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Illustration: Aïda Amer/Axios

Joe Biden and Donald Trump agree on at least one thing: Buy American. The slogan was a centerpiece of Biden's recent address to Congress, backed up with one of his first executive orders.

Why it matters: Federal law has placed a heavy thumb on the scales when it comes to hundreds of billions of dollars of U.S. government spending. But it's far from clear that it will have its desired effect.

How it works: When bidding for government contracts, U.S. businesses are allowed to come in as much as 50% more expensive than foreign competitors and still win, if they're dealing with the Department of Defense.

  • For the rest of the government, the "price preference" is 20% for large businesses, and 30% for small ones.
  • The logic is that the extra business for American companies will create good American manufacturing jobs, and help make the country more resilient to external shocks that can sever global supply chains.
  • The reality doesn't seem to work that way, however — especially since the Buy American policy, on its own, doesn't even come close to being a fully-fledged strategy to reshore American manufacturing, per a recent McKinsey report.

In order to make manufacturing jobs attractive, says Harry Moser, president of the Reshoring Initiative, the government would have to scale back on minimum-wage hikes. Working in a foundry or steel mill doesn't seem attractive, he says, when Starbucks, by law, pays just as well.

  • Adam Posen, president of the Peterson Institute for International Economics, sees a double standard at play in what he calls "the fetishization of manufacturing jobs."
  • "The image of men doing dangerous things to produce heavy stuff seems to resonate with nostalgic voters in a way that women providing human services does not," he writes, adding that "manufacturing also favors white men over men of color."
  • The result: "To favor manufacturing jobs is to favor white male workers."

The big picture: It's hard for the State Department to preach a multilateralist gospel while the White House takes an America First approach to procurement.

The bottom line: The Buy American edict forces the government to spend more — and therefore to either borrow more or tax more, too. The costs are borne across the country, while the benefits are concentrated among a small group of businesses.

Go deeper

Bryan Walsh, author of Future
May 1, 2021 - Technology

How 3D printers are being used in the manufacturing industry

The Holo 3D printer. Photo: Courtesy of Holo

A new generation of heavy-duty 3D printers is increasingly being employed for industrial manufacturing.

Why it matters: 3D printers have long been used to speed the making of prototypes, but the growing ability to design and print a range of materials means they are becoming an integral part of the manufacturing chain.

Axios roundtable on small business recovery in Los Angeles

On Wednesday, May 4, Axios' Editor-in-Chief Nicholas Johnston and Business Reporter Hope King hosted a roundtable of community leaders and small business owners in Los Angeles to discuss how small businesses have adapted to the COVID-19 economy, the importance of cross-sector partnerships, and the path to recovery.

The conversation included Wells Fargo’s CEO and president, Charlie Scharf, and Head of Small Business Growth Philanthropy, Jenny Flores, who kicked off the conversation discussing what’s being done to drive economic recovery for small businesses post-pandemic and strategies to address inequities in Los Angeles.

  • Lisa Mensah, CEO, Opportunity Finance Network on learning from past crises and preparing for the future: "Muscle memory takes money. That's the other thing we've learned...we need to be set for the next thing. That's why these infusions of real equity to the balance sheet, the smaller lenders really matters."
  • Maria Salinas, President and CEO, Los Angeles Chamber of Commerce, on the responsibility of networks like Chambers of Commerce: "This is our wheelhouse, is to ensure that we're understanding what policymakers are wrestling with and that we have a connection back with the community... I think that's a responsibility that an organization like the L.A. Chamber has to stand up for small businesses.
  • Rudy Espinoza, Executive Director, Inclusive Action for the City, on targeting support to minority-owned businesses: "Part of it is about resources. The other part is about...making sure that we're providing loan products that help businesses that are owned by BIPOC entrepreneurs because right now, we're seeing a lot of financial institutions that are still not serving our communities. And we cannot let that happen if we want a just recovery."
  • Xiomara Peña, Vice President of Engagement, Small Business Majority on having a nuanced approach to addressing small business needs: "Not all small businesses operate the same way. One of the biggest challenges to ...was around financial readiness. Financial readiness can entail everything from bookkeeping all the way to recordkeeping. Those are some of the factors we are always considering and how to address them as we think about rebuilding and looking forward."
  • Roberto Martinez, Entrepreneur-in-Residence, City of LA, on the post-pandemic future of small businesses and the need for technical training as well as capital: "We have an opportunity for post-pandemic resiliency, to build fundamental capacity to bridge the digital divide. The small to medium-sized businesses have not been given access, have not been given the tools necessary to provide the skill and the growth they need to be sustainable, resilient post-pandemic."

Thank you Wells Fargo for sponsoring this event.

Dion Rabouin, author of Markets
May 6, 2021 - Economy & Business

Teetering on the edge, small businesses get another lifeline

Illustration: Aïda Amer/Axios

Following the news that the Paycheck Protection Program had run out of funding and stopped accepting most new applications, the White House unveiled data for its $28.6 billion Restaurant Revitalization Fund (RRF), which it said saw “extremely high demand.”

Why it matters: Small businesses play an important role in the U.S. economy and many, especially those in the services sector like restaurants and bars, are still struggling with a disproportionate number forced to close for good because of revenue losses from the pandemic.

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