Wanted: A Job-Creating Manufacturing Policy
Faced with a sluggish economy and a Congress expected to be notably unproductive, President Obama is calling for "a year of action." Where he can, he says, he'll go it alone. And thus we have the manufacturing institute that his administration awarded earlier this month to a consortium in Raleigh, N.C. It’s the second in a planned network of innovation hubs backed by public and private funding -- all part of the president’s plan to bolster our manufacturing sector, the historic home for America’s middle-class jobs.
“I don’t want the next big job-creating discovery, the research and technology to be in Germany or China or Japan. I want it to be right here in the United States of America,” said the president, unveiling a facility that will develop advanced semiconductor technology. He’s right: The government should leverage its resources to encourage industrial research, which is sometimes difficult for private firms, particularly smaller ones, to do on their own. Although we have a long way to go to catch up with Japan, Germany, and other advanced economies, this nascent network will pay off in the long run.
But the rest of the president’s manufacturing plan could still use some work. Most of what the administration would call its manufacturing strategy is just creative data interpretation.
Take a look at Exhibit A: our growth in exports. Much of this is due to America’s boom in energy production and is benchmarked by a historic export low during the Great Recession. The president is fond of touting this figure, since it implies a healthy, productive economy. But imports in manufactured goods have grown much faster, particularly from China, resulting in a bilateral trade deficit that sets records every year.
Now consider Exhibit B: manufacturing employment. Obama told the crowd in North Carolina, “Our manufacturers have added over the last four years more than 550,000 new jobs, including almost 80,000 manufacturing jobs in the last five months alone.” But that selective reading of the numbers doesn’t acknowledge that the country lost roughly 5 million factory jobs since the year 2000, and has seen only a net increase of 77,000 since January 2013.
Job growth in manufacturing is also way off the target that the president himself set. During his re-election campaign, he pledged to create 1 million new manufacturing jobs by the end of his second term. That will require more than 25,000 new jobs a month until 2017 if he’s to meet his own expectations, and getting there will take more than an upward swing in the business cycle.
So imagine if, during Tuesday’s State of the Union address, the president unveiled a new, job-creating manufacturing strategy for America. What should the strategy include?
First: Guarantee enough new infrastructure investment to repair and upgrade our roads, bridges, ports, and energy grid. Doing so wouldn’t be politically impossible. The spending bill just passed by Congress includes a sizable increase for water infrastructure investment.
Second: Ensure the government is spending our tax dollars on American-made steel, iron, and manufactured goods instead of outsourcing those projects to China. In short, buy American.
Third: Increase tax incentives for reshoring (the return of jobs from overseas), and only consider reforming corporate taxes in a way that retains and expands incentives for domestic research, hiring, production, and capital expenses.
Fourth: Build clear career pathways for young people and the long-term unemployed to ensure a dynamic workforce for American manufacturing.
Fifth: Set a trade agenda that emphasizes reciprocity and balance, starting with China. We should aim to halve our record trade deficit with Beijing, and we could do so in part by passing bipartisan legislation to deter currency manipulation.
If President Obama took even half of these steps, we’d have the basis for a manufacturing policy that helps to expand our middle class.
If 2014 is to truly be a year of action, we need more than half-measures. We need more good-paying manufacturing jobs. Will the president commit to supporting them in his State of the Union address?