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Obama's Call For Manufacturing Revival A Tough Goal

By The Associated Press , Posted Feb 10th 2012 @ 8:31AM

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Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Barack Obama manufacturing focusBy Tom Raum


WASHINGTON -- President Barack Obama is making a strong election-year push for an economic revival "built on American manufacturing." But he faces an uphill slog, with little consensus even within his own party on how to do it.

For decades, the United States has gradually shifted from creating goods to providing services. Fifty years ago, a third of U.S. jobs were in manufacturing. Now they account for just 9 percent, according to the Bureau of Labor Statistics. A manufacturing renaissance is being preached both from the White House, on the GOP campaign trail and in Super Bowl commercials.

Economists suggest plans to help boost manufacturing jobs may make more political sense than economic sense.

Obama's prescription for a manufacturing comeback will be fleshed out in the new budget he submits on Monday. He is proposing tax incentives to companies that move their overseas operations back to the United States, along with tax penalties for those that don't, more training and additional education.

But few of his ideas are likely to be enacted in this highly-charged election year.

Since the recession officially ended nearly 2½ years ago, manufacturing production has increased 15 percent, helped by the replacement of aging equipment and software, and strong demand from foreign markets. But Federal Reserve Chairman Ben Bernanke told Congress this week that the rebound might not last: "More recently, the pace of growth in business investment has slowed, likely reflecting concerns about both the domestic outlook and developments in Europe."

There are political overtones to Obama's State of the Union appeal for "an economy that's built to last, an economy built on American manufacturing." Polls show support for the president has slipped in Rust Belt battleground states he won in 2008.

Helping manufacturers recover is also being talked up by Republican presidential contenders, who all blame Obama's policies for contributing to the decline.

Former Sen. Rick Santorum wants to eliminate the U.S. corporate tax completely for manufacturers, saying it would help put "men and women in this country who built this country back to work." Mitt Romney's get-tough rhetoric on China appears to be winning attention from workers and former workers in industries that have lost jobs to China. The former Massachusetts governor promises "to make America a more attractive place for manufacturers to invest." Former House Speaker Newt Gingrich says we "badly need to rebuild our manufacturing base," promoting job creation in the defense, energy and space industries.

This heavy attention on manufacturing may be misplaced, economists suggest.

"The vast majority of jobs in the future are going to be created in the service sector, not the manufacturing sector," said Nigel Gault, chief U.S. economist for the consulting firm IHS Global Insight. He said he thought it was "a bit misleading" to focus so much on manufacturing.

"I'm not sure why manufacturing rather than any other industry warrants tax incentives," Gault added.

Obama's plan would:

  • Prevent U.S. companies from deducting moving expenses when they shift production overseas, while offering a 20 percent moving-expense tax credit for businesses returning to the U.S.

  • Establish a new trade enforcement unit.

  • Modify a tax credit for domestic production to make it apply more narrowly to manufacturing.

  • Extend $5 billion in new tax credits for clean-energy companies.

  • Reduce the nominal maximum 35 percent corporate tax, most likely taking it down to the high 20s. He also may propose a minimum tax on overseas profits.

Obama also has called for a minimum 30 percent tax rate on annual incomes of more than $1 million. Business interests claim it could harm small and medium-sized manufacturers who file tax returns as individuals.

Obama's sharp focus on reviving manufacturing isn't shared by all Democrats.

"Let's not fool ourselves. We're not going to have the kind of manufacturing-based economy we had 30 or 40 years ago," says Robert Reich, labor secretary under President Bill Clinton. And Christina Romer, who headed the president's Council of Economic Advisers from 2009-2010, says it is wrong to suggest that producing "real things" is more important than "services."

"American consumers value health care and haircuts as much as washing machines and hair dryers. Our earnings from exporting architectural plans for a building in Shanghai are as real as those from exporting cars to Canada," she wrote.

Jay Timmons, president of the National Association of Manufacturers, said his organization agrees with Obama in part, that "manufacturers are poised for a renaissance."

"The good news is everybody is talking about manufacturing today. Even on the Super Bowl, you saw ad after ad referring to the promise and the potential of manufacturing in America," he said. The bad news? It is still "20 percent more expensive to manufacture in the United States than it is anywhere else in the world," Timmons said. Obama supporters argue his proposals would help make U.S. factories more competitive.

One much-discussed Super Bowl ad was a Chrysler spot featuring actor Clint Eastwood that celebrates Detroit, suggesting it was near collapse until the residents "all pulled together." Eastwood implores the nation to do the same. Some Republicans called the spot a valentine to Obama's auto bailout. Eastwood insists it was apolitical.

Despite the job losses, the U.S. remains an exporting powerhouse, right behind No. 1 China and vying with Germany for the No. 2 rank. U.S. factories have steadily become more advanced and automated, requiring only a fraction of the workers previously needed.

Yet, China is beginning to take some market share from the U.S. in exporting advanced products and equipment, said a report by the U.S. Business and Industry Council, which represents mainly family-owned companies.

"These findings demolish the still-widespread view that Chinese economic competition can be safely downplayed because it's largely confined to cheap consumer goods," council official Alan Tonelson said.



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amavel

It is hard to compete with other nations that subsidize their industries. Conservatives scream that is Socialism, but aren't tax breaks to Corporations a subsidy and therefore Socialism?
A Corporate tax rate of 35% has morphed into an average paid rate of only 12.1%. I see only a fundamental move toward alternate energy to revive us.

February 12 2012 at 4:54 PM Report abuse rate up rate down Reply
sevenv

NAFTA and negitive social change will be OUR undoing .......Plus the unregistered foreign agents in congress and manufactoring who helped pave the road that our jobs left on.......George Washington,wore to his first swearing in,((he wanted to make a point about the US making and buying our own stuff !)),so it is reported ,...clothes made HERE,when his actual love in attire was clothing made elsewhere ! ........So much for these people screaming that Free Trade is inherent in our history,when the REAL truth is something else then again.....

February 12 2012 at 4:46 PM Report abuse rate up rate down Reply
KENNETH CHARLES

I'd love to see "Made in American" stuff but there aren't any, but if there is there not much made here.
I'd buy things made here in the States. Most stuff made in China, Japan and so on just don't last.

February 12 2012 at 4:09 PM Report abuse rate up rate down Reply
yurday6

This would be great, but how can a small business survive with all tthe taxes, regulation, litigation and most of all unions. We would see a 500% inflation very soon. On top of that not many people could qualify to do manufactuing jobs, since all the younger people went to college for something like psychology, there is a big lack of skills.

February 12 2012 at 4:08 PM Report abuse rate up rate down Reply
1 reply to yurday6's comment
amavel

The Unions didn't outsource jobs overseas. Wages have gone down while Corporate profits have gone up. Your take on our education gap is exactly right tough. The jobs are there for the Sciences.

February 12 2012 at 4:59 PM Report abuse rate up rate down Reply
mike edwards

the ceos of this country sold us down the river they didnt give a dam about my grand kids their greed distroyed this country we cant even punish them most are dead they didnt care for anybody but themselve it would take 50 years and alot of going back to the old usa get rid of hope and change and think about country god and honor thanks america

February 12 2012 at 4:01 PM Report abuse rate up rate down Reply
mike edwards

the ceos of this country sold us down the river they didnt give a dam about my grand kids their greed distroyed this country we cant even punish them most are dead they didnt care for anybody but themselve it would take 50 years and alot of going back to the old usa get rid of hope and change and think about country god and honor thanks america

February 12 2012 at 4:00 PM Report abuse rate up rate down Reply
Sue

You go Mr. President. Hooray. I have been saying that we need to get our manufacturers back to this country and the way to do that is to give them tax breaks and stop importing all the junk from China. We can do this. The line out of the movie "Pretty Woman" had me feeling the same way. We make nothing and we just take companies and break them up into little pieces. Let's put our people to work and tell China to stay out of our way. Look at the things they have done. Trying to poison us and our babies with lead paint. Trying to poison our animals. Now they want to come build a huge building. We don't want the few jobs they will offer to the United States workers. We want it all.

February 12 2012 at 3:52 PM Report abuse rate up rate down Reply
reticulum9

The best thing this president, or any president, could do is get government out of the way. Government "help" has skewed the economy enough already. The four horsemen of the economic apocalypse, taxes, unions, regulation and litigation, have driven manufacturing overseas. Now, business that remains here is dependent on government favors to get by.

February 12 2012 at 3:49 PM Report abuse rate up rate down Reply
kmsbears

What is missing in articles like this is that in 2011, the US was the largest producer of manufactured goods on the planet. Almost $1.8 trillion of manufactured goods were produced in this country. China was second with $1.2 trillion and Germany a distant third with $650 billion. From an employment perspective, it is important to recognize that most of the $1.8 trillion in US manufactured goods were produced in highly automated manufacturing facilities that have eliminated the need for large numbers of workers. Many large manufacturers in the US, such as Caterpillar, have jobs they can't fill for lack of skilled workers. I recenlty heard a Caterpillar spokesperson bemoaning that they have over 600 jobs unfilled at their Peoria facility for lack of skilled applicants. The old manufacturing that required large numbers of unskilled or semi-skilled workers is a thing of the past and won't be returning to the US. Apple currentlly employs 900 engineers and over 200,000 line workers at their Chinese iPod/Ipad/iPhone assembly plant. Apple's stated goal is to replace all these workers with a fully automated assembly line. That's the future.

February 12 2012 at 3:49 PM Report abuse rate up rate down Reply
wmechaneer

There is so much pro-Obama and anti-manufacturing bilge in this so-called "article," that it's a monumental task just to take on a few...

First, America has "bargain shopped" itself into shipping its manufacturing jobs overseas. Since Americans want luxury on the cheap, they refuse to pay their blue-collar neighbor that "living wage" they demand for themselves. From TV to the education monopoly, everyone disparages "blue-collar" careers, and promotes a "college education" so your little student will have a "white-collar" one, thereby making them "superior" to those "less educated blue-collar" workers.

The result is our "more chiefs than indians" unbalanced economy, and now we have more lawyers and buraeucrats than folks that actually produce goods. Those not college educated, and even a lot who are, are now relegated to "service businesses" such as what we once called "janitorial" in nature.

All too many American manufacturers are now having to go off-shore simply to locate workers having the technical skills it takes to create modern finished goods, and that means a large number of less-educated Americans have fewer job opportunities, unless it's in the sales, or cleaning and servicing of our sophisticated appliances and machinery. That includes your computers and cars.

Second, only the application of labor to natural resources actually produces "wealth." Wealth is the excess of production that those who produce haven't consumed for their own needs. This surplus can be bartered for other goods and services the productive require for their own lives, and the remainder "services" labor is merely "consumptive" re-distribution of the excess wealth that the "productive" create through their own enterprise and labor. This Productivity ranges from agricultural and mining to sophisticated manufactured goods.

That "hamburger flipper" everyone disparages, produces more actual wealth in the creation of only one hamburger than all the lawyers in history have throughout their entire legal careers. The only thing a lawyer produces is impediments to progress, and the combative redistribution of other people's money into their own pockets.

Corporations, especially manufacturing corporations don't actually "pay" taxes, but are instead "tax collectors" who have to tack that taxation onto the price the consumer pays for finished goods. If our "highest on the planet" corporate taxation were eliminated, then American-made products would enjoy an instant 27-45% decrease in price, making them more competitive than even Chinese-made equals. Doing that alone would naturally INCREASE American manufacturing jobs by some four to seven million postions, and create a renaissance in the American economy.

As President Obama hasn't involved himself in the manufacture of anything, but has unionized manufacturers' enterprises, thereby increasing their costs of production, he'll never comprehend this. He hates capitalistic enterprise.

February 12 2012 at 3:30 PM Report abuse rate up rate down Reply
1 reply to wmechaneer's comment
Sandi

While I agree that American shopper's (for the most part) have shopped themselves out of jobs, I totally disagree with the idea that corporate taxes have also been a major cause of outsourcing. They MAY have heavier taxes but they also have more credits, loopholes and "tax incentives" than anyone else (GE got a $3.3billion return!). All you have to do is look at their profits and upper magnt salaries to know they are still making money hand over fist. The fact that the rest of the world's CEO's are still making 25 to 1 CEO/worker salaries while our CEO's are making any where from 300 - 500 to 1. It is NOT the greedy American worker but the greedy American corporation that is the driving factor behind our lack of jobs. Not too long ago Netflix lost a rival and their subscriptions increased. Instead of passing this savings on to the consumer, they upped their prices! Until the subscribers voices were heard and as we can see, someone else is coming in to fill the demands and, already bleeding from the backlash, Netflix is now paying the price for being greedy. Hallelujah!
I do think, especially with Citizens United, the American public are seeing more and more that if NOTHING else WE can make a difference by supporting our own local businesses. Small business provides so many more jobs than corporations ever will. Why give the breaks to the big business when it is the small local business who actually feed us and our economy!

February 12 2012 at 4:02 PM Report abuse rate up rate down Reply
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