As the U.S. government moved toward enacting its $787 billion fiscal stimulus legislation during the recession of 2007-2009, debate emerged over whether government-funded projects should use only U.S.-made materials. According to proponents of Buy American legislation, not one dollar of stimulus expenditures should be spent on foreign goods; instead, taxpayers' dollars should be used to buy U.S. made goods and thus support the jobs of Americans.
The initial fiscal stimulus bill sponsored by the House of Representatives stipulated that none of the funds made available by the bill could be used for infrastructure projects unless all of the iron and steel used in a project were produced in the United States. The Senate version went even further, mandating that all manufactured goods used in construction projects come from U.S. producers.
This legislation was strongly favored by U.S. labor unions and companies such as U.S. Steel Corp. Although President Barack Obama supported Buy American legislation during his presidential campaign in 2008, his enthusiasm weakened by 2009. The initial foreign reaction to possible Buy American legislation was outrage. The European Union warned that passage of the legislation would result in the United States violating past trade agreements and intensifying the possibility of a trade war that could plunge the world into depression.
Also, U.S. exporting companies such as Caterpillar argued that foreign retaliation would greatly reduce their sales abroad: Caterpillar noted that in 2009, 60 percent of its revenue was from foreign sales. In response to these concerns, Obama came out against Buy American provisions that signaled blatant protectionism. He wound up signing a fiscal stimulus bill that included a watered-down version of the Buy American provisions contained in the House and Senate stimulus bills. For example, federal agencies can waive Buy American preferences if they inflate the cost of a construction project by more than 25 percent or are deemed to be against the public interest. City and state (municipal) governments in the United States are not obligated to honor the trade agreements of the federal government: They have been able to enact Buy American preferences that exclude firms in Canada, Mexico, and other countries from bidding on municipal construction contracts for schools, water treatment plants, and the like.

What do you think? Should American taxpayer dollars be used to finance the federal government’s purchases of supplies from firms of other nations?