The Stimulus Package and Protectionism

The Stimulus Package includes some protectionist measures. Economists have speculated that this might happen. The pitch makes for good political sound bytes.

Here's what ND Senator Byron Dorgan says:

"The 'Buy American' provision will help stimulate our own economy," Sen. Byron Dorgan, D-N.D., who wrote the provision, told CNNMoney. "When taxpayer dollars are used, we should urge that money to support the things produced here at home."

So why are Economists concerned? The infamous Smoot-Hawley bill passed in 1930 to protect American producers during the Great Depression serves as a classic reminder of what protectionism can do to an already struggling economy. Most economists believe the legislation only added to the depth and length of the depression. Here's what Wikipedia has to say:

The Smoot-Hawley Tariff Act (sometimes known as the Hawley-Smoot Tariff Act) was an act signed into law on June 17, 1930, that raised U.S. tariffs on over 20,000 imported goods to record levels. In the United States 1,028 economists signed a petition against this legislation, and after it was passed, many countries retaliated with their own increased tariffs on U.S. goods, and American exports and imports plunged by more than half. In the opinion of some economists, the Smoot-Hawley Act was a catalyst for the severe reduction in U.S.-European trade from its high in 1929 to its depressed levels of 1932 that accompanied the start of the Great Depression.

Notice the proud moment in history when 1,028 economists stood together against the bill. Unfortunately they were ignored.