Boychuk: Rethinking taxes and regulations could boost American manufacturing
Weeds grow in the parking lot of the closed Culp Weaving plant in Burlington, N.C. The upholstery giant moved to China to take advantage of cheaper labor. Credit: AP, 2009
The United States has lost tens of millions of manufacturing jobs and stands to lose millions more before the decade is done. The United States is a manufacturing powerhouse, and the world’s leader. Both statements are true, but they won’t necessarily be true forever.
We still produce more than one-fifth of the world’s manufactured goods, and manufacturing accounts for $1.7 trillion — nearly 12 percent — of the U.S. gross domestic product. U.S. workers are the most productive on the planet. China is catching up, but cracks are beginning to show.
It’s also true the United States is no longer the world’s leading shoe or shirt maker. We don’t make toys and gadgets like we used to, either. Low-skills jobs in textiles and similar industries moved offshore long ago. For better or worse, those jobs are never coming back.
Probably for better. The challenge is to keep the high-skills jobs here, and to maintain the global edge in research and development of new technologies.
But Obama’s policies thus far favor subsidizing certain industries with the hope of an eventual return on taxpayers’ “investment.” And it’s been a disaster.
The Obama administration famously gave foundering solar-panel manufacturer Solyndra $535 million in loan guarantees, only to watch the company go belly up. This past week, A123 Systems, a battery manufacturer that received $249.1 million in federal grants to build factories, declared bankruptcy — making it only half the debacle Solyndra was. Taxpayers will likely recover a fraction of the money.
Instead of picking winners and losers, the federal government should be rethinking taxes and regulations. At 35 percent, the United States has one of the highest corporate tax rates in the world, protecting industries with well-heeled lobbyists while discouraging new investments.
Americans are rightly anxious about the rapidly changing global economy. Things really are different now. But instead of trying to emulate Europe and Asia, as Obama seems inclined to do in the face of sluggish economic growth and continuously high unemployment, we should be figuring out how to free entrepreneurs and innovators to do what they do best.
Ben Boychuk is associate editor of the Manhattan Institute’s City Journal.
