Jobs for China

We have the absolutely shocking situation that our politicians and government bureaucrats are awarding major construction projects to China, rather than having the work done in America by Americans.

Apparently these politicians and bureaucrats don’t watch the news on TV every evening. They apparently don’t know that tens of millions of Americans are unemployed. They apparently don’t know that the top issue on the mind of anyone with common sense is finding work for unemployed Americans, to give them dignity and to make it possible for them to feed their families.

These politicians and bureaucrats apparently don’t know that if they give work to Americans they will receive tax revenue from American workers and American factories.

Instructional memo to politicians and bureaucrats: Here is something you are apparently not aware of: Workers in China don’t pay U.S. taxes!

Specifically what are we talking about here?

According to an article in the Wall Street Journal‘s Real Estate section of February 16, 2011:

“The China State Construction Company has renovated the Alexander Hamilton Bridge between Manhattan and the Bronx,” and has also completed “a new Metro-North train platform at Yankee Stadium.“

“. . . China State Construction in partnership with the Chinese Export-Import Bank is bidding to rebuild the Goethals Bridge connecting New Jersey to Staten Island. If they get the project, the bank would finance construction and get repaid over time by the Port Authority of New York and New Jersey.“

And, exerpted from an article in the New York Times, Global Business, June 25, 2011:

“At a sprawling manufacturing complex” in China, “hundreds of Chinese laborers are now completing work on the San Francisco-Oakland Bay Bridge.“

“Next month, the last four of more than two dozen giant steel modules will be loaded onto a ship and transported 6500 miles to Oakland.“

“The assembly work in California, and the pouring of the concrete road surface, will be done by Americans.“

American officials “note that [the combination] of the full financial force of the Chinese government behind its infrastructure companies, the monumental scale of the work, and the prices bid, [make it ] hard for private industry elsewhere to beat.“

“At $7.2 billion, [the bridge] will be one of the most expensive structures ever built. But California officials estimate that they will save at least $400 million by having so much of the work done in China.“

“California decided not to apply for Federal funding for the project because the ‘Buy America’ proviso would probably have required purchasing more expensive steel and fabrication from United States manufacturers.“

The newspaper article states that former Governor Schwarzenegger was in favor of having China do the work and he visited the plant in China last year.

Another American official was quoted stating that “most U.S. companies don’t have the types of warehouses, equipment, or cash flow” required for this type of project.

This story concerns the Self-Anchored Suspension (SAS) Bridge for the new east span of the San Francisco-Oakland Bay Bridge. The main contract for the SAS bridge was awarded to a Joint Venture of American Bridge and Fluor Enterprises in April 2006. The Fluor website states that construction began in 2006 and completion is expected in 2013. The website also states:

“Bridge components are being fabricated in the U.S., Europe, and Asia. A secondary office was established in Shanghai to oversee production of the main structural steel [components] … Bridge components will ship via eight shipments, every two months from China.“

The project cost is stated as $7.2 billion. I contacted California government offices, and offices of the main contractor, but was not able to obtain information on what portion of this total is the cost of of the work done in China.

But we can draw some conclusions from the published numbers. If the saving is $400 million, then without the saving the project cost would have been $7.6 billion. Then in percentage terms the saving is 0.4 billion x 100/7.6 billion with the result 5.26%.

Is this modest saving enough to offset:

__Missing a golden opportunity to put Americans back to work?

__Taking a chance with the possibility of poor quality Chinese steel?

__Taking a chance with the possibility of poor quality manufacturing or manufacturing errors?

That is the big question.

There would also have been a cost saving if the work had been done in the United States, in that American workers and American factories would have paid taxes to federal and state governments. This tax revenue would have offset part of the cost of the bridge.

Also, if everything was sourced in America there would have been federal money available to California to help pay for the bridge.

These two aspects of the situation would have reduced California’s net cost for the bridge. Did California actually save by having the work done in China?

In any case it doesn’t look good that California avoided participating in the “Buy America” program, a program that was put in place for a very good reason.

The official quoted above did not say that there is no American company or consortium that could have manufactured the main structural steel components. I am sure American industry would have risen to the challenge. Placing this type of work in China is based on a self-fulfilling prophecy: Spend 50 years voluntarily giving away our world leadership in manufacturing and then of course when a big project comes along there may be some doubt as to our capability.

Understandably, very large-scale facilities are needed to build these bridge components and similar products. But we have to get free of China. Otherwise our economy is doomed. How much would it have cost to build the required facilities in California? Such a facility would be a permanent investment, keeping money in the country and potentially providing a continuing new industry for California.

President Obama is constantly talking about jobs. Everyone is talking about jobs. Yet there is no supervision of state-level purchasing, with the result: Purchase from China.

But we also have the shocking situation that the federal government is allowing the Department of Defense to purchase from overseas sources in a misguided attempt to save money.

The former California governor, when in office, constantly talked about the severe budget problems of California. But like most politicians he dealt with one issue at a time, in a vacuum, separate from all other issues. Through manufacturing the main structural steel components in California, the governor would have reduced his budget problems.