The Manufacturing Myth That Both Parties Cling ToBy
In the heat of the presidential primary season particularly, it seems as if Republicans and Democrats can’t agree on anything. But, although they may disagree vociferously on everything from tax policy to foreign conflicts, President Barack Obama and the Republican candidates do seem to share the common conviction that it is not just desirable but a matter of urgent national concern to revitalize U.S. manufacturing.
During the State of the Union, Obama called on Congress to provide manufacturers with special tax breaks and other support. Mitt Romney would cut the corporate tax rate to 25 percent and crack down on China. Rick Santorum would eliminate corporate taxes outright for manufacturers.
New jobs are always imperative, especially during a prolonged economic slump. But few economists show much enthusiasm for the ideas most often put forward to help America’s manufacturing sector: erecting trade barriers, investing directly in favored industries, or altering the tax code to privilege manufacturing over other sectors of the economy.
Their skepticism derives from the fact that factory jobs have been declining for 30 years due to cheap foreign labor and steady productivity gains—a decline that steepened in the 2000s and, despite a recent uptick, is not expected to reverse itself over the long term. As Christina Romer, the former chairwoman of President Obama’s Council of Economic Advisers, put it recently: “So far a persuasive case for a manufacturing policy remains to be made, while that for many other economic policies is well established.’’
What’s driving the focus on manufacturing isn’t economics. It’s politics. Both parties believe they have much to gain by emphasizing their concern. Manufacturing evokes a blue-collar, Rust Belt ethos that’s long stood as an important component of American politics. The idea that a special virtue lies in “making something real”—as opposed to, say, financial engineering—is deeply embedded in the national psyche.
For Obama and Romney, reverent paeans to manufacturing are a way of signaling solidarity with a socioeconomic class not naturally inclined to support either man; for Santorum it’s a way to revivify the class distinction between himself and the other candidates in a way that may redound to his benefit. This focus also fits into political messages that each party is eager to press: for Republicans, that cutting taxes on business is the best way to achieve a desirable goal; for Democrats, that corporate behavior harmful to workers can be reversed through government action.
This plays into a larger narrative that voters in both parties have come to agree on strongly: that U.S. manufacturing jobs have departed to places such as China (largely true) and could be brought back if only political leaders would pursue certain policies (probably untrue). A corollary belief holds that China’s rise has come at our expense.
In 2000 an overwhelming majority of Americans (65 percent) considered the U.S. to be the world’s leading economic power. China (10 percent) didn’t even rate second; Japan did (16 percent). But over the next 12 years, those numbers shifted dramatically. By the eve of the 2008 financial crisis, China had eclipsed Japan and pulled even with the U.S., and then rocketed ahead. When Obama declared in his State of the Union speech that “America is back,’’ most Americans probably disagreed. According to a February Gallup poll, 53 percent now consider China the reigning global economic power, and only 33 percent believe that title belongs to the U.S.
This gloomy self-image, and the perception that foreign competitors are passing us by, explains the remarkable salience of measures to boost manufacturing. A Gallup poll last month showed that about 80 percent of Democrats and independents, and 90 percent of Republicans, support tax breaks for companies that repatriate manufacturing jobs from overseas despite serious doubts about their efficacy.
Small wonder: Tax breaks have been held up as a cheap, easy response to economic weakness—why, even politicians who can’t agree on anything agree on that much! Sure enough, last year Gallup found they were the single most popular option for creating jobs. In fact, Americans’ faith in them goes even deeper. Many people seem to think tax breaks can reverse our national decline. A bipartisan poll from the Alliance for American Manufacturing last year found that voters believe manufacturing “will help restore America’s lost status as the world’s number one economy.’’
That’s a fantasy, but one so beguiling that few politicians would dare challenge it.