Part of President Donald Trump’s “Make America Great Again” mission is to reinvigorate U.S. manufacturing, and like nearly everything Trump says or does, that idea produced much criticism. A lot of that is the automatic Trump-hater response, but some resulted from reasoned thought and philosophical differences.
National Review roving correspondent Kevin D. Williamson discussed this in an essay titled “Made in America: Not Important in the 21st Century,” where he offers examples of products assembled in America that actually contain some or perhaps most parts made in other countries. The question is: do these products really deserve the “Made in America” label?
Calling Trump’s encouragement for us to buy products “Made in America” to support our manufacturers “a good slogan … [but] bad and incoherent policy,” reason.com’s Nick Gillespie went on to note that using more expensive American labor would increase the price of our products, and protectionist measures to exclude foreign-made materials from our markets runs counter both to the personal freedom the USA provides us, as well as the concept of free trade.
America is a “post-industrial nation,” Gillespie noted, and “the fact is that manufacturing jobs as a percentage of the work force peaked in 1943 and has declined ever since.”
He then urged pursuing policies that create new jobs, new opportunities and new wealth through “lower government spending, flatter and less distorting taxes, and less regulation.”
Opposition to Trump’s idea also includes the Chamber of Commerce and major players in the energy sector. As the Commerce Department worked to meet a late July deadline to present a plan to the president requiring oil and gas pipelines to be made with American-made steel, Trump’s allies in the energy sector warned that this might play havoc with his goal of energy dominance.
Gillespie is correct about the low percentage of manufacturing jobs. This decline occurred over many years, largely through natural progression, but as Gillespie hinted, external factors have also contributed. They had a significant negative effect that increased the decline, and removing those influences can provide some relief to manufacturing job losses.
Whereas technological advancement reduces the need for human work, natural progress in foreign countries is also a factor. In poor nations, people gladly work for pennies or quarters a day. While it may seem cruel to some of us to pay people so little for their efforts, those pennies or quarters are what enable them to achieve a better life in the less developed economy of their country.
If those workers can produce things that cost a fraction of what they cost if made by American workers, even after shipping them across the waters, businesses will go for the less expensive product in order to both enhance their economic situation, and to keep the price of their products lower.
But we often do things that increase our costs compared with other countries. High taxes and over-regulation on businesses, both of which put pressure on American companies to reduce costs to remain competitive, help push manufacturing jobs overseas.
The coal-mining sector is a good example of the effect of external factors. While natural gas usage was increasing and coal use was naturally trending down, Obama’s war on coal sped up that process through anti-coal regulations. That forced a dramatic decrease in coal use, wreaking havoc and harm much greater than if natural economic processes had been allowed to work.
Like coal mining, other manufacturing jobs are affected by the negative factors of over-regulation and high taxes. As Gillespie suggested, flatter and less distorting taxes, and less regulation would help make American steel and other products more competitive.
Other factors will also help to make American products more competitive, and provide a boost to U.S. manufacturing, such as a border-adjustment tax. The purpose of this tax is not to generate tax revenue to offset tax cuts, but to create jobs by evening out the playing field.
The U.S. is one of the few countries that does not tax imported goods and reward those exported to other countries, explains Newt Gingrich in his new book “Understanding Trump.” Taxing goods coming into the country, as other countries do to American goods, makes domestic goods more competitive, and helps create jobs and higher wages.
Gingrich also said that this “incentivizes businesses that want to sell in the United States as well as in other countries to move here, because it allows them to avoid the import tax.”
And lower the 35 percent corporate tax rate to something near that of nations to which American businesses have moved jobs. This will encourage those companies to bring back some, perhaps a lot, of the $2.5 trillion that they hold offshore to avoid the high U.S. corporate tax.
American manufacturing cannot return to 1943 levels, of course, but we have to stop shooting ourselves in the foot with anti-business policies. We need to reduce corporate tax rates, impose a border-adjustment tax, and roll back harmful regulations to free up American manufacturers.
This will enable the creation of thousands of new jobs, increase productivity levels and bring in new tax revenue. It will make it easier and smarter to buy products “Made in America.”