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Stimulus work sends cash flowing out of US

By Alan Wirzbicki
Globe Correspondent / September 3, 2009

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WASHINGTON - After winning $2.3 million in federal stimulus money for a sewer project, officials in Auburn, Maine, wrangled another prize from Washington: permission to forgo American-made manhole covers for a design made only at a Canadian foundry.

As local governments race to spend stimulus money, many are seeking exemptions from the law’s “Buy American’’ restrictions, which were intended to prevent taxpayer money from ending up in foreign pockets. The administration has granted waivers for goods as varied as steel for public housing projects, high-speed Internet equipment, and Auburn’s manhole covers, which have heavy-duty hinges to help withstand the town’s heavy truck traffic.

The Obama administration could not provide a list or amount of waivers granted - which potentially could total billions of dollars - and Vice President Joe Biden’s office, which has responsibility for overseeing the stimulus, did not respond to requests for comment.

Local officials and trade groups said that the drive to finish stimulus projects quickly, and the paucity of some American-made products, made the waivers inevitable.

But labor unions and manufacturers, which lobbied for the restrictions, said waivers should be a last resort and represent lost opportunities to reap the most benefit from the $787 billion stimulus package by directing money to struggling US workers.

“Issuing a waiver is the easy way out,’’ said Scott N. Paul, executive director of the Alliance for American Manufacturing. “You need to develop a supply chain. It’s not easy to do, but simply saying that we’ll just cede this to China and Taiwan is incredibly shortsighted.’’

“It’s your tax money and my tax money. It should be creating jobs here,’’ added Gary Hubbard, a spokesman for the United Steelworkers union.

The exemption for manhole covers in Auburn - one of the first such waivers when the Environmental Protection Agency determined in May that there was no equivalent US version - triggered an especially angry reaction from American makers of manholes, grates, and other “municipal castings,’’ which generally cost about $170 each.

“Foundries in the US are very capable of producing any manhole cover you’d need of any type, and we’re all hurting for business right now,’’ said A. Joe Mann, director of construction sales for special projects at Neenah Foundry Co. in Wisconsin, which has laid off about 400 workers at two plants. It reported a $13.3 million loss last quarter.

Mann said that Neenah was not contacted by the EPA to check whether the company could make the manholes before the agency issued the waiver.

A spokeswoman for the EPA referred questions to the White House, which did not respond to requests for comment.

Normand Lamie, superintendent of Auburn’s sewer district, said that without the waiver, a shovel-ready infrastructure project that created about 75 construction jobs could have been delayed, and the city would have been unable to buy the type of covers it wanted.

In response to a slew of requests like Auburn’s, the EPA issued a blanket exemption for foreign-made components last month as long as they do not amount to more than 5 percent of a stimulus project’s cost.

There is also a waiver for one of the marquee items in the stimulus, the $7.2 billion effort to expand high-speed Internet access to rural areas, which supporters have compared to the extension of electricity to rural areas during the New Deal. The Department of Commerce issued a blanket exemption in June, saying it would be burdensome for local governments to find US-made broadband switchers and routers.

Today, the Obama administration will continue its public relations blitz to highlight the benefits of the stimulus plan - which Republicans and other critics say has wasted money and not created jobs quickly enough - with a major Biden speech in Washington and appearances around the country by four Cabinet secretaries.

Most of the infrastructure money in the stimulus package has not been spent, and labor leaders said they would press for more information on waivers as the administration tackles some of the bigger projects, including high-speed rail.

“We really want transparency in the process,’’ said Robert Baugh, executive director of the industrial union council at the AFL-CIO. “Now, you find out after the fact. Put them online, make them move quickly, make it easy for people to find.’’

Critics of the restrictions, however, said the waivers reflect the reality that the United States no longer makes many basic goods, and that in a global economy many products are assembled in several countries, rendering the rules unenforceable.

The provisions were among the most contentious parts of the stimulus bill during the congressional debate in January, backed by labor and most Democrats, but opposed by big business, Senate Republicans, and Canada.

The federal government has required state highway contractors to use mostly American-made components since the 1980s, and federal contractors have been subject to the rules since the Great Depression. But the stimulus bill for the first time expanded those rules.

Opponents of the rules said they have created confusion that has delayed projects, especially in the water treatment industry.

“There was $7 billion in the stimulus for that sector, but only about 1 percent of that has been spent so far, and ‘Buy American’ is a large part of the reason,’’ said John Murphy, vice president at the US Chamber of Commerce, which opposed the restrictions. “That’s a huge missed opportunity, because the stimulus is supposed to stimulate.’’

Before the rules were put in place, Canada exported about $6 billion worth of sewer and water treatment equipment to the United States annually. Canadian business officials said US distributors are now afraid to stock Canadian products that they may never be able to sell to cities.

“We’re seeing a chilling effect throughout the supply chain,’’ said Jay Myers, the president of Canadian Manufacturers & Exporters.

Canadian Prime Minister Stephen Harper complained to President Obama about the issue last month.

But Linda Andros, legislative counsel for the United Steelworkers, called Canada’s complaints comical, pointing out that Canadian towns and provinces have long restricted their purchases to domestic goods, and that the Canadian government had recently declined to join an agreement to open its municipal contracts to foreign manufacturers.

“They’ve been screaming and yelling because their companies are upset because of course they are an exporting country and they depend on the market for a lot of things,’’ she said. “They just don’t like it, because now they can’t compete.’’