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Steel Industry Advocates Stimulus “Buy American” Clause

Published 01/03/09 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

The slumping U.S. steel industry is not asking for a government handout, but industry insiders are lobbying the President-elect’s administration for a public works program that would increase the dwindling demand for U.S. steel, the New York Times reports.

Executives are hoping that the incoming Obama administration will invest heavily in public infrastructure projects such as roads, bridges, schools, hospitals and public transit systems, all of which would provide a shot in the arm to the steel industry that until the current downturn was experiencing one of its best years on record.

“What we are asking,” Daniel R. DiMicco, chairman and chief executive of the Nucor Corporation, a giant steel maker, was quoted in the paper as saying, “is that our government deal with the worst economic slowdown in our lifetime through a recovery program that has in every provision a ‘buy America clause.”

Before the crisis struck the steel industry was actually booming. Prices were at an all-time high, output was increasing and times were good. In Aug., however, things took a turn for the worse as the housing bubble burst, the credit industry froze and consumers began to rein in spending. Since Sept., the industry has seen output plunge by 70 percent. Not since the 1980s, when imported steel began to flood the U.S. and put American companies out of business, has the industry experienced such hard times.

“The third quarter was one of the best in U.S. Steel’s history,” John Armstrong, a spokesman for the United States Steel Corporation, told the paper. “And it has been a very precipitous drop from there.”

Since the drop, the industry has experienced mass layoffs, plant shuttering, production cuts and fears that the worse is yet to come. The steel industry has been it particularly hard because of the plummeting demand of automobiles and construction projects, both steel intensive industries.

For that reason, the industry is pinning its hope on a massive spending plan from the Obama administration that will require plenty of U.S. made steel. Early signs indicate that an Obama spending package could do just that, with rumors being floated that that package could include anywhere from $700 billion to $1 trillion in infrastructure spending.

That would sit well with industry insiders who are lobbying the Obama transition team hard, according to the Times.

“We are sharing with the president-elect’s transition team our thoughts in terms of the industry’s policy priorities,” said Nancy Gravatt, a spokeswoman for the American Iron and Steel Institute. Any spending bill should, as the steel industry suggested, include a “buy American” provision to ensure that the money is going to American companies that will put American people to work.



Source New York Times:

But then the recession hit in force. Steel goes into nearly everything made in America, from homes and office buildings to cars, appliances and light bulb sockets, and as construction and manufacturing wound down, so did the output of steel, plunging 50 percent since September.

The steel industry’s collapse closely tracks the alarming late-autumn swoon in the national economy, as the housing bust and the credit crisis converted a mild downturn into “a severe one that has much further to run,” says Nigel Gault, chief domestic economist at IHS Global Insight, offering a view increasingly shared by forecasters.

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Article Comments From Readers

biguru says "Buy American theory" on 01/09/09

In a stable world economy, buy American may not be a good idea. But this is not the stable times. Too many mistakes were made which caused the economic cancer and now if we keep going at it as business as usual, we will have serious depression and American Civilization as we know it will go the same way the Greeks and Romans did..

So, buy American should be a temporary measure until balanced trade is restored. We contributed an additional $72 Trillion dollars in to the global economy. We want some of them back first.

guest says "An economic thought on this" on 01/09/09
I have written up some ideas about this at:
http://www.knowingandmaking.com/2009/01/buy-american-clause.html

It will be interesting to see what the mainstream economists say about this when it is discussed further - it hasn't had a lot of coverage in the economics press or blogs, though Greg Mankiw has mentioned it.

biguru says "economic minister" on 01/04/09
Please see the solutions at this website. If you appoint an economic minister (hopefully an engineer) whose department can analyze what is imported and what is exported at the product level, then that trend can be used to make policy decisions favoring American Industry. They also need to find out as to why MITI of Japan and CCPIT of China do better and why we can not?

We all know, why Americans buy foreign cars. It is about quality even though the parts cost an arm and a leg. But there is a simple solution. The same economic minister and the consumer protection agencies should be empowered to encourage American producers to produce quality stuff, not just create marketing hype. How many people listened to Deming in the USA? The quality leader never got any respect in his own country.

Change that and you will have the best and brightest flock to this country and not just techno-coolies (laborer). A little greed is good for the soul, too much like salt can kill your society.

guest says "Tariffs last year, yesterday, and now." on 01/04/09
I agree! But does the "Buy American" clause stop with the purchase of American made steel? Do American steel companies buy American made equipment and products at the company level, and do its owners and employees buy American made products with their dividends and earnings? Those are the questions that I would like to get an answer for from the steel companies, its owners and workers. Is the "Buy American" from the steel companies just a self serving promotion for the American made steel that they produce? I would also like to know what makes of cars fill the parking lots of the steel companies and the auto companies, and why any foreign made cars are allowed to park in their parking lots. Are the cars that they buy made with American produced steel? They should at least buy the products that their livelihood is dependent upon before they ask us to.

I am reminded of a union shop steward that I talked with at a construction site in downtown Seattle. His union was picketing the site. I asked him how many of his union members shopped at Walmart. He said that was a problem which the union was trying to address. An acquaintance of mine is a retired member of the longshoremen's union and a strong unionist whose last car was a Lexus and whose previous car was foreign made. I can't get through to him on the need to buy American made products. If it effects his personal spending choices he doesn't care. He just doesn't get it.

I am not impressed by Americans that care about "their" job and that think that we should "Buy American" when it comes to "their" production, but ship their income straight off shore. It's not about "me"! It's about country! The reason why we got into this mess is that Americans don't realize or care that it is about country as they spend their incomes on foreign made products. My eight year old grandson could figure that out, and I am not suggesting that he is not intelligent. Too many Americans don't get it! I talk to them all the time.

BUY AMERICAN, including American produced steel! It's your country. If Americans don't care, who will?

glen says "Obama: just more foreign-financed debt" on 01/04/09
I can't necessarily blame Obama for not proposing a VAT or revenue tariff system--Americans have been long propagandized by the globalist elites that profit off foreign imports that the country would fall apart should we adopt the taxation systems long used by our trade rivals.

Still, Obama needs to start offering something different to get us out of the economic mess we are in. So far his economic ideas have primarily involved massive increases in foreign-financed debt--a short term non-solution that will only aggravate the situation the United States will be in later.

guest says "Wishful thinking, Fritz" on 01/04/09
Obama will never no anything beneficial, because, like most politicians, he is a corporate and Israeli puppet. He only cares that people think he wants to do the right thing. Stupid Americans voted for Obama because he was good looking, was young, or had a good personality. There were much better choices, like Chuch Baldwin, Dennis Kucinich, Ron Paul, and Ralph Nader. But should Obama try to use a VAT or any other form of protective measure, China and Japan will not take this lying down. They can threaten to dump their dollar holdings, like China threatened in '07, or they can stop loaning us money. The US will then have to print money, as taxpayers don't have the income or savings to absorb a tax increase. This will create hyperinflation. Basically, the US is screwed.

biguru says "Buy American" on 01/03/09
Is that not what I suggested here in the first place? If only the Team Obama can read this website and use all the ideas presented, the country will be in ship shape in no time.

A little about the Steel industry. In mid eighties, I helped Chinese Steel Companies improve their productivity by 4 times - with a continuous improvement framework. When my company presented the same ideas to the American Steel Industries after verified improvements in China, they laughed at us. We knew then that the days of our steel industry are numbered. Rest is history.