On one hand, I get the "if there's one got dangit thing 'Murica makes anymore it's the got dangit flag" sentiment. I wouldn't bother flying a flag made in China. I don't know if it warrants a law though.
Does flag production really mean anything when nearly all of our textile industry went overseas in a matter of a few years? Entire towns and communities were forced to seek work elsewhere, like Harbor Freight, Wal-Mart, and every other store BITOGers love to hate.
Feel good 'Murica laws might feel good, but at the end of the day they probably don't help anything.