Richard Posner proposes the following alternative to the current Buy America provisions (which require the use of American inputs in certain projects):
An appropriate solution to this dilemma is to focus the stimulus package on goods and services that are made in the United States. That is one more reason why, as some Republican senators are now urging, more of the stimulus money should go to construction, whether of roads or bridges or schools. True, some inputs into these products, such as steel for bridges, may come from abroad, but most are local, in particular of course labor--and there is a lot of unemployment in the construction industry.
I wonder how different this is than the existing approach. It's a little more subtle, but it would have the same practical effect. The problem is, if we focus our stimulus money on domestic goods and services, other countries are likely to do the same. And if everyone does it, does anyone benefit? I suppose the countries who currently spend the highest percentage of their budget on foreign goods and services might, but I'm not even sure who those countries are.
ADDED:
Food for thought from Doug Irwin:
Once we get through the current economic mess, China, India and other countries are likely to continue their large investments in building projects. If such countries also adopt our preferences for domestic producers, then America will be at a competitive disadvantage in bidding for those contracts.