The longer one looks at the Pelosi-Reid-Obama Debt Act of 2009 the more pessimistic one becomes about its success.

The latest discovery in the so-called “stimulus” package is a “Buy American” provision that has many concerned about its implications, and wondering if it’s simply a repeat of the disastrous Smoot-Hawley Tariff Act that drove the country into the Great Depression.

As one blogger at The Motley Fool explains:

In short, this provision of the stimulus package, which is now up to a whopping $819 billion BTW, would ban the user of foreign steel and iron from use in the infrastructure projects that it pays for.  As if this provision wasn’t dumb enough, the Senate version of the bill, which has not yet been approved, required all stimulus-funded projects use only American-made equipment and goods.

The old proverb “The road to ruin is paved with good intentions” (get it…infrastructure…road) is extremely appropriate here.  While the “Buy American” rider is not nearly as offensive as the infamous Smoot-Hawley Tariff Act, which raised the tariffs on 20,000 types of imported goods to a record level and created a global air of protectionism and retaliation from foreign countries that prolonged the Great Depression, it is clearly a big step in the wrong direction.

Perhaps protectionism won’t be as disastrous this time around because we hardly produce anything in America any longer, but I doubt it.  If our trade partners are offended by “Buy American” provisions like this one they will start rolling out protectionist tariffs of their own and the companies here that do actually produce things and export them will be hurt.

In short, the protectionist provision could spark a series of tariffs on our goods from nations that import our goods. Just as Smoot-Hawley did, the measure could lead to a plummet in American import levels. Fewer people in the global community buying what we produce isn’t about to lift us out of the recession.

The Obama administration is supposedly reviewing the “Buy American” rider and formulating a response right now.  Let’s all hope that they can get it modified or removed.  Heck, even large U.S. industrial companies like Caterpillar and GE have come out against it.  Bill Lane the government affairs director for Caterpillar recently said this about the provision, “There is no company that is going to benefit more from the stimulus package than Caterpillar, but I am telling you that by embracing Buy American you are undermining our ability to export U.S. produced products overseas….Any student of history will tell you that one of the most significant mistakes of the 1930s is when the U.S. embraced protectionism.  It had a cascading effect that ground world trade almost to a halt, and turned a one-year recession into the Great Depression.”

President Obama has reportedly been doing a lot of reading about the Great Depression and FDR’s New Deal. He should know that protectionist policies won’t help save the economy — they’ll drive it deeper into recession.

Might I recommend The Forgotten Man, Mr. President?