The Case for Protectionism: "Buy American" Program Will Fix Jobless Recovery
Posted Nov 05, 2009 12:21pm EST by Heesun Wee in Investing, Recession
Related: ^gspc, ^dji, dia, spy, ^ixic, FXI, PGJ

American worker productivity surged in the third quarter and new jobless claims fell to their lowest level since January, the government reported today, more signs of a nascent economic recovery. But no one's cheering just yet.

With businesses reluctant to hire, economists forecast the unemployment rate will tick up to 9.9%, when October’s figure is reported tomorrow.

"I think we're going to lose another million jobs between now and the middle of next year," says our guest Leo Hindery, managing partner at InterMedia Partners. Hindery, a former cable executive, has also advised President Obama and John Edwards on economic policy. "There need to be some prescriptions," he says.

His proposed game plan?

Genuine manufacturing policy. With less than 12% of U.S. GDP stemming from manufacturing, the sector must be energized to stabilize and offset an economy now hinged on consumer spending and services. Domestic labor costs are not what's costing Americans jobs, Hindery says. The real culprits are illegal subsidies, currency manipulation and poor environmental practices by our trading "partners," most notably China.

Buy domestic program. While critics cry foul, with charges of protectionism, Hindery argues U.S. policies simply need to be in line with other industrialized nations. But how do you implement "Buy American," when for example a GM car includes Chinese parts? The solution lies in buy domestic programs for the federal government, Hindery says.