President Obama Champions Manufacturing In The SOTU

During last night’s State of the Union address, the president spent roughly the first quarter of the speech talking about manufacturing. Does Obama have the right solutions? Time will tell. (It is an election year, so little will get done anyway.) But the Administration has certainly identified the right problem: the need to turn around manufacturing in the U.S.

The speech began with the auto companies:

On the day I took office, our auto industry was on the verge of collapse.  Some even said we should let it die.  With a million jobs at stake, I refused to let that happen.  In exchange for help, we demanded responsibility.  We got workers and automakers to settle their differences.  We got the industry to retool and restructure.  Today, General Motors is back on top as the world’s number-one automaker.  (Applause.)  Chrysler has grown faster in the U.S. than any major car company.  Ford is investing billions in U.S. plants and factories.  And together, the entire industry added nearly 160,000 jobs.

We bet on American workers.  We bet on American ingenuity.  And tonight, the American auto industry is back.  (Applause.)

What’s happening in Detroit can happen in other industries.  It can happen in Cleveland and Pittsburgh and Raleigh.  We can’t bring every job back that’s left our shore.  But right now, it’s getting more expensive to do business in places like China.  Meanwhile, America is more productive.  A few weeks ago, the CEO of Master Lock told me that it now makes business sense for him to bring jobs back home.  (Applause.)  Today, for the first time in 15 years, Master Lock’s unionized plant in Milwaukee is running at full capacity.  (Applause.)

Let’s make one thing clear: “bankruptcy” isn’t the same thing as “going out of business”. The public seems to conflate those two things, perhaps for understandable reasons. Usually the 11 o’clock news stories about bankruptcy filings are discussing local retailers. Retailers are usually laden with a lot of working capital—namely inventory—and not a lot of fixed assets (Usually some readily sellable real estate and store infrastructure). Such retailers are easily liquidated and simply disappear.

Big manufacturers have a lot of equipment that isn’t as easily transferrable to other firms. If there had been a normal bankruptcy procedure, GM and Chrysler, could very well have emerged as successful car companies. LyondellBasell went through bankruptcy around the same time. It emerged, and it is now making manufacturing investments again.

However, it is also likely that the government-controlled procedure might have allowed for a more orderly process, especially in regards to a labor-management agreement. And the government likely offered the financing on more attractive terms than private banks would have been able to provide in the middle of the financial crisis.

Much of the remarks had to do with tax policy:

So we have a huge opportunity, at this moment, to bring manufacturing back.  But we have to seize it.  Tonight, my message to business leaders is simple:  Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed.  (Applause.)

We should start with our tax code.  Right now, companies get tax breaks for moving jobs and profits overseas.  Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world.  It makes no sense, and everyone knows it.  So let’s change it.

First, if you’re a business that wants to outsource jobs, you shouldn’t get a tax deduction for doing it.  (Applause.)  That money should be used to cover moving expenses for companies like Master Lock that decide to bring jobs home.  (Applause.)

Second, no American company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas.  (Applause.)  From now on, every multinational company should have to pay a basic minimum tax.  And every penny should go towards lowering taxes for companies that choose to stay here and hire here in America.  (Applause.)

Third, if you’re an American manufacturer, you should get a bigger tax cut.  If you’re a high-tech manufacturer, we should double the tax deduction you get for making your products here.  And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers.  (Applause.)

There are tax breaks, accelerated depreciation deductions and the like that benefit manufacturers. There could always be more. Preferential treatment of U.S. manufacturers over other enterprises is justifiable, in my opinion. I am additionally intrigued by the idea of helping those firms that want to site near small towns that have experienced plant closures. When a plant closes down, not only the plant workers, but the local diner owner, barber, and plumber can find themselves out of work.

Obama discussed trade:

We’re also making it easier for American businesses to sell products all over the world.  Two years ago, I set a goal of doubling U.S. exports over five years.  With the bipartisan trade agreements we signed into law, we’re on track to meet that goal ahead of schedule.  (Applause.)  And soon, there will be millions of new customers for American goods in Panama, Colombia, and South Korea.  Soon, there will be new cars on the streets of Seoul imported from Detroit, and Toledo, and Chicago.  (Applause.)

I will go anywhere in the world to open new markets for American products.  And I will not stand by when our competitors don’t play by the rules.  We’ve brought trade cases against China at nearly twice the rate as the last administration –- and it’s made a difference.  (Applause.)  Over a thousand Americans are working today because we stopped a surge in Chinese tires.  But we need to do more.  It’s not right when another country lets our movies, music, and software be pirated.  It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized.

Tonight, I’m announcing the creation of a Trade Enforcement Unit that will be charged with investigating unfair trading practices in countries like China.  (Applause.)  There will be more inspections to prevent counterfeit or unsafe goods from crossing our borders.  And this Congress should make sure that no foreign company has an advantage over American manufacturing when it comes to accessing financing or new markets like Russia.  Our workers are the most productive on Earth, and if the playing field is level, I promise you -– America will always win.  (Applause.)

U.S.A! U.S.A! I would like to think of the Trade Enforcement Unit as something akin to the Crest Cavity Patrol, attacking unfair subsidies and dumping with giant toothbrushes and toothpaste hoses. In reality, the Chinese government would cry “protectionism!” and retaliate at a time when wealthier Chinese consumers are looking to buy more American stuff. (OK, maybe “American” stuff actually assembled by Foxconn in China.)

Obama also reiterates an idea that I have heard before, notably from Andrew Liveris, Dow’s CEO.

I also hear from many business leaders who want to hire in the United States but can’t find workers with the right skills.  Growing industries in science and technology have twice as many openings as we have workers who can do the job.  Think about that –- openings at a time when millions of Americans are looking for work.  It’s inexcusable.  And we know how to fix it.

Jackie Bray is a single mom from North Carolina who was laid off from her job as a mechanic.  Then Siemens opened a gas turbine factory in Charlotte, and formed a partnership with Central Piedmont Community College.  The company helped the college design courses in laser and robotics training.  It paid Jackie’s tuition, then hired her to help operate their plant.

I want every American looking for work to have the same opportunity as Jackie did.  Join me in a national commitment to train 2 million Americans with skills that will lead directly to a job.  (Applause.)  My administration has already lined up more companies that want to help.  Model partnerships between businesses like Siemens and community colleges in places like Charlotte, and Orlando, and Louisville are up and running.  Now you need to give more community colleges the resources they need to become community career centers -– places that teach people skills that businesses are looking for right now, from data management to high-tech manufacturing.

And I want to cut through the maze of confusing training programs, so that from now on, people like Jackie have one program, one website, and one place to go for all the information and help that they need.  It is time to turn our unemployment system into a reemployment system that puts people to work.  (Applause.)

I’m not terribly sure if the only reason why companies have difficulty hiring good people is because there aren’t enough skills available in the workforce. Perhaps, unemployment benefits are keeping some people from looking for work. The housing market is still terrible. Maybe too many workers are tied down to their homes to move. Or perhaps, a spouse of a prospective worker is too attached to his or her own job for the couple to relocate.

But, I do think that community college/manufacturer partnership a good idea. In fact, it is so much in the best interest of employers that I can hardly see how the government can help. Though, Obama seems to only be suggesting a website here, which I suppose can’t hurt.

Author: Alex Tullo

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1 Comment

  1. Unfortunately, as you pointed out, nothing significant will occur in an election year. Manufacturing and housing continue to lag which is helping to keep the rest of the economy in slow mode.