I watched a Congressional hearing yesterday (webcast), examining why we need a national industrial strategy. There were a few pro-manufacturing voices. But in a surprise move, Republicans and representatives of Wall Street & giant multinationals opposed such a policy and repeatedly called for more tax cuts for the rich and corporations, more “free” trade agreements, getting rid of regulations and stopping government from holding corporations accountable to our laws. And at the end of the hearing the top committee Republican said we should not blame China’s trade-cheating for our trade deficits, we should instead blame our “home-grown” regulations, citizen access to courts, taxes, good wages, benefits, worker-safety protections, environmental protections, etc. [aka democracy] that China lacks.
Yesterday’s hearing was before the Joint Economic Committee, which is a committee of members of the House and Senate, created by Congress to review economic conditions and to analyze the effectiveness of economic policy. The hearing was named: Manufacturing in the USA: Why We Need a National Manufacturing Strategy? Click through for details and an archived video of the hearing.
The format was remarks by the committee heads, brief remarks from a panel of two members of Congress and a panel of four “experts” in the subject, followed by a question/answer session.
Rep. Kevin Brady’s introductory remarks set the stage for the coordinated Republican/Wall Street/multi-national corporate position. Opposing the idea of a national industrial policy, Brady summed up the reasoning:
The concern is that policy can “morph” into “central planning” that interferes with “the invisible hand.” He said industrial strategies have failed everywhere. [note- of course they haven't, just look at China, Germany, Brazil, India...] It comes at the expense of the consumer and leads to protectionism. Instead we should adopt “pro-growth” economic policies: (see if you can guess what is in the following list)
Reduce government spending, reform entitlements, cut taxes, give more tax breaks to big companies, give a tax “holiday” to repatriate “stranded” American profits, do even more trade agreements, repeal regulations and health care, enact tort reform.
Alex Brill of the American Enterprise Institute testified that we should “rely on market forces,” and government should make no specific policies. We should not expect an increase in employment in manufacturing because of productivity growth, which increases our standard of living.
The downward employment trend prompts some to conclude need government assistance, but that can harm “other sectors,” with resources misallocated. Manufacturing is only one sector of economy. Rely on market forces, government should stay out of it. [Note - by "other sectors" see if you can guess which "other sectors" he means. Hint: the answer is Wall Street.]
Instead we should should Improve US business environment as a whole. Encouraging growth across the economy [i.e. Wall Street].
Having government involved in manufacturing policy is an oxymoron in a free market economy [i.e. Wall Street].
To reduce the harmful distortions: (get ready, here it comes)
Reduce the corporate tax rate. We need a significant reduction, to level the playing field, improve general competitiveness. This is one step toward “neutral” fiscal policy.
Jay Timmons of the National Association of Manufacturers offered a contrasting opinion, saying that we need tax cuts, deregulation, etc.
We must have policies to compete successfully in international marketplace. Pro-growth policies: (get ready, here it comes)
Reduce the corporate tax rate. Reduce the regulatory burden, and “onerous” regulations that put the weight on “job creators.” [Note - see: Actually, "The Rich" Don't "Create Jobs," We Do.]
Get rid of barriers to trade and growth. We need more trade agreements. We are ceding market share to competitors. Our policies are turning clock back. There are excessive new regulations, like ozone standards. They “hamstring” the economy and “job-creators.”
A Different Perspective
Scott Paul from the Alliance for American Manufacturing offered a pro-manufacturing perspective.
Robust strategy has been at the core of American policy from the country’s beginnings. Today’s dearth of policy is the exception, not the rule. Hamilton’s manufacturing policy was in place until WWII.
Having a manufacturing strategy is not partisan, Reagan had one, the Plaza Accord. His administration made key investments, including semiconductors, and had “Buy America” requirements.
We saved the auto industry, which stabilized part of the support structure for domestic manufacturing.
There are many problems that can’t be solved on their own by companies, like R&D investment.
No single firm can coordinate national projects. We need a robust manufacturing strategy because fate of this sector is too important. The decline of manufacturing is not inevitable or desirable.
1) Address Chinese currency manipulation
2) Counter China’s other cheating – when we act and enforce we get results.
3) Retool our export initiative to focus on zero trade deficit.
4) Tax changes – but don’t offset corporate tax reduction with reductions in manufacturing – this is just a windfall for Wall Street
5) Winning a race to the bottom — don’t engage in this.
6) Infrastructure bank
7) Skills and training infrastructure
Chairman Casey asked Scott Paul about Chinese currency manipulation.
Chairman Casey and Mr. Scott Paul on International Currency Manipulation:
Paul: We need legislation to allow workers and firms relief from currency manipulation. Currency manipulation is one of most harmful policies out there, contributes to global imbalances, viscious cycle, hard to get out of. A year ago China took off the “peg,” and the currency appreciated but arguably not enough, still grossly undervalued between 30-40%.
Rep. Brady Brady: “If we blame china we will be sorely mistaken.” Our challenges are home-grown. Fiscal stimulus is one cause of our problems, we have fewer workers because of it, unemployment higher, etc.
A Unified, Coordinated Front: Government, Taxes, Regulation, Democracy — All Bad
Question – to Timmons (NAM), don’t your manufacturing members want tax cuts instead of jobs programs?
Timmons – Enact legislation that reduces costs and barriers. 18% higher cost here because of taxes, tort, regulatory and energy costs. We can reduce those costs, not blame other countries.
Then most of the Republicans and panelists got going about why government and taxes and regulations are bad. They were a unified, coordinated front, dismissing any consideration of government involvement…
Someone talked about uncertainty which is caused by government. This is why businesses are slow to hire. Businesses don’t know what We, the People might demand next.
Mark Zandi of Moody’s Analytics argues that government itself creates uncertainty because it has the power to tax and regulate. This makes companies question whether to do business in the US. Need to provide certainty and stability [like China?]
Someone said, “Pull back and eliminate as much as we can.”
Finally someone said we need to get rid of the National Labor Relations Board “to lower labor costs.
As always, Frank Sobotka explains what’s wrong: