Bring The Jobs Back!

Art Crino
Art Crino is a combat veteran of WW II, graduate of OSU in Electrical Engineering

This primarily reviews the book American Made by Dan Di Micco, Chairman Emeritus of Nucor Steel.

The United States has experienced 30 years of slipshod economics and 20 years of failed unbalanced trade policies. This was caused by lack of leadership. Di Micco says we need to create 30 million new jobs by 2025. And we need to invest $3.6 trillion in infrastructure improvements and expansion. Our leaders, consciously or unconsciously have declared his goals as mission impossible. Di Micco disagrees.
A review of history is important. After World War I, we saddled our conquered enemies with reparations. However, after WWII, we spent billions shoring up a free-market system in Europe and Asia. We let that go on too long, with the unintended consequences that Germany and Japan’s manufacturers began taking more of the global market — and with it American jobs. Furthermore, Germany and Japan were allowed to depreciate their currency against our dollar, making their goods artificially cheaper and ours more expensive to export. Our manufacturing went from 25% in the mind 1960s to 12.5%. In September, 1985, President Reagan and Congressional trade representatives met with Germans and Japanese at the Plaza Hotel in Manhattan. Reagan advised them they were to correct the currency evaluation immediately or he would implement tariffs on their goods. The Germans and Japanese complied. It became known as the Plaza Accord.

Presidents George H.W. Bush and later Bill Clinton took a more open approach to China in an attempt to access the billion-person market for U.S. consumer goods. China did not respond in kind. Instead Beijing promoted mercantilist policies that protected domestic manufacturing. A mercantilist trading policy is one in which a government protects and heavily subsidizes key industries, exporting as much as possible and importing as little as possible. According to the Economic Policy Institute, China’s currency manipulation alone costs the U.S. more than 2.1 million manufacturing jobs and adds $217 billion to our trade deficit.

In 2009 Congress passed the President’s $787 billion so-called economic stimulus package. A Buy American provision was rejected allegedly to avoid a trade war. Realistically, we have a trade war. When you don’t hold nations accountable for not playing by the rules they agreed to when they joined the World Trade Organization (WTO), and Congress granted them most favored nation trading status, opening our markets to their goods while our companies struggle under quotas and ownership restrictions, you’re basically saying, “Anything goes.” And currently our leader’s so-called Free Trade measures — that are not free trade but more regulated trade.

U.S. innovators have their manufacturing done in China to avoid the many U.S. regulations and high costs. The Chinese are happy to reap the technical benefits of our innovations. When it becomes unfavorable for China they force our industries to leave. A recent example is the Chinese government told Boeing and Airbus in 2012 that it would stop buying passenger aircraft from them in the next five years because state-owned Commercial Aircraft of China Corporation is going to make China’s airplanes.

Another drag on the economy is our aging infrastructure. In addition to the vehicle traffic needs, there is a need for better fiber-optics cables, wireless networks, and an improved air traffic control system. Seventy percent of Americans have access to high-speed connections compared with 94% in South Korea. And the average connection in Seoul is about 200 times faster than it is in Charlotte. If these needs are met, it will benefit more than the United States. Foreign investors will be more likely to invest in the United States.

Forcing manufacturers to use more renewable sources of energy will not improve the world’s environment. You’re just letting them produce the same stuff in China and Russia — where the environmental impact is potentially twice as bad. Also the cap-and-trade program in reality is a tax on business.

So, what is the path to reaching Di Micco’s 30 million new jobs by 2025? The Ike Interstate Highway System took 35 years to complete and cost more than $114 billion, but economists agree that the investment was a boon to both the American economy and to society. The best economic research suggests that every dollar America invested in the highway system 60 years ago has been paid back six-fold.

The World Economic Forum’s Global Competitive Index in 2008 ranked the U.S. infrastructure sixth in the world. In 2012 the U.S. fell to 25th place. Why? The U.S. spends a paltry 1.7% of our national wealth on infrastructure. Canada spends 4%, India 5%, and China 9%.
The non-partisan Milken Institute suggests a program that would repair, update and expand U.S. highways, tunnels and bridges. Rewire 80% of the nation’s neighborhoods, expand high-speed fiber-optics and build next-generation networks. Repair America’s urban wastewater system, water infrastructure and pipelines, along with schools and public buildings. An energy program that includes coal, natural gas, oil, nuclear, wind and solar. The above would require an investment of $415 billion and would create ten million jobs for Americans.

And beyond the jobs, the American Society of Civil Engineers and the FAA suggest the following benefits:

• Better roads will cut the estimated $78 billion drag on the U.S. economy that results from wasting 4.2 billion hours a year idling in traffic. We’ll save as much as $67 billion on car repairs.

• Improved waterworks and sewage systems will spare business $147 billion and homeowners some $57 billion in repairs over a decade. We’ll save as much as seven billion gallons a day from being wasted to rusty and leaky pipes.

• A satellite based air traffic control system would slash delays and allow more direct flights, saving airlines and consumers $24 billion and 1.4 billion gallons of jet fuel through 2020.

• A smarter power grid will improve distribution, cutting outages and rolling blackouts, saving anywhere from $20 to $180 billion a year.
The Energy industry has potential. About half of our trade deficit is $250 billion a year in petroleum. Let’s cease buying petroleum from unfriendly nations and reduce the trade deficit by $200 billion.

Natural gas is a game-changing resource for the American economy. It is literally fueling the beginnings of a manufacturing renaissance in the U.S. If we’re paying $2.50 or even $3.50 per thousand cubic feet (TCF) for natural gas domestically and its $16 or $17 TCF overseas, that neuters foreign labor advantage. To retain this advantage, we must not export natural gas. To do so would drive our domestic cost to $10 TCF and our overseas competitors to $10 TCF — and we’re back to being uncompetitive again.

As more U.S. – based manufacturers face the fact that China is a less-than-desirable place to do business, the lure of inexpensive energy will bring them home.

A major obstacle to a recovered economy is the United Nation’s Agenda 21 program that is based on a false premise. A single scientific study, the 420 thousand year ice-core readings, conclusively show temperature leads carbon dioxide (CO2) in the atmosphere by about 800 years — not follow as Mr. Gore claims. This hoax must be exposed in order to maximize the creation of U.S. jobs.

There needs to be a better appreciation for the benefits of manufacturing. It creates real wealth. For every dollar of activity in the business of creating and making things, it creates an additional $1.34 in activity in the broader economy. The other sector that comes close is construction — in the business of building things — which generates about 97 cents in the economy for every dollar.

The big question is how do we finance these programs? One clue is for our leaders to reduce spending and increased investing. Also, go back to see how they financed the Ike Interstate Highway System.

The U.S. has the highest corporate tax rate of any industrial nation at 39.1%. According to a Milken Institute study, a cut to 23% would boost the nation’s GDP by $282 billion and increase employment by 1.82 million.

Another step would be to apply the Reagan Plaza Accord to China. Their mercantilist measures have taken more than 2.1 million U.S. jobs and added $217 billion to our trade deficit.

Art Crino is a combat veteran of WW II, graduate of OSU in Electrical Engineering and his career was in engineering and factory management. Art may be contacted by e-mail at: crino9850@comcast.net.

(Unless otherwise noted, the opinions expressed are the author’s and do not necessarily reflect the views of the Northwest Connection.)

 

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