American Protectionism

This week the U.S. House of Representatives passed Obama's 800 billion dollar stimulus package. As part of this bill, they included a clause that would require all infrastructure projects funded by the stimulus money to be made with domestic steel. There are indications that the senate will uphold this 'American-made' clause, and possibly expand it to require that all materials be of U.S. origin.

World leaders, including Stephen Harper, Canada's Prime Minister, have cried foul play. It is against international trade laws to practice what is known as protectionism. The raising of tariffs and banning of imports is thought to have contributed to the intensity of the Great Depression. In Bush's last economic meeting with world leaders, he concurred with other countries that the only way out of the global crisis was to rigorously guard against protectionism.

Now Obama is being called on to strike down the 'American-made' clause in the stimulus bill. He has not yet made a commitment to leave it in, or delete it. His considerations are complex. Tax payers are already reeling from the recent news that Wall Street tycoons walked away with over $18 billion in bonuses in a year when they relied heavily on government money to prevent collapse. Many tax payers are not interested in seeing any of the $800 billion spent overseas as our own unemployment numbers swell. On the other hand, protectionism works both ways. If we begin to refuse other country's products, they can wipe out their markets for ours.

I propose that in light of this complicated conflict, rather than deciding whether to use a right or left hook, that we side step the whole issue. Well, admittedly it won't be possible to completely ignore the problem, but investing in a key area of need would go a long way towards helping our own economy without breaking any laws.

While the United Kingdom, France, Japan, and Canada are clamoring for us to avoid protectionism, they are not dealing with domestic populations at the same risk that Americans are. Unlike those countries, when Americans lose jobs, they lose health insurance. There are provisions in the stimulus package for expanding medicaid coverage and subsidizing COBRA expenses, but we could go much further.

As Paul Krugman argues, a major shift in the economy is a perfect time to enact a new social contract, like providing health insurance for all. In 2006 Massachusetts passed legislation that paved the way to providing universal health insurance in the state. To date it is the only state to provide this level of coverage. Three years later, it is instructive to analyze how their system is functioning.

While overall it is receiving support, the main problem for people has been accessing a primary care physician. There simply aren't enough of them working in the state to keep up with the new demand. If the entire U.S. were to be covered for health insurance, it is reasonable to assume that we'd experience the same bottleneck.

However, far from being a problem, this is a golden opportunity for us to stimulate our economy. Not only does a healthier work force translate into a more productive one, but health care is a non-exportable industry that currently accounts for 15-18% of GDP. Estimates for future costs show that it will continue to rise. Many people use this as an argument for why we shouldn't provide universal insurance. But what better way to keep our dollars at home, without breaking international law?

My proposal is this. There are millions of people out of work. Hundreds of thousands of them would be happy to train as primary care physicians. The stimulus package should include a huge sum for this retraining program, so cost isn't an issue for students. More of the stimulus package should go towards extending health coverage everyone. We could phase this coverage in to coincide with the graduation of our new physicians. More clinics and hospitals should be built right away (and granted, this may require us to spend money on imports, but at least the wages would stay here), of course with the blessing of stimulus money.

In this way, when we finally start climbing out of the recession, we will have a newly trained, non-exportable work force, healthy workers in all industries, and enough clinics to serve our country's needs. Then next time an economic disaster hits (and it will, we have alarmingly short memories), we'll at least be on an even playing field with other wealthy nations.