobs in the domestic economy.
Read more: Economic Policy Institute