In a bid to revive their sagging election prospects, congressional Democrats have hit on the theme of promoting domestic U.S. manufacturing. As a front-page story in the Washington Post reports today, the party has adopted the bumper-sticker slogan, “Make It in America.”
I’m all for making things in America, when it makes economic sense to do so. But the Democratic plan opens a window for all sorts of government intervention, including trade barriers, higher taxes on U.S.-owned affiliates abroad, and subsidies for “clean energy” and make-work infrastructure projects.
The campaign relies on two major but faulty assumptions: That U.S. manufacturing is in deep trouble, and that creating more manufacturing jobs is the key to prosperity. Neither assumption is true.
Despite worries about “de-industrialization,” America remains a global manufacturing power. Our nation leads the world in manufacturing “value-added,” the value of what we produce domestically after subtracting imported components. The volume of domestic manufacturing output, according to the Federal Reserve Board, has rebounded by 8 percent from the recession lows of a year ago. Even after the Great Recession, U.S. manufacturing output remains 50 percent higher than what it was two decades ago in the era before NAFTA and the WTO.
Manufacturing jobs have been in decline for 30 years, not because of declining production, but because remaining workers are so much more productive.
Again, I’m all for manufacturing jobs supported by a free market, but members of Congress need to wake up to the reality that America today is a middle-class service economy. As I wrote in the column yesterday:
More than 80 percent of Americans earn their living in the service sector, including a broad swath of the middle class gainfully employed in education, health care, finance, and business and professional occupations.
It is one of the big lies of the trade debate that manufacturing jobs are being replaced by low-paying service jobs. Since the early 1990s, two-thirds of the net new jobs created have been in service sectors where the average pay is higher than in manufacturing. Members of Congress who belittle the service sector are ignoring the interests of a large majority of their constituents.
Congress and the president should focus on economic policies that promote overall economic growth, not policies that favor one sector of the economy over all the others.