Obama pledges to bring manufacturing back to the U.S., but is it possible?

The Takeaway

In the State of the Union address Tuesday, President Barack Obama talked about trying to move manufacturing jobs back to the United States.

Intel, for example, is building a multi-billion dollar computer chip facility in the desert of Arizona. But that is a very large outlier. Since the 1980s, the U.S. economy has shifted away from manufacturing and toward intellectual property and services. This was due in part to the perceived expenses involved in production based in the U.S.

But in recent years, globalization has, to a degree, leveled the cost playing field — and some say the time is now ripe for bringing back manufacturing. But is it possible? Can the United States be a major manufacturer again? And can existing domestic manufacturers remain open?

Beri Fox, president and CEO of Marble King in West Virginia, which manufacturers toy, decorative and industrial marbles, said the proposals Obama outlined in the State of the Union — tax cuts for moving into economically depressed areas, tax credits for hiring new employees or assistance for buying new equipment — are a step in the right direction.

“His focus on manufacturing is critical for all Americans,” Fox said. “If you look at the job losses in the downturn in the economy over the last two decades, it’s significant. And it’s directly related to our manufacturing.”

Fox said there are four jobs that are directly tied to each manufacturing job. When the manufacturing jobs go away, so do those four other jobs. In some high-tech jobs, Fox said, it’s even greater.

“I think it’s critical we keep these jobs here in America,” she said, “and bring a lot of them back.”

Peter Morici, a macro-economist and professor of international business at the University of Maryland, said the problem of American manufacturing is multi-faceted. While wages are an issue, and one that’s become less dramatic, there are currency differences and trade barriers with China that make it very costly to send goods from here to there, but relatively simple to send goods to here from there.

“Labor only goes so far. If that were the case, nothing would be made in America and everything would be made in China,” he said. “Comparative advantage never worked that way.”

Morici said Obama’s policies, while not dealing with all of those problems, will make the situation somewhat better. It will also make the United States more competitive with Germany, where a lot of manufacturing is still done.

“We have to look at the world, and not just China,” Morici. “But there’s no substitute for a president who does something about China. This president won’t. And it’s going to be a big campaign issue if Romney is nominated, and maybe if Gingrich is nominated.”

Fox said the most important thing Obama could do to aid domestic manufacturing is to form a trade enforcement unit, to ensure that Americans are competing on fair terms with other nations, but particularly with China.

Fox said Chinese manufacturers are selling marbles, for example, at prices far below what raw materials cost alone — and that’s not fair, she said.

Morici said steel is another example of a product that China’s sending the United States and costs well below what it costs them to make the product and ship it to the U.S.

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