Comments on: The U.S. is exporting unemployment with ‘Buy America’ http://www.creditwritedowns.com/2009/02/the-us-is-exporting-unemployment-with-buy-america.html Finance, Economics and Markets Fri, 10 Feb 2012 00:37:00 +0000 hourly 1 By: John Creighton http://www.creditwritedowns.com/2009/02/the-us-is-exporting-unemployment-with-buy-america.html#comment-3141 John Creighton Mon, 02 Feb 2009 19:35:24 +0000 http://www.creditwritedowns.com/?p=5637#comment-3141 I suppose in the interest of being fair that the best allocation of resources would mean producing things in the most cost efficient manner possible. However, countries look to benefit their country first and the world second. What is optimal in a global sense may not be optimal in a regional sense. Because taxation and social services are regional and not global the cost the government sees for procurement depends upon how much value was added within the country. When the United States is forced to accept the lowest bidder in a contract regardless of where the work is done then it can end up subsidizing foreign workers at the expense of local tax payers. The opportunity cost from lost tax revenue due to foreign content is given by: C=P*T(Pf+(r-1)) P=Cost of procurement Pf=The fraction of the procurement cost spent overseas T=Average Tax rate per dollar transaction (includes income plus sales tax) r=The Money Multiplier It is clear that the cost the government sees when procuring bids exceeds the value of the bid if there is value added outside of America. I suppose in the interest of being fair that the best allocation of resources would mean producing things in the most cost efficient manner possible. However, countries look to benefit their country first and the world second. What is optimal in a global sense may not be optimal in a regional sense.

Because taxation and social services are regional and not global the cost the government sees for procurement depends upon how much value was added within the country. When the United States is forced to accept the lowest bidder in a contract regardless of where the work is done then it can end up subsidizing foreign workers at the expense of local tax payers.

The opportunity cost from lost tax revenue due to foreign content is given by:

C=P*T(Pf+(r-1))

P=Cost of procurement
Pf=The fraction of the procurement cost spent overseas
T=Average Tax rate per dollar transaction (includes income plus sales tax)
r=The Money Multiplier

It is clear that the cost the government sees when procuring bids exceeds the value of the bid if there is value added outside of America.

]]> By: Ranger Turtle http://www.creditwritedowns.com/2009/02/the-us-is-exporting-unemployment-with-buy-america.html#comment-3139 Ranger Turtle Mon, 02 Feb 2009 18:51:57 +0000 http://www.creditwritedowns.com/?p=5637#comment-3139 Since the U.S. exports very little compared to China, any protectionism would hurt China worse than the U.S. Besides, my belief is that the intension was to keep the Stimulus Plan money in the U.S. I for one, would not like to go into debt to give stimulus money to China or even Canada. Since the U.S. exports very little compared to China, any protectionism would hurt China worse than the U.S.

Besides, my belief is that the intension was to keep the Stimulus Plan money in the U.S. I for one, would not like to go into debt to give stimulus money to China or even Canada.

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