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Manufacturing America's Future

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Once upon a time, America was the world's factory. That time will never come again. But, recent results and research indicate that factories and products will and must play a pivotal role in manufacturing America's future.

Even with its relative decline as a contributor to GDP as an employer of American workers, the manufacturing sector remains a powerful force. Bruce Stokes notes in a 2011 posting published by the New America Foundation:

  • The United States is the world's mightiest manufacturing economy producing 21 percent of all goods made globally versus Japan's 13 percent and China's 12 percent
  • Manufacturing still employs more than 11 million jobs in the U.S.
  • For every dollar U.S. manufacturers spend directly, they foster another $1.40 in economic activity
  • Manufacturing workers have higher pay and more generous benefits -- about 20 percent higher -- than those in non-manufacturing jobs
  • Manufacturing jobs have a direct linkage to high level service jobs (as many as five per job) and create five to 10 indirect jobs for each direct manufacturing job

Manufacturing fuels innovation. It accounts for approximately 70 percent of all private sector R&D spending.

Importantly, American manufacturing is on the rebound. Between February 2010 and July 2012, manufacturing added approximately 500,000 jobs, the fastest growth in the sector since 1995.

Moreover, as Charles Fishman highlights in his December 2012 Atlantic article titled "The Insourcing Boom", industry is also returning to the United States at an accelerating rate. Companies such as General Electric, Whirlpool, and Otis elevator are bringing the manufacturing of many of their products back to the United States. In addition, manufacturers such as BMW and Volkswagen have opened new facilities stateside.

It appears that the reports of the "death of American manufacturing" were definitely premature. The need at this point, as we said in ourbook, Renewing the American Dream, published in 2010, remains "to implement a comprehensive and consistent set of policies and practices that put manufacturing front and center on the nation's radar screen as the basis for creating the American economy of the future."

Excellent recommendations for creating that future have been advanced by groups such as the Brookings Institution, the New America Foundation, the Alliance for American Manufacturing, the National Association of Manufacturers, the U.S. Business and Industry Council, the President's Advanced Management Partnership, the President's Council of Advisors on Science and Technology and numerous others including academics and industry practitioners.

At the federal level, the executive and legislative branches have put forward numerous proposals related to manufacturing -- to name just a few. The president has established an Office of Manufacturing Policy in the White House and in July 2012 set out "The President's Plan to Revitalize American Manufacturing." In March, 2011, Senator John Kerry along with Mark Warner and Kay Bailey Hutchinson filed legislation to create a national infrastructure bank to attract capital for major transportation, water and energy projects.In April 2011, bipartisan National Manufacturing Strategy bills were introduced in both the House and Senate. In May 2011, Minority Whip Steny Hoyer (D-MD) announced the Democrats' Make it in America Agenda.

There have no shortage of good ideas over the past two years. The problem was that the 112th Congress was the place where those good ideas went to die -- especially as policymaking went into suspended animation during the national election year. We have a new Congress now and the chance to breathe life into those ideas and to begin constructive policy making again.

The nation needs an industrial policy/agenda that supports the growth of businesses and job creation in targeted manufacturing sectors. The critical importance of that dual need is highlighted by two papers from the McKinsey Global Institute.

In its 2011 paper, "An Economy that Works: Job Creation and America's Future," McKinsey examines the slow pace of the economic recovery and cautions, "To create the jobs that America needs to continue growing and to remain competitive, leaders in government, business and education will have to be creative -- and willing to consider solutions they have not tried before." In its 2012 paper, Manufacturing the Future: The Next Era of Global Growth and Innovation, McKinsey analyzes the different types of manufacturing and economies and advises, "The way it (manufacturing) contributes to the economy shifts as nation's mature: in today's advanced economies, manufacturing promotes innovation, productivity and trade more than growth and employment."

Our industrial policy/agenda should be developed based upon the McKinsey findings and the best available recommendations. Among others, that policy should include pillars on innovation, investment and insourcing.

There is a wealth of good ideas to be considered for each of these pillars. We highlight a Whitman's sampler here:

Innovation Pillar: The Brookings Institution has recently released three briefs as part of its federal policy initiative, Remaking Federalism/Renewing the Economy, that deserve serious consideration: Create a Nationwide Network of Advanced Innovation Hubs; Create a 'Race to the Shop' Competition for Advanced Manufacturing; and Support the Designation of 20 U.S. 'Manufacturing Universities.'

Investment Pillar: We proposed establishing a national Industry, Innovation and Infrastructure Bank (3-I) in a Huffington Post blog in 2011. The 3-I Bank would be financed through a public-private partnership and serve as sort of a "development" bank for the U.S. We advance the concept again.

Insourcing Pillar: In July of 2012, the Senate failed to advance an "insourcing" bill that would have ended tax breaks for large companies that ship jobs overseas but would have given a new 20 percent tax deduction to companies that bring jobs back. The Senate voted 56-40 to advance the bill. Sixty votes were required. This insourcing legislation demands reintroduction now.

As noted, there are numerous other ideas that should be examined to construct the right policy framework for manufacturing. An essential test that must be applied to each is whether it will contribute to creating jobs for qualified American workers in the short, medium or long-term.

During his reelection campaign President Obama set the goal of creating a million new manufacturing jobs during his second term. He has also identified repairing America's "broken" infrastructure as a source of good jobs. We agree with the focus on manufacturing and infrastructure job growth as key drivers for renewing our middle class. We will present our thoughts and recommendations in this regard in a future blog

In conclusion, over the past two years, Congress has concentrated much of its attention on the debt ceiling and cutting the deficit. It should now give even greater attention to the factory floor and manufacturing America's future. For the sake of working-class Americans, it's time to stop tearing things down and to start building them up again.

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