All about ideas…

Putting America First

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Manufactruring workerFor several years, even before the Great Recession hit as a result of the collapse of the financial markets and credit crisis in 2009, I’ve been searching for the best ideas from across the spectrum of political and social ideas to revitalize America’s manufacturing economy.

Frankly, I never bought into the idea that the US should become a service economy. I don’t know why, but intuitively it felt wrong. It appears history has borne out my intuition correctly.

Detroit and the great manufacturing centers of the Midwest did not become the Rest Belt overnight in 2009. The slow loss of manufacturing began as early as 1979, accelerating to rapid proportions by 2006. Today only 9 out of every 100 workers work in manufacturing as opposed to the forty years leading up to the Second World War, when the percent of U.S. employment in manufacturing was a fairly consistent 30% or so, and followed by the three decades thereafter, when, despite the introduction of new service sector jobs as post-War manufacturing incomes rose, the percentage of manufacturing jobs still consistently hovered at around 25%.

As Leo Hindery, Jr., Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations, writes:

In sum, America, with just 9% or so of its employees working in manufacturing, suffers economically in multiple ways when it competes against large-scale trading partners which, percent-wise, have multiples more workers in the sector. We suffer in the magnitude of our trade deficit, the progressiveness of our average wage, the extent of income inequality, the amount of our federal indebtedness, and the pressures put on our nation’s state and municipal budgets.

However, the U.S. can develop trade and training policies that mimic best practices from other countries. In Germany, for example, 22% of its workers are engaged in manufacturing, with 25% of GDP coming from that sector. Today, manufacturing in the U.S. only amounts to 11% of GDP.

From the Washington Post:

In 2009, the German government created a job-sharing program called “Kurzarbeit” in which companies agreed that instead of laying off workers, they would cut back their hours, with the government making up the difference in pay. Germany replaced lost income for at least 1.4 million workers. While they were off the job, many of them took training classes.

The program saved nearly 500,000 jobs, according to a report by the Organization for Economic Co-operation and Development. The result was that as the global economy began to pick up speed again last year, German companies were ready to ramp up with the right workforce in place. The government budgeted about $7.5 billion for the program.

But that’s not all Germany did to protect its manufacturing base. It instituted a trade policy that demanded for every shipload of imports, an equal shipload of exports. That kind of trade policy bolstered its manufacturing sector and supported the nation’s economy and its workers. Inflation-adjusted average hourly pay has risen almost 30 percent since 1985 in Germany, the kind of gains American workers have not enjoyed since the ’50s and ’60s. In this country, hourly pay has risen a scant 6 percent since 1985.

China, likewise, demands certain benefits to its economy when pursuing trade about which much has been written, including its lack of meaningful environmental and labor standards, currency manipulation and other subsidies, highly restrictive limitations on foreign goods purchases, and demands that countries seeking to do business in China first make massive transfers to it of their intellectual property.

Nineteen of the G20 countries have precise manufacturing and trade policies, and most bounced back faster and are doing far better economically than the U.S.

The United States simply cannot afford to have nearly 18% of its workforce either working part time at low wage jobs or unemployed for the next two decades as currently predicted. If the U.S. is going to attain historic employment levels of previous decades, Congress and the Administration must develop our own manufacturing and trade policy that puts America first.
That doesn’t mean isolationism or the 1930s Smoot-Hawlings trade protectionism that led to trade wars, but a rational trade policy that put American manufacturing on an equal footing with our international competitors…and provides the kind of job training and security that Germany smartly instituted a couple of years ago.


Written by Valerie Curl

July 3, 2011 at 5:33 PM

One Response

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  1. Our government, especially now, has been persecuting the business community with an absurd tax burden and onerous regulations for decades for the simple reason that blaming our problems on (those greedy and exploitative)corporations is a politically expedient way of getting votes from the have-nots.

    All of the ills you mention are a direct result of government intervention into the workings of our once free markets. They screw it up and they blame capitalism. It’s a lie, but it works. While there are obviously progressives on the right, it is the left that’s responsible for this lie.

    The perfect case in point is our current debate over extending the debt limit.

    Last week, Obama began his campaign to put the blame on owners of private jets and the major oil companies. It’s such an obvious lie, that I’m amazed that more people don’t see it for what it is. Last week Charles Krauthammer did a quick mathematical analysis of this lie. I don’t remember the exact numbers, but they were mind boggling. He said that the total revenue that the government would raise if they cancelled the tax credits given to owners (business and personal) of private jets and the various depletion allowance, and depreciation tax credits given to major oil companies, if added up over 100 years (or more?), would not cover the budget deficit that Obama ran up this past February alone.

    The failure of the right to properly explain these facts to people, is one of the biggest obstacles we have in countering the outrageous lies of the left, and this extends to all areas of government abuse.

    Perhaps the single best step we could take to bring back our economic prosperity, would be to eliminate all taxes on corporate income. Why? Because all of the income of all corporations is already being taxed by the individual shareholders when the dividends are distributed. Even the huge salaries paid to some corporate executives, gets taxed, in fact at a higher rate due to their upper income tax rates status.

    If we could eliminate all taxes on corporate income, they would be able to reinvest all of those lost funds into expanding their business activities. And here’s the best part: They’d be able to invest those funds in expansion here in the US, not overseas, because the taxes saved would far outweigh the costs involved in doing their manufacturing overseas due to cheap labor.

    The republican party needs to find charismatic spokesmen and candidates, who can explain these issues to the public in language they can understand. Listen to Mitch McConnell speak, and you’ll understand exactly what I’m referring to, that’s assuming you don’t fall asleep within minutes after he starts speaking.

    The truth about the problems with our economy is so simple to see, that I find it hard to imagine that any thinking individuals can fail to see the fact that Obama and his fellow progressives are INTENTIONALLY trying to bring down the American economy.



    July 3, 2011 at 11:38 PM

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