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Fact-checking manufacturing jobs

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Fact-checking manufacturing jobs

Postby kurt_w » Fri Sep 28, 2012 7:37 am

I was browsing the "Corner" blog at the National Review's website this morning (always good to see what the enemy is talking about...) and ran across a post discussing one of President Obama's new campaign ads.

In the ad, the President makes the following campaign promise:

President Obama wrote:First, we create a million new manufacturing jobs [...]


The NR blogger's response is dismissive:

The National Review wrote:Well since Obama’s been in office, the nation has actually lost nearly 600,000 manufacturing jobs.


Hmmmm. Who to believe? So I went to the BLS and downloaded the past 20 years' worth of seasonally-adjusted data on private-sector manufacturing jobs.

Manufacturing jobs have been on a downward trend since the mid-1990s. Here is the net change in jobs over each of the past five presidential terms:

1993-1997 (Clinton 1): +0.5 million
1997-2001 (Clinton 2): -0.2 million
2001-2005 (Bush 1): -2.9 million
2005-2009 (Bush 2): -1.7 million
2009-2012 (Obama 1):-0.6 million

OK, clearly the Bush presidency was an absolute disaster for manufacturing jobs. Aside from that, though, the National Review comment does seem to be factually correct -- since President Obama took office, the US has lost nearly 600,000 jobs in manufacturing.

But ... those losses were all during Obama's first year. They were the tail end of a larger collapse in jobs that coincided with the financial crisis, during the last 14 months of Bush's term. Manufacturing jobs hit bottom one year after Obama took office, and have been rising almost continuously since then.

In fact, the past 31 months have by far the largest increase in manufacturing jobs in the past 20 years. On average, since Jan. 2010 the rate of increase is +0.21 million jobs per year.

If you extend that out for four years -- and assume the recovery just keeps limping along slowly the way it has been -- that gives an expected increase of 855,000 manufacturing jobs during the next four years.

That's a little below President Obama's campaign promise of one million new jobs. So he seems to be saying that things will get a little better, but not a lot better.

It's also worth noting that these numbers aren't adjusted for population growth. 214,000 new manufacturing jobs per year represents about 1.7% annual growth. That's pretty good -- it's about twice the overall US population growth rate. So we're keeping even, and actually gaining a bit, but it's still not all that impressive.

On the other hand, it's important to remember that the US manufacturing sector has been in a long-term decline. Viewed in comparison to the trend during Bush's eight years -- when we lost an average of 0.6 million jobs per year for eight years -- this would represent quite a turnaround.

So, the bottom line:

(1) The National Review comment is narrowly correct, but deeply misleading. Manufacturing jobs declined steeply in both of Bush's terms, and collapsed during the last year of his presidency. Obama took office in the middle of this collapse. Manufacturing jobs hit bottom at the end of Obama's first year, turned around, and have been increasing over the past three years at the fastest rate in decades.

(2) The campaign promise in Obama's new TV ad is reasonable if slightly optimistic based on the trend over the past three years. One million new jobs in four years would represent a slight increase over the recent trend. Whether that is impressive or not depends on whether one prefers to see the glass as half empty or half full.
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Re: Fact-checking manufacturing jobs

Postby bdog » Fri Sep 28, 2012 8:18 am

The other question to ask is...is this promise inherently a good thing?

How is it actually going to get done? The forces that have caused manufacturing jobs to disappear (or more likely move to another country) are going to be hard to change.

So what will create the turnaround? Incentives? If so, at what cost?

Honest questions from me, I'd like to hear your thoughts.
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Re: Fact-checking manufacturing jobs

Postby fisticuffs » Fri Sep 28, 2012 8:24 am

So what will create the turnaround? Incentives? If so, at what cost?


Keeping Romney running for President and out of the private sector has surely saved thousands of manufacturing jobs. We could get rid of the tax credit for shipping those facilities overseas. Romney could actually come right out and say that is one of the loopholes he intends to close. Of course he won't name any since it seems more likely he'd dispose of mortgage interest credits and the alt min tax credit.
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Re: Fact-checking manufacturing jobs

Postby wack wack » Fri Sep 28, 2012 8:51 am

bdog wrote:The other question to ask is...is this promise inherently a good thing?

How is it actually going to get done? The forces that have caused manufacturing jobs to disappear (or more likely move to another country) are going to be hard to change.

So what will create the turnaround? Incentives? If so, at what cost?

Honest questions from me, I'd like to hear your thoughts.


Why does business go overseas? To maximize profit. What will create a turnaround? Convince business that there is a purpose to life in America other than maximizing profit. Convince business that a strong, healthy, educated society is truly more valuable than profit at any cost.

And good luck with that. The problem isn't technical, it's philosophical. This battle was lost when conservatives started to convince their dunderheads that "financial freedom" was the real freedom, the entire reason America was founded. It's gonna take a few generations to shake that out.
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Re: Fact-checking manufacturing jobs

Postby kurt_w » Fri Sep 28, 2012 10:09 am

bdog wrote:How is it actually going to get done? The forces that have caused manufacturing jobs to disappear (or more likely move to another country) are going to be hard to change.

So what will create the turnaround?


Well, again, the turnaround has already begun. We've gained manufacturing jobs in 27 of the past 31 months. This nearly three-year increase in manufacturing is by far the biggest expansion of US manufacturing in at least the past two decades (I haven't looked back further).

Any serious effort to boost US manufacturing jobs needs to be a three-legged stool:

1. We need to get our trade deficit with China under control.
2. We need to increase domestic demand.
3. We need to speed the transition to more high-tech manufacturing (what's called "advanced manufacturing" in the engineering world).

The first one really is about China's currency manipulation. Obviously I'm not a "China hawk" (I'm probably one of the more China-friendly forons) but the US needs to figure out how to deal with China's very aggressive export-oriented policy of avoiding currency revaluation. China doesn't want to do this -- even though it would be beneficial to much of its own population -- and it's difficult to swallow in the US because it means a weaker dollar, which is psychologically difficult to accept even when it's economically advantageous.

The other thing that will help with the trade side is ... health care reform. US manufacturers are at a disadvantage because they have to pay for health care for their employees -- and the prices for health care purchases in the US are sky-high. Get the burden of paying for health care off of American manufacturing companies, and you remove a major drag on their competitiveness globally.

The second leg, boosting domestic demand, means some kind of economic stimulus, be it from Congress (avoid spending cuts, avoid tax increases) or the Fed (keep interest rates low even if the economy begins to heat up).

The third leg of the stool is specifically promoting the transition to Advanced Manufacturing. A reasonably good report on this was just issued back in July, which identifies 16 specific mechanisms the US should be pursuing to encourage the expansion of high-tech manufacturing. The full report is here and a handy summary is on page 13 of the pdf.

Some of the 16 recommendations seem pretty weak to me, but overall it's got a lot of good ideas. If you look at the membership of the PCAST committee, it's dominated by science and engineering people from both academia and industry. The recommendations deal with everything from increased spending on high-technology training in community colleges to tax reform, regulatory reform, and energy policy.

Disclaimer: I have worked on advanced engineering R&D for the past 20 years in both industry and universities, and hope to continue to do so for many years. So I have a rather strong conflict of interest in this.
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Re: Fact-checking manufacturing jobs

Postby snoqueen » Fri Sep 28, 2012 3:05 pm

Bringing back manufacturing jobs (advanced and other) is only one part of a sustainable economic recovery (which was the original topic here).

Without dissing advanced manufacturing, I'd also like to see attention paid to agricultural jobs. Agricultural exports are a big part of the national economy, agricultural jobs are not only entry level, and certain aspects of agriculture actually enhance, not degrade, the environment (which, like it or not, has to be a global priority).

Agricultural products for export can be part of the recovery, but I think in the long run agricultural products for regional and local consumption are the most sustainable type of agriculture. The jobs created by this type of agriculture are part of the strong small-business base we should be building. It's another way of keeping money and investment right in the community, and local agriculture jobs aren't easily outsourced overseas.

Focusing on traditional manufacturing jobs misses quality jobs created in other sectors. In a way, agriculture and manufacturing are not dissimilar: both involve using natural resources to produce something of value. Agricultural jobs should count right along with other kinds of manufacturing when we try to quantify economic recovery.
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Re: Fact-checking manufacturing jobs

Postby ArturoBandini » Fri Sep 28, 2012 3:41 pm

fisticuffs wrote:We could get rid of the tax credit for shipping those facilities overseas.
Tax credit, huh? Do tell, what are the terms and conditions required to qualify for this tax credit? Can you find some documentation on it, perhaps from the IRS.gov site?
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Re: Fact-checking manufacturing jobs

Postby eriedasch » Fri Sep 28, 2012 4:13 pm

ArturoBandini wrote:
fisticuffs wrote:We could get rid of the tax credit for shipping those facilities overseas.
Tax credit, huh? Do tell, what are the terms and conditions required to qualify for this tax credit? Can you find some documentation on it, perhaps from the IRS.gov site?

If we actually cared about workers in the United States the government would be penalizing/taxing companies that attempted to move jobs to other countries like many other nations do today.
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Re: Fact-checking manufacturing jobs

Postby ArturoBandini » Fri Sep 28, 2012 4:31 pm

eriedasch wrote:If we actually cared about workers in the United States the government would be penalizing/taxing companies that attempted to move jobs to other countries like many other nations do today.
Right, cause fuck free trade, right? All those other countries are wrong, we should not replicate their policies.

edit: Sorry, that was kind of a knee-jerk reaction. In a more reserved manner, I urge you to consider the possible negative consequences of a protectionist trade policy like what you've described. Bonus points for actually acknowledging a specific negative consequence, even if on the whole you still support protectionism.
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Re: Fact-checking manufacturing jobs

Postby kurt_w » Sun Sep 30, 2012 10:13 am

ArturoBandini wrote:
fisticuffs wrote:We could get rid of the tax credit for shipping those facilities overseas.
Tax credit, huh? Do tell, what are the terms and conditions required to qualify for this tax credit? Can you find some documentation on it, perhaps from the IRS.gov site?


OK, that wasn't my claim, and it's not something I know a lot about. But my understanding is that there are at least two ways in which the US tax code encourages moving jobs overseas. First, companies will list the costs of relocating overseas as a deductible business expense. Second, the US offers a tax credit for taxes paid to other countries, if they have lower corporate tax rates than the US (which most do).

I believe the Democrats in Congress proposed a bill that would have at least partially removed the first of those incentives (and actually reversed it). The bill was killed, mainly due to GOP opposition -- the Republicans claimed that the amounts of money involved are relatively small and thus the bill was purely symbolic (I think they are mostly right on both points, but nonetheless don't think it really makes sense for the US tax code to allow companies to deduct their expenses in moving out of the US....)

I don't think any bill has been proposed to remove the tax credit for taxes paid to foreign countries.

There might be other tax incentives for corporations to move jobs overseas besides these, I don't know. When it comes to specifically manufacturing jobs, I think the benefits are mostly from lower labor costs and weaker regulatory oversight, rather than the tax benefits. (The issue of offshoring profits to Caribbean tax havens, as opposed to offshoring manufacturing to Asia, is a different question.)
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Re: Fact-checking manufacturing jobs

Postby Galoot » Sun Sep 30, 2012 11:27 am

It isn't clear at all to me that protectionist trade policies always have negative impacts.

A Chinese truck maker, Foton, is spending $300M to build a new truck factory here in Brazil. One reason is that Brazil is increasing its (already hefty) import duties by 30%. The Chinese response is not to increase their import duties, it is to go build the trucks in Brazil.

http://online.wsj.com/article/BT-CO-201 ... 14047.html

From what I gather, there is a 100% import duty on almost everything coming into Brazil. It certainly isn't hurting Brazil's economy, is it?

I'm not saying I'm in favor of all such duties, especially living here--the cost of just about everything here is equal to or higher than what it would be in most places in the states. I was hoping to buy a Yamaha XT660 motorcycle here and go touring around Brazil on weekends (I get a lot of 3 and 4 day weekends here). That motorcycle would cost about R$28000 here, the equivalent of $US14,000 roughly. That bike would cost less than half that in the U.S.

Still, the economy here seems to be doing fine, with very strong protectionist policies in place. It is taken as an article of faith by libertarians and other free-marketeers that protectionist policies *must* ruin a nation's economy.
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Re: Fact-checking manufacturing jobs

Postby ArturoBandini » Sun Sep 30, 2012 2:48 pm

Galoot wrote:From what I gather, there is a 100% import duty on almost everything coming into Brazil. It certainly isn't hurting Brazil's economy, is it?

I'm not an expert on the Brazilian economy, but from what I've seen, it seems like this import tariff hikes were recent, this making it difficult to say whether they will hurt or help the economy.

I gather you are in Brazil now, correct?
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Re: Fact-checking manufacturing jobs

Postby ArturoBandini » Sun Sep 30, 2012 3:15 pm

kurt_w wrote:(I think they are mostly right on both points, but nonetheless don't think it really makes sense for the US tax code to allow companies to deduct their expenses in moving out of the US....)
I'd say it depends on the circumstances whether it makes sense or not. I don't think that tax policy should be used to punish particular business decisions (e.g. offshoring) while favoring others. Basically, the tax writeoff impacts of moving your business to Malaysia should be the same as those earned by moving your business to Minneapolis. Tax policy should be about collecting revenue to fund legitimate government functions, and it should otherwise be as neutral as possible. All of this discussion presupposes that taxation of business income is worthwhile or legitimate in the first place, which is arguable.
kurt_w wrote:I don't think any bill has been proposed to remove the tax credit for taxes paid to foreign countries.
This one is somewhat tricky, because it's hard to say where the income belongs and thus who deserves the tax revenue. It's easy to see how removing this credit and taxing corporations two or more times on the same incomes or profits would be disastrous for trade that involves corporations with locations in more than one country. I don't totally understand what counts as US-taxable income earned overseas. If any profits from overseas are repatriated to the US, I think the government should just be happy with this added wealth that they had little to do with, instead of trying to get their grabby hands on it.
kurt_w wrote:(The issue of offshoring profits to Caribbean tax havens, as opposed to offshoring manufacturing to Asia, is a different question.)
Agreed.
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Re: Fact-checking manufacturing jobs

Postby Galoot » Sun Sep 30, 2012 3:39 pm

Yes, some of the increases are recent, Arturo, but from what I gather, the rest have been in place for quite a few years.

You seem to overlook the response from China, which is to invest $300M in a new factory here. Any comments on that?

And yes, I live in Brazil now, I got here in late July.
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Re: Fact-checking manufacturing jobs

Postby jonnygothispen » Sun Sep 30, 2012 4:18 pm

kurt_w wrote:
Well, again, the turnaround has already begun. We've gained manufacturing jobs in 27 of the past 31 months. This nearly three-year increase in manufacturing is by far the biggest expansion of US manufacturing in at least the past two decades (I haven't looked back further).
According to BLS, we saw manufacturing job gains from 1950 until 1979 when they peaked at 21 million. Then we lost 3 million manufacturing jobs under Reagan/BU$H by 1992. So you can safely say that the current trend is the best in at least the last 33 years.
Page 6: http://stats.bls.gov/mlr/1993/11/art1full.pdf

1950..... 15,241,000
1960..... 16,796,000
1970..... 19,367,000
1979..... 21,040,000
1980..... 20,285,000
1985..... 19,248,000
1990..... 19,067,000
1992..... 18,040,000
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