Sometimes you read something so dumb that you’re left speechless.  In the New York Times today, Robert Reich discusses how the U.S. economy is in big trouble.  He says that we’re “sliding into recession, or worse.”  That part’s self-evident.  One look out the window and you can see the storm clouds gathering.

Reich then notes the importance of lifting wages for working Americans as a way to help the economy: “The only lasting remedy…is to give middle- and lower-income Americans more buying power.”  

So far so good, right?  Who could object? 

But then Reich states: “The answer is not to protect jobs through trade protection. That would only drive up the prices of everything purchased from abroad. Most routine jobs are being automated anyway.”

Such ignorance on his part.  

Mr. Reich seems to forget that manufacturing jobs pay extremely well, and have the additional benefit of creating other good-paying jobs through a multiplier effect.  This is one surefire way to inject helpful purchasing power directly into the economy.

Furthermore, manufacturing jobs are not “automated.”  Modern manufacturing work, with which Mr. Reich is painfully unaware, often requires the skills to operate hi-tech computerized machinery.  Manufacturing workers are paid well precisely because they have the skills to operate machining gear, for example, calibrated to one-ten thousandth of an inch.

When these workers lose their factory jobs, however, they tumble down the wage scale to hourly work in retail or fast food.  These service sector jobs do not pay well– and they do NOT boost the earning power of American families.

Mr. Reich is correct to say that “The only way to keep the economy going over the long run is to increase the wages of the bottom two-thirds of Americans.”  Unfortunately, he has no idea how to do so. 

What’s needed is to create good-paying jobs, and one avenue is to strengthen American manufacturing.

“Trade protection” is a poor term, and it’s inappropriate.  What is needed is strong enforcement of existing U.S. trade law to tackle the illegal, protectionist tactics of countries like China, who utilize currency manipulation in violation of world trade law, to undercut honest American manufacturers.

Why not simply do the right thing and create a level playing field so that American manufacturers, who do play the rules, can create the jobs necessary to sustain a middle class?  If we don’t, we’re in real trouble.

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As ManufactureThis has reported numerous times, the safety of imports from China is open to question.  An AAM study in December spelled out the need for “safe trade” to address toxic imports.  And Richard Miniter, the report’s author, has noted that a potential worse case scenario from tainted Chinese products “could cost thousands of Americans their lives.”

It’s not just the possibility of tainted toothpaste and lead-based toys that are discouraging American from buying Chinese exports, however.  Growing awareness of labor abuses and wanton environmental pollution has discouraged many Americans from supporting Beijing’s regime.

  This disenchantment has now reached mainstream America, with the Trader Joe’s supermarket chain announcing yesterday that it will phase out sales of certain questionable Chinese food imports including frozen spinach and edamame (soybeans).  According to Trader Joe’s spokeswoman Alison Mochizuki, “customers have voiced their concerns about products from this region, and we have listened.”

It remains to be seen if the same concerns will wind their way up to Capitol Hill and help to drive the passage of legislation to address unsafe imports.

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Once again, AAM will be taking our message of “Strengthening American Manufacturing” to the VOTERS.  We’re holding our seventh “Keep it Made in America” Town Hall meeting in Chicago on Feb. 20, hosted by John Ratzenberger.

The various presidential contenders are currently talking taxes, stimulus, and “Who-voted-what-on-Iraq-and-when.”  But poll after poll shows that Americans are worried about jobs and the economy.  A sound trade policy that helps to strengthen American manufacturing by enforcing existing trade laws is a sensible step toward saving jobs.

We’ll talk more about “Enforcing the Rules” at our Town Hall meeting.  In the interim, The Northwest Indiana Times has already run a good preview article detailing the Feb. 20 Town Hall. 

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BusinessWeek’s Washington Bureau Chief Jane Sasseen has written an interesting commentary that suggests support for free trade is fading among Washington’s intelligentsia.

Treasury Secretary Henry Paulson testified before the Senate Budget Committee yesterday.  Chief among the topics of discussion was a potential economic stimulus bill.  However, Paulson was also queried about Congressional efforts to address China’s artificially devalued currency.

“Bordering on the silly” was Paulson’s view of such legislation targeting China’s illegal undervaluation. 

Verging on DoubleSpeak, Paulson stated: “I have engaged very actively with China. Engaged — and I think with some results — when you look at the currency.  Don’t be confused by the fact that I say I’d like them to move quicker, because I would like them to move quicker but their rate of appreciation of the currency roughly doubled last year to 6.7 percent.”

Most economists estimate the Chinese yuan to be at least 40% undervalued—creating an artificial subsidy for Chinese exports.  This currency rigging has been going on since 1994, so it’s hard to say what timeframe Mr. Paulson is looking at when he celebrates a 6.7% rise in the currency.

Time passes, though.  Civilizations rise and fall.  Nero fiddled while Rome burned.  The Treasury Secretary chats up Beijing while U.S. factories fold.

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On CNBC this morning, AAM Senior Analyst Kerri Houston discussed the results of Super Tuesday.  She cited an important, but overlooked, piece of data: the U.S. lost 300,000 manufacturing jobs in 2007.

  Are any of the candidates listening?  Do they have a plan to strengthen U.S. manufacturing?

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An interesting item in today’s Wall Street Journal notes that, while most countries run a trade deficit with China, Japan is the only G-7 country to run a surplus.  Just why is this? 

Japan has oriented itself as an export-based economy and is now China’s leading supplier of industrial parts and equipment.  Essentially, Japan sells Beijing the machinery (like auto parts and building materials) that it needs for government and infrastructure projects.  This means that Japan is providing China with the raw equipment it needs to build its own manufacturing base.

The U.S. has typically been Japan’s largest export market, but China’s meteoric rise is seeing them closing the gap.  In 2007, the U.S. imported an estimated $144 billion worth of goods from Japan, compared with $100 billion from China. 

America’s wanton consumption of Japanese goods, however, has racked up a trade deficit projected to exceed $80 billion in 2007.  Ironically, that debt receives little attention when compared with an expected $260+ billion U.S. trade deficit with China in 2007.

Both Japan and China have positioned themselves as net exporters, manufacturing the goods and products that the rest of the world consumes.  Once upon a time, the United States held that position.  The famous Delaware River Bridge in Trenton, NJ still bears a sign that states “Trenton Makes, the World Takes.”  Sadly, Trenton, like many U.S. factory hubs, no longer houses a thriving manufacturing base.

What then is the difference between the U.S. and competitors like China and Japan?

China has captured much of America’s marketshare by adopting what the Washington Post’s Bob Samuelson termed “new mercantilism.”  By utilizing illegal currency manipulation, subsidies, dumping, and other predatory trade practices, Beijing has been able to undercut American producers.

Similarly, Japan has captured huge swaths of the American electronics industry through targeted efforts to underbid U.S. producers.  The American TV industry was decimated in the 1970’s by a flood of low-cost Japanese products.  Today it’s essentially impossible to find an American-made TV or CD player.

All this points to a simple question: why doesn’t the U.S. emphasize manufacturing’s importance, like the Chinese and Japanese do? 

Super Tuesday provides an excellent opportunity to look at the candidates running for president and ponder their views on American manufacturing.  Do these candidates understand that China is cheating, and that U.S producers are suffering the consequences?  With the media ringing the alarm bells of “impending recession,” it would be helpful indeed to know that our potential leaders are aware of the problem and have a plan of action.
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A Washington Post article this weekend noted that the U.S. manufacturing sector has lost 269,000 jobs over the past 12 months, with 28,000 jobs lost in January 2008 alone. And apparently, manufacturing employment has dropped to less than 10 percent of the U.S. workforce for the first time since workplace data began to be collected in the 1930s.

Manufacturing matters, though.  And whether it’s the roughly $1.6 trillion per year that it contributes to gross domestic product (roughly 12 percent of GDP), the good-paying jobs it generates, or its multiplier effect in creating additional jobs, the U.S. economy can not afford to see its continuing decline.

This ongoing drop in manufacturing employment is troubling, and it prompted actor/producer John Ratzenberger, who hosts AAM’s Town Hall meetings, to publish a piece in today’s Buffalo News that explains why he believes manufacturing is vital to the future of the U.S. economy.  John will expound on this at length during AAM’s upcoming Town Hall meeting in Chicago in Feb. 20.

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The U.S. Bureau of Labor Statistics reported today that the United States lost 28,000 manufacturing jobs in January 2008.  These losses were a leading contributor to the overall decline of 17,000 jobs in the U.S. economy for the month.

 Not a happy indicator for an already troubled economic picture.  As ManufactureThis reported earlier in the week, the 24 states holding primaries on Super Tuesday have lost more than 1.5 million jobs in the past seven years.

Bloomberg News took note of AAM’s Super Tuesday report and observed that job and economic issues could factor heavily into the outcome of Super Tuesday: “Falling home values and the collapse of the subprime- mortgage market are the major worries in several states, including the biggest prize on Feb. 5, California. A slowing automotive industry and manufacturing-job losses dominate Midwestern states like Illinois and Missouri, and parts of the South. Financial industry losses are a burden in the Northeast.”

An economy in rough shape needs real solutions.  And, as AAM has said numerous times, one significant effort would be to revitalize U.S. manufacturing.  

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