Infrastructure bill’s ‘buy American’ provision inflates healthcare costs
The Senate is poised, on Tuesday, to pass a $1 trillion bipartisan infrastructure package. According to the latest estimate from the Congressional Budget Office, the new spending will increase the deficit by over $250 billion.
The 2,700-page bill appropriates an avalanche of funding for everything from electric vehicle charging stations to public transit systems. It also includes a “Buy American” provision that requires government agencies to purchase masks, gloves, and other personal protective equipment from domestic companies. Such protectionist policies are economically indefensible. The provision will needlessly inflate spending for taxpayers.
It’s expensive to manufacture PPE in America, largely because we have much higher labor costs than in developing countries. In the United States, it costs 50 cents or more to make an N95 respirator. In China, it costs only 25 cents, according to a recent NPR report.
That’s why China dominates the PPE manufacturing industry. It exported 41% of the world’s masks as of 2017. American exports accounted for just 18%, according to an analysis by the Organization for Economic Cooperation and Development. Advocates of the “Buy American” provision note that this Chinese dominance created problems for the U.S. and other countries when the pandemic first swept the globe in early 2020. China’s pausing of PPE exports led to widespread shortages.
Many U.S. companies then pivoted to making masks, face shields, and sanitizers during the depths of the pandemic. And now, there’s a glut of PPE. Companies have excess inventory. The “Buy American” provision is intended to prop up U.S. PPE manufacturers with government contracts that last at least two years.
Such government micromanagement of the economy is inefficient. Rather than subsidizing politically connected firms, we should be stockpiling PPE now for the next public health emergency. The federal government did not do an adequate job of keeping our strategic national reserve of PPE stocked before the coronavirus pandemic. We should learn from that mistake.
The “Buy American” requirement, though, remains wasteful and unnecessary. But perhaps it’s right at home in this monstrosity of an infrastructure bill.
Sally C. Pipes is the president, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.