Congratulations to Mr. Donald John Trump winning as the 45th president of the United States. His creative, explosive and populist movement proved that there is still a chance for an outsider to win a presidential race and change our country.
Now the real work begins. Therefore, I will share some suggestions as an expert on R&D (research and development), scientific, technical, engineering, IT (information technology) and manufacturing recruiting to President Trump in this two part series on creating U.S. jobs. This first part will focus on 4 policy steps to ramp up American manufacturing jobs.
19,500,000 Manufacturing Jobs 37 Years Ago!
Back in 1979, there were 19.5 million manufacturing jobs in the U.S. By 2001, the total had dropped to 17 million. Between 2001 and 2010, the U.S. lost 5.6 million more manufacturing jobs and hit bottom at 11.4 million manufacturing jobs in 2010.
In 2016, total U.S. manufacturing jobs grew to 12.3 million. That means, the U.S. has recovered 900,000 jobs, but still needs to create four million more jobs to return to a manufacturing base that we can call a growing and vibrant sector that supports the middle class and a healthy economy.
Obama Claimed, But Failed To Create Manufacturing Jobs
President Obama, during both of his election campaigns, claimed that he wanted to create more manufacturing jobs. This helped many recruitment firms to salivate at the manufacturing recruiting possibilities. Unfortunately, nothing happened.
As a response to manufacturing job losses, President Obama created the Council on Jobs and Competitiveness back in 2011. Its mission was to provide non-partisan advice to the President on how to strengthen the nation’s economy and ensure the competitiveness. It also was supposed to find ways to create jobs and recruit opportunities for prosperity for the American people.
The 26-member jobs council set a specific goal for companies to recruit 1 million new manufacturing jobs in Obama’s second term. According to the Alliance for American Manufacturing (AAM), which tracked this goal, as of October of 2016, the U.S. has added only 302,000 manufacturing jobs since the beginning of President Obama’s second term in Jan. 2012. This is 698,000 short of his objective.
The Council’s recommendations to create these new manufacturing jobs are the same as often repeated by multinational corporation demands, including calling for less government regulation, lower corporate taxes and reforming the tax code. These demands have everything to do with supporting what the Fortune 500 companies want to achieve in increasing their profits and little to do with recruiting immediate jobs for working people. Additionally, President Obama formed this council dominated by the large corporations, which are the very people whose major goal is to cut labor costs, outsource jobs and lower their head count!
The problem is we focused on the wrong solutions. Instead of begging the large corporations to create jobs, we should have identified the four economic factors that are killing job creation.
Manufacturing Jobs Killer #1: Trade Deficits and Currency Manipulation
Growing trade deficits have been one of the single biggest killers of manufacturing jobs. A report from the Economic Policy Institute states that “currency manipulation, which distorts trade flows by artificially lowering the cost of U.S. imports and raising the cost of U.S. exports, is the primary cause of growing trade deficits. Halting global currency manipulation by penalizing or offsetting currency manipulation is the best way to reduce trade deficits, create jobs, and rebuild the economy.”
The report goes on to conclude that stopping currency manipulation could create between 2.3 million to 5.8 million jobs.
The U.S. also needs to enforce our current trade laws to counter industrial subsidies, intellectual property theft and barriers to market access by our trading partners.
The problem is that neither Democrats nor Republicans in Washington seem to be willing to take on China regarding any of these problems. There is a positive historical precedent for stopping currency manipulation. In 1985, both Germany and Japan were gaining unfair advantage by manipulating their currencies. President Reagan persuaded Congress to pass a bill that outlawed foreign currency manipulation with the threat of slapping tariffs on their exports to the U.S. Both countries backed down, and the strategy worked. If we can’t reduce trade deficits, there is little chance that we will create manufacturing jobs.
Manufacturing Jobs Killer #2: Poor Trade Agreements!
Closely allied to the trade deficit problem are trade agreements. It is now pretty obvious from the analysis of the 1993 North American Free Trade Agreement (NAFTA) and the 2012 South Korea FTA agreement that both are detrimental to American jobs. We need to negotiate trade agreements that create jobs and lower the trade deficit, not agreements designed to simply increase overall trade which benefits the few. If negotiating agreements that will increase jobs and reduce the trade deficit are impossible to attain, then from the point of view of working Americans we don’t need trade agreements.
Manufacturing Jobs Killer #3: Poor Infrastructure!
The U.S. has let its highways, bridges, waterways, water systems, sewer systems and electric grid fall into disrepair. Twenty-four percent of bridges are structurally deficient; 240,000 water mains break every year; 75,000 sewers over flow each year; and the electrical demand has exceeded our capacity to build transmission lines by 25% per year. Repairing or replacing these systems is the best short-term opportunity to create manufacturing and construction jobs. The cost of replacing or repairing our entire infrastructure exceeds $3 trillion, but it is an investment in America and will create millions of jobs.
Dan DiMicco, chairman emeritus of Nucor Corp., says that investing in infrastructure is a “public investment that pays dividends for decades. Every dollar of infrastructure spending adds $1.59 in gross domestic product.” In his book, American Made, DiMicco proposes a realistic job creation plan that invests in $415 billion in repairing infrastructure and produces 10 million jobs.
Manufacturing Jobs Killer #4: Poor Tax Policy!
Multinational corporations have been lobbying Congress to reduce corporate taxes from 35% to 25% and to give them a one-time 5% tax on the $2.4 trillion they have in overseas tax havens. Instead of giving them another “no strings attached” tax reduction, a better idea would be to offer tax breaks that support job creation and help domestic manufacturing. This can include expanding up-front expensing for plant and equipment purchases, and more research and development tax credits for firms that make their products here in the U.S.
Giving up-front tax breaks has led to little job creation or GDP growth. We should instead insist on results first, and pay later. Also, any tax reductions or tax credits for R&D should be based on creating jobs and investment in the U.S. — not overseas.
The manufacturing sector is not growing, and in fact is now contracting. Since January of 2016, America has lost 67,000 manufacturing jobs and, in the last four quarters, manufacturing productivity has increased an anemic 0.09%, according to the Bureau of Labor Statistics. So we are not moving in a positive direction.
President Trump I Hope You Create Manufacturing Jobs!
President Trump opportunity with both houses of Congress on your side to force China and other Asian countries to play by the rules. We can’t continue to hope that the large corporations will reverse themselves and focus on creating jobs or growing American manufacturing. Hope is not a plan.
This is no longer a problem that will be solved by free market absolutists. Currency manipulation, trade agreements, corporate taxes and infrastructure are political problems that require political solutions. We need to face up to the fact that we are in a worldwide competition for jobs and growth–and we are losing. The future is now. Are we going to act or talk?