A new bill is on its way to the House Capital Investment Committee in St. Paul. The chief author is Carly Melin, DFL Hibbing. It would require the State of Minnesota to purchase only American made steel for public works.
The idea sounds pretty good on the surface. It is intended to bring business, unions, and government together to strengthen the economy of Minnesota by ensuring demand for the ore from the Iron Range.
It won’t work. Yes, it will ensure demand and help the production side in the short term, but in the long term, it will further damage the economy and create more problems as time goes on.
First, it will ensure a demand, but it will not do this by increasing the demand for the product, it will do this by restricting competition. Disqualifying some of the potential bids will allow the remaining bids to possibly be quoted at a higher rate, and it leads to the situation where the government decides which companies will be allowed eligibility to be awarded a contract. This gives rise to the opportunity for a company to either influence the government to either add them to the list or exclude their competition. It is obvious where that can lead.
Second, by arbitrarily excluding bids which may be at a lower cost, it necessarily drives the price of the product up. Those who support this theory would have us believe that the price would be worth paying to make sure jobs are available in one area, but who pays the price? All of us. This is just a well camouflaged redistribution tactic in which the government forces us to pay taxes, then takes those revenues and sends them to corporations of their choosing, in this case domestic steel. In spite of the beautiful, rainbow colored appearance, this is the definition of crony capitalism, which most would vehemently oppose were it in a different setting.
This bill will likely pass into law. When it does we can expect the price of the projects the State of Minnesota decides to make us pay for will be maintained at an inflated level. I doubt that it will create any jobs, as it can not possibly change the overall demand that much, but it will benefit the unions (although probably not the union members), the industry lobbyists, and the politicians they influence. The rest of us will bear the cost in the form of higher prices for these building projects that the government selects for us.