Which presidential candidate will be best for US manufacturing? Issues to consider before voting November 4th
By Harry C. Moser
Chairman of the Board
Neither Senator Obama nor Senator McCain has placed a high emphasis on manufacturing. Neither home page lists "manufacturing" as an issue even though one or both list: "immigration," "border security," "rural," and "urban policy." Senator Obama's nomination speech word count was: healthcare, six; energy, three; immigration, one; and manufacturing, zero. A word count for "manufacturing" on the two Web sites showed Obama with six and McCain zero, perhaps because Senator Obama has proposed many more plans than has Senator McCain. Neither man seems to realize that only a strong manufacturing sector can drive enough growth in the rest of the economy to pay for their other plans to both spend/cut taxes and balance the budget. Nevertheless, the sum of their actions and omissions can and will significantly impact US manufacturing.
It is essential to the standard of living of all US citizens that our manufacturing sector becomes more world-competitive. For the last 50 years, the US has been the target of the world's exporters. We offer the largest market with a single language, and have an efficient retail system with almost no nationalistic drive to buy domestic products. Moreover, government has neglected domestic manufacturing. As a result, our trade balance has been negative each year for the last 30 years (currently about $700 billion/year), resulting in about $2.5 trillion of foreign-held US debt.
There are two ways to fix the trade deficit. Either take the necessary actions (such as tax policy and allocation of education/training funds) to become more efficient at designing, producing, and selling products here and abroad, or dramatically lower the value of the dollar against other currencies. The first solution strengthens our economy, federal budget, and defense capabilities. The second reduces the real income of our citizens versus the rest of the world and will cause severe inflation, further weakening Social Security and other government pension systems that are indexed to inflation.
Neither candidate appears to realize—or is willing to tell the public—that in a world in which two billion low-wage workers are rapidly being trained, given access to modern technology, and able to interact instantly, the real incomes of all US workers will, inevitably, stagnate or decline—unless dramatic steps are taken to make our manufacturing sector more competitive.
On June 18, I addressed the Apprentice Graduation of the Pittsburgh chapter of the National Tooling and Machining Association (NTMA; Fort Washington, MD). My presentation was crafted as a campaign speech for the US presidency. I had the opportunity to present my priorities for strengthening US manufacturing. Because this speech did not lead to an actual nomination by either party, I will instead evaluate each of the candidate's positions on the issues that I presented in Pittsburgh, and that I believe are most critical to manufacturing.
To keep this analysis to a readable length, I defined certain criteria for issue selection:
First, "manufacturing" means the employees and owners of US manufacturing facilities. It does not include the foreign facilities of US-headquartered companies, or their need for low-cost offshore sources. It does not mean the lowest-skill jobs, which are probably inevitably lost to low-wage countries. Thus, I chose issues that could have the greatest impact on the number of high-wage/high-skill US manufacturing employees and the profitability of their employers.
Second, I focused on actions or policies that had a chance of being implemented, and might actually have an effect. As Prince Otto von Bismarck, 19th Century German chancellor, said, "Politics is the art of the possible."
Third, wherever possible, I stuck to issues on which one or both candidates had taken a position. Where no position was available, I emailed and called the campaigns seeking position statements. Neither responded. Where I could not determine the candidate's position on an issue, I indicated that with a question mark (?) in the table (see below).
Fourth, I generally avoided issues such as public education, healthcare, and the environment that, although they ultimately impact manufacturing, are already evaluated in the media daily, and often trend towards the impossible. For example, many companies would like to avoid the burden of healthcare costs, which are higher in the US than in other countries. To the extent that we take those costs from employers and shift them to the government, taxes on companies and employees will rise to pay the bills, and no net gain will have occurred.
I judged the candidates' positions based on the impact they would have on the following incentives:
First, for small to medium-sized manufacturers, e.g. the country's job shops, to invest, expand, and hire. These companies now represent 50% of the manufacturing workforce.
Second, for larger US-branded companies to expand their own manufacturing in the US, or outsource to domestic job shops.
Third, for larger quantities of intelligent, motivated US citizens to seek skilled manufacturing careers. At ISTMA (International Special Tooling and Machining Association) world meetings, all countries lament their growing shortage of skilled workers. The country that solves this problem will be the world's manufacturing leader. Especially in a high-wage country, manufacturing must have highly competent recruits or it will never overcome the competition of low-wage countries, where a manufacturing job still sounds like a key to the good life.
Fourth, for foreign-owned companies to start or expand their US transplant facilities. The decline in the value of the dollar relative to the Euro has motivated many companies' presence in the world's largest market, counteracting some of the offshoring by US multinationals. We need to build on this momentum. If we do not, NAFTA makes it very convenient for companies to invest in Mexico for low wages or Canada for a better source of skilled labor, including skilled immigrants.
Six key issues are covered in the table in this article. Analysis of two additional issues, "Skilled Workforce Development" and "Maintaining a Generally Low Value of the US Dollar," are available on the Manufacturing Engineering Web site. Senator Obama has moderately higher ratings on both issues than does Senator McCain.
My conclusion from the analysis is that Senator Obama is more committed on issues of trade, while Senator McCain will provide a tax and legal system that is more conducive to a strong manufacturing sector.
For another view, the National Association of Manufacturers (NAM; Washington, DC) reports that, in the last six Congressional sessions, the votes on issues that matched NAM's positions were: McCain 60%, Obama 16%. I agree with most, but not all, of NAM's positions.
The candidates' neglect of manufacturing is consistent with the public's conception of living in a post-industrial society. Manufacturing should be, at least, an important means to an end for both candidates. The following thoughts apply to both, but fit best as shown:
Senator Obama: Manufacturing is the traditional upward mobility ladder for minorities and the poor. The decline in high-paying manufacturing jobs has been an important cause of increasing income inequality. A strengthened manufacturing sector is by far the best solution to the twin deficit problem. Eliminating the $700 billion/ year trade deficit will strengthen the US dollar, lowering prices and raising real wages. The increased economic activity and resulting higher employment and profitability will raise tax revenue and lower entitlement expenses, reducing the $250 billion budget deficit by about $70 billion/year, funding the social programs you have promised.
Senator McCain: The economic effects described above will produce more tax revenue at lower tax rates. A strong manufacturing sector provides a reliable and secure longterm source of defense material.
When you are contacted by either candidate's campaign, ask for the candidate to improve his position on the key manufacturing issues. Especially push the Democrats on tort reform and card check. Push the Republicans on the dollar and Chinese currency manipulation. Push both on the skilled technical workforce versus just more university degrees. Periodically, after the election, I will update you on the actions our new President and Congress are planning, and taking, on these issues, and encourage you to communicate your views directly to your elected representatives.
President, then Chairman, of first Charmilles and then GF AgieCharmilles since 1985, Harry Moser is a national leader in the effort to attract more of America's youth into manufacturing, in providing strategies for competing with low-wage countries, and in the campaign for government policies that support manufacturing. Moser serves on the boards of the National Institute for Metalworking Skills (NIMS) and ISTMA. He received a BSME and an MS in Engineering at MIT in 1967, and an MBA from the University of Chicago in 1981.
This article was first published in the October 2008 edition of Manufacturing Engineering magazine.