California Taxpayers Financed A New Chinese Competitor!

American tax dollars should employ American workers and build American companies. But the Bay Bridge project not only didn’t do that, it paid to build up a new Chinese state-owned competitor that will bid against American companies on future projects! Let’s not make that mistake again. Jeeze!
Should Be Made In America
Last week I wrote about the Should Be Made In America project. A coalition of American companies and labor organizations has launched this campaign to let taxpayers know when their state sends jobs out of the country. This is an effort to get state governments to buy steel and supplies from American companies when they do infrastructure projects. If they do not, there will be a PR campaign to shame the elected officials and state procurement agencies who made the decision to outsource American jobs with taxpayer dollars.
The New San Francisco Bay Bridge Project
The new San Francisco Bay Bridge is underway. The eastern span of the new bridge is called the self-anchored suspension span (SAS), which will have a single 525-foot-tall tower and uses a single mile-long cable to support the deck, which is two side-by-side steel roadways. The cable is made up of 137 strands of steel which are being pulled across the bridge one-by-one right now. The 1,542 ft span is the largest span of its kind in the world. (Lots of info is available here.)

They Turned Down Federal Dollars So It Could Be Made In China!
The cable and key sections of the tower and deck were outsourced to China. Governor Arnold Schwarzenegger’s administration wanted this done in China, saying the low wages and lack of environmental regulations would lower the cost. Federal procurement rules require that taxpayer dollars be spent here, so Schwarzenegger turned down federal funds for the job, in order to be able to outsource the work. Never mind the cost of lost tax revenues, unemployment benefits, food stamps and other “safety net” programs for the lost workers and bankrupted companies that resulted. And never mind the cost to the larger economy and country from the foreclosures, closed businesses, lost jobs, etc. Those larger costs to the larger economy and country were not Schwarzenegger’s problem
Built Up A Competitor!
Shanghai Zhenhua Heavy Industries got the job — even though they had never done a job like this before. Until now the company manufactured cranes and ship loaders. But, thanks to California’s tax dollars, they can now. California paid for this Chinese state-owned company to build its capacity to do major infrastructure projects like this one. And they will be bidding against American companies on project in the United States and around the world from now on.
Here is Scott Paul from the Alliance for American Manufacturing, talking about the Should Be Made In America project, on KQED’s show Forum. Skip to around 16:00.

“What it has done now unfortunately is established a competitor to these American firms, that has been subsidized by the taxpayers of California, that will compete on future infrastructure projects. And California taxpayers have given this state-owned firm in California China the knowledge and the know-how to do this. And that is not fair to other private-secotr firms in the United states.”

(Note, at 16:18 Scott says the Bay Bridge project has “given a state-owned firm in California” the obviously meant to say China.)
So one agency of California “saved money” by outsourcing a project to China. But the state government overall probably lost money when you add in all the costs to other state agencies who lost tax revenue and have to pay out “safety net” expenses. And the national government and larger economy certainly lost out from the lost jobs, closed businesses and loss of steel and manufacturing capacity. American businesses certainly lost out.
At least now as other states look to future infrastructure projects the Should Be Made In America project will be there to remind them of the larger costs that come from “saving money” by sending taxpayer dollars out of the country.
P.S. here is the video from the Should Be Made In America launch event:

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Use State ‘Buy American’ Rules To Promote Insourcing

President Obama is hosting a forum on “insourcing” today. We need to bring jobs back to America, and restore our “industrial commons.” One way to help move this along is for states to require “Buy American” in their procurement rules. This is legal and here’s the big thing — it saves states money.
In December Steelworkers President Leo Gerard wrote a strong post, Antidote For Stupidity Of Shipping Tax-Dollar-Financed Jobs Overseas, writing,

Amid prolonged, painfully high unemployment, ABC News Anchor Diane Sawyer for the past year tirelessly advocated a simple solution – buy American-made products. She clearly explained the reasoning: every American dollar spent on an American-made product helps create an American job.

Repeat and amplify: Every dollar spent on an American-made product helps create an American job.
Buy American Legislation
Gerard wrote,

Now there’s an antidote for California’s stupidity. It is legislation called the Invest in American Jobs Act. Championed by U.S. Rep. Nick J. Rahall, (D-W.Va.) and Senators Sherrod Brown, (D-Ohio), Bob Casey, (D-Pa.), and Debbie Stabenow (D-Mich.), it would strengthen existing requirements for buying American products when federal tax dollars pay for construction of highway, bridge, public transit, rail, water systems and aviation infrastructure equipment.

California Example
California decided to “save money” by purchasing Chinese steel to build the new Bay Bridge. Gerard writes about the disaster that brought to California. Never mind all the problems with the quality, the welds, the delays, and the problems overseeing the work that he described… Gerard also gets into the hidden costs to the state and country from the loss of business and the loss of jobs this caused:

Also, Schwarzenegger’s estimate that $400 million would be saved failed to account for the wages American workers lost, the taxes they would have paid, or the multiplier effect on the economy when workers spend their wages in their hometowns. In addition, Schwarzenegger’s estimate failed to account for the downside of hiring Chinese workers with American tax dollars, or in this case, bridge toll receipts. That includes unemployment compensation, Medicare fees and other costs borne by governments for joblessness.
The Investigative Reporting Workshop at the American University School of Communication included a story about the Bay Bridge project by two-time Pulitzer Prize winning investigative reporters Donald L. Bartlett and James B. Steele in a series called What Went Wrong: the Betrayal of the American Dream.
In their report about California sending the bridge work to China, Bartlett and Steel quote Tom Hickman, vice president of Oregon Iron Works in Clackamas, Ore., one of the American companies that tried to form a consortium to perform the Bay Bridge work. Here’s what Hickman said about the jobs California denied American workers and the work California denied his America company:

“These jobs are living-wage jobs and family-wage jobs. They provide health and welfare benefits, 401(k)s and pensions. Our facilities meet all of the environmental requirements, and it just is a very, very difficult thing to compete with the Chinese when you are really competing with the Chinese government (which subsidizes Chinese industry).”

Caltrans argued that no American company had the facilities to perform the work. Hickman said the consortium could have done it. But if government agencies like Caltrans continue to ignore the real costs of shipping work to China, American factories will continue to close. America lost 55,000 manufacturers over the past decade. If that doesn’t stop, at some point, America will forfeit the capacity to perform this kind of work.

Buying steel from another country proved to be a disaster for California every way you look at it.
Buy American Costs LESS
California “saved money” by purchasing Chinese steel to build the new Bay Bridge. In fact, the one government agency that built the bridge may have “saved money.” But what about the other costs to government and the rest of us because of the jobs lost from not making that steel here? What about the lost taxes from the unemployed workers and the American steel companies that would have provided the steel — and their suppliers ? What about the unemployment, food stamps, Medicaid, and all the other “safety net” costs that resulted? What about the loss of business to grocery stores and gas stations near the steel plants, and near all the suppliers that had to lay people off, and the lost sales taxes, etc?
When you add in the cost of losing jobs, factories, companies, industries and communities that result from decisions like this, you start to see that it really doesn’t make sense to “save money” by buying things made elsewhere.
BART Buys American
The Bay Area Rapid Transit district learned a lesson from the Chinese steel debacle and last year introduced a Buy American policy. BART Adopts “Buy America” – First in U.S., Agency Says,

The Bay Area Rapid Transit district has become the nation’s first transit agency to approve a “Buy America” policy, BART said.
The new Buy America Bid Preference policy, adopted unanimously by the BART board Thursday, “gives preferences to rail car manufacturers who create jobs in the U.S.A.,” according to a BART news release Friday.
BART is preparing to award $3 billion in contracts for its new fleet of train cars, which the agency calls the “Fleet of the Future.”

Buy American Policies
If we really want to start insourcing American jobs, then we should put our policies where our mouths are. “Buy American” provisions should be a mandate on federal, state and local government purchases, consistent with our trade laws. There is no reason our own government should be undermining American manufacturers. To accomplish this, our bottom line for federal procurement should be:

  • All federal spending should have “buy America” provisions giving American workers and businesses the first shot at procurement contracts.
  • New federal loan guarantees for energy projects should require the utilization of domestic supply chains for construction.
  • Our military equipment, technology and supply purchases should have increased domestic content requirements.
  • Renewable and traditional energy projects should use American materials in construction.

State-level spending should have similar requirements, and this panel will discuss these, and strategies to getting them in place.
Today many state-level procurement laws are very weak. As a result, a lot of tax dollars go to purchase goods made overseas instead of goods made in the USA. The impact of this often includes delays or cost overruns such as what happened with the San Francisco to Oakland California Bay Bridge, as well as the loss of jobs and revenue in the US.
The idea that national and state governments should “Buy American” isn’t in any way a partisan issue. If you look at polling you find that Republicans as well as Democrats believe that at least now while we are in economic distress, and trading “partners” are selling to us but not buying from us, our tax dollars should be supporting American companies and jobs.
There is a reason countries like China are working so hard to get this business.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Steel: Important To Us But Not Important To Us

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
I had the opportunity to tour a steel plant outside of Pittsburgh yesterday. (I am here for the Netroots Nation convention.)
The word that keeps coming into my mind is “intense.”
I experienced intense heat, intense colors in the molten steel, and intense faces on the workers. We wore protective clothing, boots, earplugs, gloves and protective eyeware. Safety is a prime concern because without careful attention to detail this can be a very dangerous undertaking. The workers in these plants depend on safety procedures and each other to a degree that you do not find in many other occupations.
One of the notable things about this tour was the security. It was intense. I won’t get into some of the details, but plants like these are considered to be very important to the Department of Homeland Security and special precautions are taken. You need special permission to even enter the grounds. ID is carefully checked. We not only couldn’t even take pictures of the facilities but they will confiscate a cell phone if they see it out of your pocket. (You can have it back later.)
Let that sink in: Manufacturing plants like these are considered vitally important to the security of the United States and are assigned special protection.
Unfortunately our own government does not feel the need to protect plants like this beyond the vague post-9/11 threat of “terrorism.” They check your ID at the gate, but they aren’t concerned with making sure plants like this one stay in the United States. The two blast furnaces at this plant are the last two operating in the whole state of Pennsylvania. There used to be a dozen just at this plant. Nationally the decline is similar. We all know this but we do not seem to be capable of doing something about it.
This decline is not the “buggy-whip” phenomenon where an industry is being replaced or is evolving. Quite the opposite. Steel is the core component of the bridges, buildings, appliances, cars, etc. that we build. But now much of that steel comes from other countries. And much of it is inferior quality or produced in ways that harm the planet. This plant produces 1/3 the carbon emissions of similar plants in China. And then there is the carbon-emitting shipment across oceans to consider. But harming the planet is apparently someone else’s long-term problem when money is to be made today.
The problem is not even labor costs. Labor is not a large component of our steel costs. The cost of raw materials is a larger part of the lower cost of imported steel. When you hear about hundreds of people trapped in mines in other countries you are hearing about lower cost of raw materials. Lives can be cheap and it is someone else’s problem when money is to be made.
We have stood by and allowed other countries take over industries like this one by pursuing national strategies to build their economies at the expense of our own, or their own workers and of the environment. When competition is allowed to occur by continually moving the work to cheaper and less protective (of both lives and the environment) regions the result has to be a continued downward spiral of living standards. This is not sustainable and we are all living the results of this constant downward pressure.
Manufacturing is the key to economic power. Yet we worry about some fanatics in a cave somewhere, but we don’t seem to worry about losing the steel plants and other industries and the jobs and the economic benefits to us and the world. This practice of checking ID at the gate but standing back and letting the plant itself close because another country allows worker or environmental exploitation is beyond short-sighted. It is self-destructive.

New Report: Pittsburgh —The Rest of the Story

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
Campaign for America’s Future has released a report, Pittsburgh —The Rest of the Story (pdf file, 12 pages). This report tells the story of “Pittsburgh’s transition from the old to the new.”
A lot is happening in Pittsburgh this summer and fall. Netroots Nation is taking place in Pittsburgh this week, then next month the AFL-CIO annual conference and the G-20 Summit. (See also.)
But a lot more has been happening in Pittsburgh so there’s a good story to tell.
Pittsburgh, known as “Steel City,” was a center of the “rust belt” – so-called because so much of our manufacturing, once America’s economic powerhouse, has been “outsourced.” This is the process where the contents of the factories are packed up and sent to another country to make the same things that were made here, using the same raw materials, and shipping the same items back here to sell. For propaganda reasons that is called “trade,” even though it isn’t trade it’s really just paying off politicians to let them externalize costs onto the local communities and pocket the profits. (Our laws even let the companies pay lower taxes at the very time they are transferring so many costs onto the rest of us.)
At the same time, competitors arrive from countries that understand that manufacturing is the key to economic power. They have national policies to build their own manufacturing base. So the might subsidize their industries, or hold the value of their currencies low, or exploit their workers or the environment, giving their companies a pricing advantage. Or, they might just “dump” products into our market
The result is closed factories, eyesores rusting in the sun and rain, taking up local space. Hence the name, “rust belt.”
Pittsburgh has been working to do something about the rust-best phenomenon. From the report,

In the 1990s, the city reinvented itself. The story often told is one of transition from heavy industry to a new post-industrial age, with a high-end service economy built around health care and higher education. Grant-funded research led to entrepreneurial opportunity in software and biotechnology. The University of Pittsburgh Medical Center replaced U.S. Steel as the region’s largest employer. Pittsburgh built the world’s first Gold LEED-certified convention center. Once a giant consumer of dirty energy, Pittsburgh positioned itself for leadership in the new energy economy.
The good news is true enough, although many problems are far from solved. But it is only half of the story. Behind the good news are two unseen parts of the story.

I’m not going to tell the story here. Instead you have to read it for yourself. It’s a good read.