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President Puts American Manufacturing Front And Center In State Of The Union

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Reposted from Campaign for America’s Future

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President Puts American Manufacturing Front And Center In State Of The Union 

Dave Johnson  |  January 25, 2012  |  Campaign for America’s Future

President Obama put American manufacturing literally at the front and center of his State of the Union speech. American manufacturing was at the front of the speech and at the center of a “blueprint” for bringing back jobs and strengthening our economy. By placing manufacturing front and center he has taken this conversation further than any President before him.

There is good reason to cheer, but also good reason to ask for even more. He outlined steps to stop the outsourcing and start the insourcing, but there is not yet a comprehensive, overall government strategy to fix trade and capture the industries of the future.

The Speech

Right up front the President talked about building “an America that attracts a new generation of high-tech manufacturing and high-paying jobs.” Then,

“Tonight, I want to speak about how we move forward and lay out a blueprint for an economy that’s built to last, an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.

This blueprint begins with American manufacturing.”

Bob Borosage, in The Obama State of the Union: A Progressive View,

On the economy, the speech led with more discussion of manufacturing than anyone has heard in years. The president wanted and deserved credit for saving Detroit – a key to his campaign in the Midwest – and wanted to highlight the uptick in manufacturing jobs and “insourcing,” the movement of some jobs back to the US.

Again, his agenda focused on mostly symbolic measures of populist appeal. In addition to the tax on multinationals, he promised a new trade enforcement effort to challenge China and others who trample global trade rules. With Romney promising to cite China for currency violation on day one if elected, the administration seems likely to finally challenge China, at least symbolically.

Steps, But Not An Overall Picture

The President outlined steps to stop the outsourcing and start the insourcing. There are things that the Congress can do right now. These include but are not limited to,

  • Eliminate existing tax deductions for outsourcing
  • Big multinational corporations should pay a minimum tax
  • Use some of the money this brings in to cover the expenses of bringing jobs home
  • Pass tax cuts for manufacturing here
  • A trade enforcement unit to look at bringing cases against countries like China that cheat, use piracy, give subsidies
  • Steps to train skilled workers, with a national commitment to train 2 million with skills that will lead to a job
  • Do something about the maze of confusing training programs
  • Turn our unemployment system into a reemployment system
  • Instead of bashing teachers and laying them off, give schools resources to keep good teachers
  • Reduce the cost of college. Stop student loan interest rates from doubling in July. Condition federal assistance on lowering tuition.

This “blueprint” has a number of good, solid steps that will help stop the outsourcing and start the insourcing. But it is not a comprehensive national industrial/economic strategy that addresses the overall picture of all of the components of a national manufacturing ecosystem. To begin to address this, the President has established a cabinet-level Office of Manufacturing Policy to coordinate efforts of various government agencies.

Coordinating the efforts of various government agencies to help American exports is important, but this does not address the development of a national plan, like other countries have. We need this, too. A national plan would seek to cover all the elements of a healthy “industrial commons” — meaning all of the components of a healthy manufacturing ecosystem. These include government efforts to make sure the components are ready, funded and functioning:

  • The necessary educational components to provide people ready to do all of the jobs an industry requires;
  • The financing to build factories and obtain inventory;
  • The modern infrastructure of roads, electrical power, internet, posts and airports, to support the companies;
  • Trade and tax policies to help these companies locate and export;
  • R&D facilities and researchers for innovation and design;
  • Local suppliers to support the companies;
  • Legal structures and fully-funded and staffed court systems to support the industry;
  • The entire “chain of experience” located in an area, often around a “cluster” of businesses, required for an industry to develop and thrive.

Countries like China are engaged in national efforts to get all of these components lined up to capture industries like the new green energy revolution that is taking place. China is working to capture solar and wind energy manufacturing. They are working to capture high-speed rail manufacturing. The news about the reasons Apple and other high-tech manufactures have had to locate in China show how hard China has worked to capture that industry — and not without quite a bit of cheating that we are not stopping.

Our competitors are engaging in national efforts to line up all of these components to capture other new industries as they emerge. We are not.

Ideology Holds Us Back From Competing

This list of components of a national industrial/economic policy describes the kind of national effort that competitors like China are engaged in, and is the reason they are bringing in such a share of new industrial growth. To address this we have to see ourselves as a country, as China does, mutually supporting each other, to be able to embark on an undertaking like this. We have to abandon the “each of us on our own” and selfish, “in it only for ourselves” mentality that has set us apart, preventing national government efforts like other countries engage in.

Some of us hold on to an ideological fantasy that government is only in the way, but other countries do not. So the result is that we keep sending our companies out on their own against national systems. Even our largest companies cannot compete on their own against countries with national efforts to put all of these components in place. It takes a unified government effort.

We have to move to a “we are in this together” understanding of ourselves and our country if we want to bring back the shared prosperity we used to have, and can have again.

Update - White House fact sheet: FACT SHEET: President Obama’s Blueprint to Support U.S. Manufacturing Jobs, Discourage Outsourcing, and Encourage Insourcing

6 Responses to “President Puts American Manufacturing Front And Center In State Of The Union”

  1. Harry Moser says:

    I was one of the business experts in Pres. Obama’s excellent Jan 11, 2011 Insourcing Forum. I emphasized, and the assembled executives supported, the need for companies to more consistently utilize total cost of ownership analysis instead of price variance in making their sourcing decisions. U.S. industry can proceed with this important change while the President and Congress decide what to do about taxes.
    I went away with follow-ups with the Secretary of Labor and high level staff at the National Economic Council, the Commerce Department and the SBA. I believe continued cooperation will improve both reshoring and skilled workforce availability.
    The non-profit Reshoring Initiative, http://www.reshorenow.org, provides for free a Total Cost of Ownership (TCO) software that helps corporations calculate the real offshoring impact on their P&L. Readers can bring back some manufacturing by asking their companies to reevaluate offshoring decisions. Suppliers can use the TCO software to convince their customers to reshore.
    As a side note, it is not helpful for clear communication for the President to write “stop the outsourcing and start the insourcing.” “Outsourcing” means to have work done at another company no matter where located. Millions of Americans work at domestic factories that are outsourcing for other companies. Examples include machine shops, foundries, even steel mills. The use of “insourcing” instead of the correct reshoring or backshoring is confusing enough. Rejecting “outsourcing” is totally unproductive.
    You can reach me at harry.moser@reshorenow.org.

  2. Bruce Bishop says:

    The solution then, is to emulate China? We need to implement a communist dictatorship as soon as possible, so that, as Thomas Friedman of the New York Times might say, our government will have the latitude and the flexibility to make the changes necessary to turn our economy around.

    The fly in the ointment, as regards China, is that they have had to allow a few entrepreneurs to become billionaires (at least temporarily), because only the “free market” can generate the sort of wealth China must have to become the number one “superpower.”

    China has seemingly achieved the “best of both worlds,” by manufacturing huge wealth, while keeping the majority of its people in abject poverty. They have accomplished this with total disregard for human rights, worker safety, product safety, intellectual property rights or the environment. We gleefully scoop up our $28 DVD players and our $248 laptop computers without giving a thought to what is happening on the other side of the world.

    In China, the state is EVERYTHING; and the individual is NOTHING. In America, individual sovereignty is supreme — or at least it was until the “progressive” left came to power.

    Communist China is a criminal enterprise that is dependent on the fact that our government is both corrupt and stupid. Our government borrows forty cents of every dollar it spends from China. Anything that can’t go on forever, won’t. When the Chinese finally come to collect what we owe, it won’t be pretty.

    To understand how the “progressive” left is destroying our individual sovereignty and, indeed, our country, I recommend “Ameritopia — The Unmaking Of America,” by Mark Levin.

  3. Mo says:

    The solution is not to emulate China but North Dakota. The State government of North Dakota takes tax money received by taxpayers and fees and deposits them into their own bank to fund industrial activity. Every state should have their own bank that they can use to fund industrial activity. Also manufacturers should pool their funds into banks devoted to the manufacturing sector and encourage workers to keep funds in the bank too so that the funds can be recycled within the sector to grow supply chains. Countries with industrial policies have development and industrial banks that constantly recycle credit within that sector. Unless funds can be recycled regularly within that sector, a loan here and there from the government is not going to be sufficient to compete with countries that have these banks that provide unlimited amounts of credit.

  4. Bruce Bishop says:

    Mo,

    The lack of industrial activity in the U.S. is not due to a lack of available funds.

    The problem is that there is nothing that can be manufactured in the U.S. that China can’t produce at one tenth the cost.

    North Dakota is in the middle of an “oil boom.” Small, local manufacturers will pop up, or ramp up, to supply the oil field components that are needed quickly. During an oil boom, time is of the essence; cost is a minor consideration. They don’t have time to get the tanks and valves from China or they would.

    Having a State Bank that understands the oil patch and knows the local players is probably a good idea under the circumstances.

    It’s a shame that our “Commander in Chief,” is doing everything he can to prevent the development of new petroleum sources, and, of course, the thousands of high-paying jobs that would result. This pretty much puts the lie to his SOTU comments about manufacturing jobs being “front and center.”

    • Mo says:

      Bruce, if every state had their own state bank working with local community banks and partnering with manufacturing banks, industrial activity would grow with an increase in supply chains. China being able to produce everything at one-tenth the cost is a monetary illusion. China has to keep printing new money out of thin air faster then the US so that based on paper exchange rates it makes labor costs appear artificially cheaper. In order to prevent prices like wages from rising fast, they implement all sorts of price controls. With state banks recycling funds within a sector like manufacturing, the manufacturing sector would have a better chance of neutralizing the industrial policies from countries like China.

      The bridge being renovated in San Francisco is a perfect example of the monetary illusion. Orginally the state believed they were going to save 400 million, but now the project is billions over budget and delayed where US workers had to travel overseas to train them.

      When it comes to North Dakota, the state bank is one of the main reasons for their success rather than the oil boom. For example, other US states that have lots more natural resources than North Dakota have high unemployment.

      • Bruce Bishop says:

        Mo,

        Your arguments about China printing money so they can continue shipping goods to us at one-tenth of what it would cost for us to produce them might make sense if they were trying to drive U.S. manufacturers out of business. But, they have already done that. I say they could double the price on everything they ship to us and there wouldn’t be a damn thing we could do about it. There is no reason for them to subsidize us by shipping us goods under cost.

        I don’t know any of the details regarding the Oakland Bay Bridge and I don’t care. California is a lost cause. Nothing they could do would surprise me any more. They are standing in the national soup line demanding Beef Bourguinon.

        If you are correct and the creation of state banks would lead to an oil boom, or some other sort of extraction boom, in each of several states, then I am all for it. I’m sure that those states with “lots more natural resources” are watching North Dakota very closely. I hope you are right.

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