Making Sense Making It In America

Dave Johnson

Editor’s Note: We’re publishing a series of “Making Sense” fact sheets on key economic issues to help you win the debate on the core issues facing middle-class families. Each fact sheet contains information, talking points and resources you can use to make the case for progressive policies. Earlier: Curbing Wall Street, Social Security and Clean energy. Today: Jobs and manufacturing.

The Challenge

PDF versionAmerica is the world’s largest debtor. Between 2000 and 2009, we’ve run trade deficits totaling over $5 trillion dollars, borrowing money largely from Chinese and Japanese central bankers to cover the cost. We’re borrowing money to pay for the goods that they make with the jobs our companies have moved over there.

Nearly 6 million, or about one-third, of the nation’s manufacturing jobs have been lost in the last decade. Not surprisingly, working families have lost ground. Since the Reagan years companies have been closing factories and putting millions of middle-class people out of work in pursuit of low-wage labor and lax regulation overseas. Conservative lawmakers and corporate lobbyists have encouraged companies to do this with tax incentives and trade policies that end up favoring giant multinational corporations over American manufacturers.

We need to change course. Like other countries, we need to develop a serious plan to revive cutting-edge manufacturing in this country – as part of putting America back to work. While conservatives suggest we can’t afford these investments, the reality is that we cannot afford not to make them.

The Argument

The new American economy must be built on a solid foundation. Manufacturing is that foundation. It creates the goods that bring in the income that supports the service economy; we can’t just cut each other’s hair and sell each other hamburgers. As a nation, we either manufacture or we borrow, and borrowing cannot go on forever.

We need to renew our manufacturing base, rebuild our infrastructure and educate our people. We need a national economic strategy that fits these pieces together, a collaboration between the private sector and the government that ranges from worker training to research to component-making. And we need an economy in which everyone shares the benefits of the work that gets done, instead of the current paradigm in which all the incentives work toward eliminating jobs rather than sharing productivity gains with workers.

Let’s start with investing in the foundation of a competitive high wage economy: 21st century infrastructure, world-class education for our children, research and development. We have to move to renewable energy, and capture a leading role in the green industrial revolution that is already defining the markets of the future.

Conservatives argue we should just let companies make their own way. But faced with a decrepit infrastructure, outdated communications systems and costly big-oil subsidies, companies competing with countries like China that have an aggressive national plan need a government that is on their side.

A core objective of our global economic strategy must be to end the destabilizing global imbalances in exchange rates and trade. End the tax breaks that create incentives to move production offshore. Instead, let the federal government resume the role it has played in years past: investing in a modern infrastructure and providing seed money for research and development in key sectors whose commercial application will come later—as it did with the Internet 30 years ago and with clean energy today.

The Obstacles

Conservatives, backed by giant multinational corporations and their lobbyists, continue to push for “free trade” agreements that keep us in a race to the bottom. They argue that consumers benefit from cheaper consumer products, but those products come a high price, not just in America in the form of lost jobs, but overseas in the form of subsistence wages, inhumane working conditions and environmental degradation. Conservatives even fight enforcement of existing agreements when our trading partners refuse to play fair, allowing factories and jobs to continue bleeding away.

Conservatives insist that cutting taxes and regulations will solve everything. But the tax and regulatory breaks that businesses won during the Bush administration did not reverse the loss of manufacturing and other goods-producing jobs. At the same time, conservative anti-government policies cut the education, infrastructure investment, R&D and regulations that made America competitive in the world.

Progressive Solution

What need a national economic strategy that ensures the infrastructure, finance, supply chain, educational, legal, technical and regulatory elements are in place to enable American workers to compete. All of our global competitors have policy that promotes domestic manufacturing; the U.S. does not. Because we don’t have an active and engaged industrial policy, we’re handing business over to those that do.

We need to set clear goals:

  • Buy American. We should maximize the use of domestically-produced goods in government projects. Other countries have domestic purchase requirements. For example, China requires that at least 80 percent of the equipment in its own solar power plants be made in China, and 70 percent domestic content for wind turbines installed in China.
  • Change tax incentives to keep factories and jobs here. For example, companies can defer paying tax on income earned by their foreign subsidiaries. This gives these firms an advantage over U.S. firms that hire U.S. workers to make products here. We should end tax policies that reward moving factories and jobs out of the country.
  • Balance our trade relationships, especially with China. China’s mercantilist policies have been a leading cause of manufacturing job loss in the U.S. Subsidized and dumped imports, artificially low currency, and lax environmental standards put our workers and companies at a significant disadvantage.
  • Invest in Infrastructure. Roughly 18,000 new jobs would be created for every $1 billion in new infrastructure spending on our nation’s transportation, energy, water systems, and public schools.
  • Prioritize green-job creation in the U.S. A comprehensive energy plan promotes conservation and innovation, improves our energy infrastructure, expands domestic production and creates green jobs. Energy tax incentives and renewable energy standards will help develop new manufacturing facilities and jobs.
  • Develop a manufacturing education policy and enact legislation for vocational and technical training programs to strengthen manufacturing education.

Fast Facts

  • The United States lost more than 42,400 factories and one-third of our manufacturing jobs after President Bush took office in 2001. 90,000 manufacturing companies are still at risk.
  • Manufacturing jobs being lost pay an average of of $69,000 while the service jobs gained pay an average of $43,200.
  • Every dollar spent on manufacturing produces $1.40 of additional economic activity, a higher “multiplier” than information, business or health care; twice as high as financial services.
  • The U.S. invented solar cells. But 90 percent of solar cells we use are imported from China.
  • 1.2 billion cellphones were sold worldwide in 1889. Not a single one was manufactured in the United States.
  • Roughly 50 percent of our windmills come from overseas, mostly China and Europe.
  • We need to spend $2.2 trillion during the next five years to restore our infrastructure—such as the one in four bridges that are today “structurally deficient or functionally obsolete”—to just minimal standards, according to the American Society of Civil Engineers.

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