One of the great things about teaching economics always was finding new grist for the economic analysis mill in the adventures, misadventures, and policy proposals based on lack of knowledge about basic economic analysis and economic history. Today, my exam question would have read "Please write a short essay on the economic effects of Buy America policies."
A temptation has long existed to believe that protecting American workers, jobs, and factories by imposing import quotas, "buy America first" policies, and placing restrictions on outsourcing is the answer to seeing our American economy continue to move more jobs and production activities overseas. Dallas Federal Reserve President Richard Fisher warned today against "Buy America" provisions in a proposed fiscal stimulus law and said it could lead to devastating trade protectionism" according to Reuters News in an article reported by CNNMoney.com. To read the article, go here.
Fisher labeled protectionism as the "crack cocaine of economics." Such protectionism, he continued, " . . . may provide a high. It's addictive and leads to economic death." Not too many people today are even aware of the Smoot-Hawley tariff bill and its disastrous consequences earlier in the last century. Protectionism, of course, always looks like the logical policy to adopt. Save a factory going out of business. Prevent American workers from losing their jobs. But two months into Econ 101, students learn the perils of protectionism which leads to higher costs, lower incomes, and a declining domestic economy--exactly the opposite of hoped-for results.
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