This traditionally sparks a silly season of outlandish and impossible promises which, in the US, have always been exemplified by 1928 candidate Herbert Hoover who offered policies that would put a 'chicken in very pot,' and who then made good by delivering the Great Depression.
So, yeah, that was 84 years ago - before phone cameras and twitter feeds - and we still remember it, so pardon our skepticism. This year manufacturing jobs are the functional equivalent of those illusory fowl. Candidates spanning the ideological spectrum from President Obama to Rick Santorum are promising the return of the big factory. But the promises are likely to prove as intangible as those of their predecessors. And the reason is that manufacturing aint what it used to be. The long rows of minimally educated worker-automotons made famous by Henry Ford's assembly line have been supplanted by machines or, when you can find human workers, by highly trained multi-taskers who understand statistics, technology and the economics of Asian competition.
Manufacturing may be coming back but in its current form is unlikely to provide the answer to nagging unemployment. JL
Josh Mitchell reports in the Wall Street Journal:
Proposals by President Barack Obama and GOP presidential candidate Rick Santorum to promote manufacturing are running into skepticism among economists who doubt modern factories can churn out many new jobs.
After shedding millions of jobs over the past three decades, U.S. factories are adding workers again. The White House says that with the right mix of policies—including tax breaks—the government can help sustain that growth. Mr. Santorum would go further, eliminating the corporate tax on manufacturing
Critics of such proposals say the rise in manufacturing employment of the past two years is more a blip than a trend. Opponents of "industrial policy," government efforts to promote certain sectors have long argued it's folly for policy makers to try to pick winners and losers. But even some analysts more open to active government involvement in the economy doubt manufacturing can become a significant job creator in the U.S.
"The trend is increasingly that factories are not assembly lines with lots of people standing around. It's increasingly a lot of machines with fewer workers," said Susan Lund, director of research at the McKinsey Global Institute, the research arm of the consulting firm. "If job creation is your goal, manufacturing is probably not the sector you'd look to."
Multinational companies are increasingly moving production to the U.S., but "the problem is that there are few jobs created by insourcing activity," Wells Fargo Securities Economics Group wrote in an analysis Tuesday.
U.S. manufacturers have added roughly 400,000 jobs since 2010, after losing 5.8 million jobs from 2000 through 2009. Manufacturing employed more than a third of the nation's nonfarm workers in 1950, but now employs less than 9%.
Manufacturing employment also declined from 2000 through 2009 in Germany by 9% and by more in South Korea, the United Kingdom and Japan, according to McKinsey.
In all these countries, advances in technology and management processes have enabled factories to boost their productivity, or output per hour of labor. In the U.S., despite the loss of millions of jobs,factories' output—the value of goods produced, adjusted for inflation—was almost the same in 2011 and 2000.
The White House and some outside economists say other global trends are driving the recent pickup in American factory jobs. While many U.S. manufacturers in past years shifted production to countries with lower wages, some find now that rising wages in China and other emerging economies are driving up operating costs abroad. Meanwhile, higher oil prices have raised the cost of shipping goods.
Mr. Obama's plan would give manufacturers a boost by cutting their effective top tax rate to 25%, and other industries' rate to 28%, from 35% now. Breaks for research and development, and for specializing in "clean" energy technologies such as wind farms, would further lower some manufacturers' tax bills.
The White House says its plan gives preference to manufacturing because of the sector's "spillover" effect on the broader economy: Factories create innovative methods and technologies that spread to other industries. Also, factories support a broader network of other jobs, including parts suppliers, than service providers do.
"We've got to strengthen American manufacturing so that more and more good jobs and products are made here in America," Mr. Obama said last week in remarks to governors at the White House.
Mr. Santorum said in a statement Friday that his proposal is part of a broader tax-reform plan that would help all U.S. companies and boost jobs. He said current regulations and policies put U.S. factories at a disadvantage against overseas competitors, including those in China, and that his plan would seek to remedy that. "It's vital we create a profitable environment to bring manufacturers back to this country so we can make things here again—and not be forced to rely on countries that aren't allies of the United States," he said.
Both the Obama and Santorum proposals could have particular voter appeal in Midwestern states that have lost millions of factory jobs over the past three decades, and which could be pivotal in deciding the outcome of November's presidentialelection.
The other main Republican candidates all propose cutting the corporate tax rate to the same level for all companies. Mitt Romney would lower it to 25%, Rep. Ron Paul of Texas proposes 15% and former House Speaker Newt Gingrich 12.5%.
R. Glenn Hubbard, a Columbia University economist who is advising Mr. Romney, criticized Mr. Santorum's plan as industrial policy. Critics say such policies can hold back the economy by maintaining the status quo, effectively denying resources to other sectors.
"I am not aware of economists who support differentiating the corporate tax rate by industry," Mr. Hubbard said.
Mr. Santorum's campaign declined to respond to Mr. Hubbard's comments.
Some critics said Mr. Obama's plan doesn't detail what would happen to manufacturers, such as so-called S-Corporations, that are structured so they effectively pay individual tax rates, not the corporate rate. They say such companies could be hit by a separate White House proposal to raise taxes on high-income individuals.
The White House has said that manufacturers in the aggregate would be paying lower taxes under its plan.
Jim Frings, chief executive of G3 Industries, a Wisconsin metal fabricator that employs 175 workers, said lower taxes would help his company pay workers more and expand more quickly, but that it's not clear how the plan would affect his company since it files as an S-Corporation.
John Shannon, CEO of Quick Cable Corp., a 140-person company in Franksville, Wis., that makes electrical connectors, cabling devices and tooling for the power-storage industry, said a lower tax rate along the lines of what Mr. Obama has proposed would speed his company's plans to increase employment.
"Exports have been growing generally.We would like to invest in people to help take us into overseas markets," and lower taxes would help his company do that, Mr. Shannon said.
Some manufacturers are more skeptical of Mr. Obama's plan. Jay Timmons, chief executive of the National Association of Manufacturers, said the proposal would raise many factories' costs by eliminating deductions they currently receive and also raising their taxes on profits earned overseas. He also said an effective rate of 25% would be too high to lure overseas manufacturers to the U.S.
Scott Paul, executive director of the Alliance for American Manufacturing, which represents steel companies and union workers, said additional tax breaks could help U.S. manufacturers compete with foreign companies that receive support from their governments.
"In a textbook world of perfect efficiency, you don't want to do that," Mr. Paul said. "But when you're competing against companies around the world who have major incentives (from their governments) and you're not playing that game, you're going to get left out."
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