If the Obama administration has a strategy for reviving manufacturing, Douglas Bartlett would like to know what it is.
Buffeted by foreign competition, Bartlett recently closed his printed circuit board factory, founded 57 years ago by his father, and laid off the remaining 87 workers. He auctioned off the machinery, and soon he will raze the factory itself, in Cary, Illinois.
“The property taxes are no longer affordable,” Bartlett said glumly, “so I am going to tear down the building and sit on the land, and hopefully sell it after the recession when land prices hopefully rise.”
Although manufacturing has long been in decline in the United States, the loss of factory jobs has been especially brutal of late, with nearly 2 million disappearing since the recession began in December 2007.
Even a few chief executives, heading companies that have shifted much production abroad, are beginning to express alarm. “We must make a serious commitment to manufacturing and exports. This is a national imperative,” Jeffrey R. Immelt, chairman and chief executive of General Electric, said in a speech in June, while acknowledging that GE was enriched by its overseas operations too.
President Barack Obama, agreeing in effect, has declared, “The fight for American manufacturing is the fight for America’s future.”
The United States ranks behind every industrial nation except France in the percentage of overall economic activity devoted to manufacturing — 13.9 percent, the World Bank reports, down 4 percentage points in a decade. The 19-month-old recession has contributed noticeably to this decline. Industrial production has fallen 17.3 percent, the sharpest drop during a recession since the 1930s.
So far, however, Obama’s administration has not come up with a formal plan to address the rapid decline. Instead, it has pursued ad hoc initiatives — bailing out General Motors and Chrysler, for example, and pushing green energy by supporting the manufacture of items like wind turbines and solar panels.
Dr. Xunming Deng, a physicist and the chairman of the Xunlight Corporation, sees himself as a beneficiary of what he describes as the Obama administration’s more-flexible loan guarantees. His factory in Toledo, Ohio, with 100 employees, is in the early stages of making solar panels, and Deng is already planning to quadruple the plant’s size. He has applied to the Energy Department for a $120 million loan guarantee. If he gets it, he will not have to pay the hefty fees charged for loan guarantees before Obama took office.
Beyond energy, the administration’s approach gradually outlines the elements of a manufacturing policy — what Lawrence H. Summers, director of the National Economic Council, described as “a number of things to support manufacturing.”
The auto bailout, for all its improvisations, served notice that the administration would probably rescue any giant manufacturer it deemed too big (or too iconic) to fail, and would help the suppliers of failing giants transition to other industries.
The Buy America clause in the stimulus package pointedly favors the purchase of American-made goods for infrastructure projects. The Commerce Department is adding $100 million, more than double the current outlay, to a program that helps American manufacturers operate more effectively. And trade agreements negotiated by the Bush administration — agreements that would make the United States more open to imported manufactured goods — have been allowed to languish in Congress.
“Bush and Obama,” Bartlett said scornfully, “one is as bad as the other in terms of manufacturing policy.”
He acknowledged that the recession was the immediate reason for the demise of his family’s business. But what really did it in, he said in an interview, was the competition from less-expensive Chinese circuit boards — less expensive, he argued, because the Chinese undervalue their currency and this administration, like the ones before it, lets them get away with it.
“Our orders went from $8 million at an annual rate to $4 million, which was not enough to make money,” he said.
Bartlett, who is co-chairman of an organization called the Fair Currency Coalition, said that Chinese competitors charged only $1 for each printed circuit board sold in this country, while he charged $1.40. Like many economists and government officials, he says he believes the Chinese currency is artificially undervalued. As a countermeasure, he said the Obama administration should impose a 40 percent tariff on imported Chinese goods.
One tactic for strengthening the manufacturing sector, in the administration’s view, would be a shift in tax policy. The research and development tax credit, which is now subject to renewal by Congress, would be made permanent, encouraging much more research and development among manufacturers, a senior Commerce Department official argued. And foreign taxes paid on profits earned overseas would not be deductible in this country until the profits were repatriated, a restriction that might discourage locating factories abroad.