They spent years training the Chinese side-by-side in the US.
In the end they still haven’t exactly caught up to the quality we had in the US. However, they now have 5x the tool & die makers in China.
To compete, you really do have to cut minimum wage. You have to loosen regulations, and importantly, you have to do massive tariffs / sanctions on China for the next decade.
There are enough people still here to teach and expand the Industry. However, if you don’t start now. Like today. We won’t ever recover. Once enough manufacturing is gone, it’ll be impossible to come back - we are almost there.
You are competing against a foreign power who uses slaves. You either let free people work for what ever wage they can achieve or we risk becoming slaves ourselves.
Part of the problem here is that the existence of some kind of universal "more regulations / less regulations" slider is an illusion. It allows the problem to be cast in partisan terms when that isn't the problem at all, because the problem isn't more or less lines of regulatory code but rather higher or lower regulatory efficiency.
Some regulations save a thousand lives at a 0.02% increase in costs. Repealing those is bad. Enacting them is good. Some regulations save two lives at a 5000% increase in cost, which could equally be saved by some less expensive regulation. Enacting those is bad. Repealing them is good.
The real problem is that politicians lack the qualifications and incentives to do this well. If good rules don't exist, then someone gets hurt and there is a call for "more rules" rather than "better rules". Politicians who don't know what they're doing pass bad rules. The bad rules cause costs to exceed what they are in China, so manufacturing moves to China. Then the local lobby for improving the rules evaporates because there are no longer local manufacturers to propose or lobby for more efficient rules, and the continued existence of those rules on the books causes no more to form.
We clearly need to throw away the existing rules -- they're not working -- the question is, how do we actually get better ones?
This is something that eludes most people, especially among progressives.
Not to get political but this reminded me of covid-19. Masks and social distancing are an obvious 0.02% increase in costs that save a thousand lives. Lockdowns and extended stay-at-home orders and shutting down businesses so that we start needing to send out trillions upon trillions of stimulus cash to keep companies and people afloat start to cross into "save 2 lives at a 5000% increase in cost" territory
Taiwan is an example of a country that managed to eliminate covid-19 without lockdowns, so it is possible, but part of their success is likely due to the fact that the authorities acted very early to impose strict quarantine rules and contact tracing (when there were fewer than 10 new cases per day!) AFAIK every other country that has managed to eliminate community transmission has done so via lockdowns.
'The observed temporary excess mortality likely arises because people in vulnerable groups die weeks or months earlier than they would otherwise, due to the timing and severity of the unusual external event.' https://www.medrxiv.org/content/10.1101/2020.11.11.20229708v...
You're in a car crash? To bad hospital is saturated. You got 4th degree burn in a burning building? To bad hospital is saturated.
Do you realise that is the problem?
Hospitals are saturated, because we want to keep these people alive for few more months. Younger people don't need hospitalization.
You are in car crash, too bad hospitals are only admitting people with covid. This is current situation in Poland.
Youngers are less affected but some absolutely do need hospitalization. Reality is not as black or white as you're making it.
The situation is like that in Poland ... and the solution is geronticide ?
Correct solution is to treat covid like very strong flu.
As I understand it, the US status as a global reserve currency requires us to maintain a perpetual trade deficit - other countries need dollars and we must give it to them. This is done by buying goods from overseas which has eroded our manufacturing base, as the foreign demand for the dollar is greater than the local demand (which means there is a cheaper manufacturing market).
I'm not sure what regulation you could enact here that wouldn't severely depresses other sectors as they exist today.
Fused with Graeber and @dredmorbius phrasing where "deregulation" means "pro-monopoly" and "anti-competitive".
I'd like to learn more about "regulatory efficiency".
--
Law (et al) is much like source code. Technical debt, path dependencies, tooling stack, managing complexity and risk. You get the idea.
So of course there's evergreen debates about refactoring, rewrites, paradigms.
Germany still has a strong industrial base, without a race to the bottom and with strong unions. So it is possible :)
A lot, and I mean a LOT, of German industrial base is now located abroad, in Poland, Czechia, Slovakia, Hungary, Romania. These countries are rather close, but because they belonged to the Soviet Bloc, their economic development was retarded so much that local wages are 20-30 % of wages in Bavaria, but the workforce is qualified and the infrastructure adequate. This is a historic anomaly you do not have in the U.S.
Come here (I am in Czechia) and look around, the countryside around cities is absolutely dotted with German-owned factories that mostly produce parts. Those parts are then moved by trucks to Germany where the final product is assembled - and so the miracle of higher "work productivity" in BRD is created. Of course you have nominally higher productivity if you finalize products.
This is, by the way, how Viktor Orbán gets his political way. Hungary is absolutely vital part of German industrial base and German industry gets premium conditions on the ground. So for all the shouting about values and rule of law, German CDU/CSU and Orbán always find a way to coexist.
And as for race to the bottom, look to former East Germany. There, people want German wages from German bosses. They do not get them, most of the industry moved abroad where cheaper workforce is. Former GDR is an economic periphery where anti-system parties command majority of the vote.
Wages in the US are artificially high because of the dollar's position, but the US needs to either a) match the wages of the countries producing similar stuff or b) increase productivity and value to the levels of countries like Germany.
Since b) requires decades in factories, supply chains, trade agreements and most importantly training in actually producing things which means science and engineering, exactly the occupations an increasingly large portion of the US population has been taught to abhor, it is very unlikely to happen. The US has spent the last decades destroying all those things, so the only real option is to sadly let wages fall to levels markets are willing to pay for. It will bring a lot of suffering but is the consequence of decades of mismanagement and complacency, and it is unavoidable so it will either happen by will or by force. And we know it won't happen by will.
Of course there is always c) keep forcing the rest of the world to pay for the US standard of living while they themselves live beneath their means, but that is the actual problem now so how much longer can it last?
If you’re going to make US manufactured goods cost competitive with foreign goods, much of it has to come out of that 95% operating revenue that is operating expenses, most of which will be employee wages. There’s no way around this.
Factories will need to adjust their prices, now you take that as you will, and if one is naive one can think it means executives will take a pay cut while workers do not, but in the end it mean less wealth for everyone, less money for taxes, less money for shareholders, less money for executives, and of course less money for workers. That is less wealth for the nation.
So yes, owners will take smaller profits, along with everyone else.
Our entire society is built on this, though. Silicon Valley wouldn't exist if electronics couldn't be produced for comparatively cheaper overseas. You bring up an interesting moral point, but if you're serious about that there's a lot of reckoning society will have to deal with. It's not just going to affect minimum wage lol. It'll affect wages across the board. You're really talking about totally reforming the economy
Silicon Valley literally exists because it was an electronics manufacturing center.
So I guess not?
Asian or "factory" countries (not necessarily from Asia but for illustration) have an "artificially" held minimum wage, which indirectly subsidizes the US minimum wage. This is happening to all wages not just minimum wages mind you, so the market needs rebalancing. Wages need rebalancing, taxes need rebalancing, but most wages, including the minimum wage need to come down (in real terms not necessarily in fiat terms).
It's hard to parse what you are asking for - what more economic incentive would you imagine there to be; I think the problem with this line of thinking is that you are taking a far too simplistic model of the world where our problems are caused by people being "lazy". I think the world you are wishing for existed - it's probably the hunter/gatherer model; any more sophisticated organization of civilization requires some level of socialization. I think your "darwinistic" approach is a flawed philosophy upon which it build a nation or a global superpower.
It's interesting because the article posits, and makes a very good case for, systemic issues that has caused the erosion of manufacturing base - however politically we are unable to move beyond simply understood talking points such as "minimum wage".
Of course, all things aren't always equal, but if you're going to argue its going to be different this time around, i think there is some onus to argue why the present would be different from the past.
It's because they build the machines to build the product the Chinese manufacture. The Germans have forced themselves to be at the top of the Manufacturing Food Chain (engineering, etc) while letting the Chinese/Rest of the world build the crap we buy.
I don't think we could get there manufacturing the "Trinkets" the Chinese mostly manufacture, that is a a race to the bottom where either automation or cheap labor win.
Chinese manufacturing is now at a very high level, to the point where many western brands have effectively become "fabless", leveraging the fact that Chinese brands still struggle with poor reputation even domestically. In this symbiotic relationship, the fact that Germany is literally "the land of virtue" in Chinese might play a role.
Chinese labor has now too become relatively expensive, its economy is moving to become a service economy, and manufacturing gets outsourced from China to even cheaper countries.
The thought that comes to mind is when American railways tried to import German locomotives in the 1960s. They were appealing because they offered higher horsepower ratings than anything domestic, but they required too much babying and maintenance to keep healthy and were quickly scrapped. I hear strikingly similar things from people buying German cars today-- everything tends to be expensive to keep running after the warranty expires.
I wonder if American manufacturing needs to develop its own meme. I'd suggest the old line about GM products-- they'll run poorly for a lot longer competing products run at all. That could be a compelling argument when you're selling to a manufacturing sector that's rolling out in low-development countries with unstable infrastructure, poor environmental conditions, and low-training staff.
That gives us a niche we can target and use as a base to re-bootstrap ourselves into competitiveness. We need to be decidedly better than bottom-bit Chinese (etc.) tooling, which is probably still within our abilities, and if we overdeliver there, we can begin to position American-made as a premium choice.
I agree with you that trying to compete on low-cost, low-margin is a race to the bottom. We could conceivably bring manufacturing of iPhones back to America. I would also imagine that manufacturing of silicon is largely automated, so the US could try to build the best fabs.
Reading this as a non-American. Isn't 'opportunity' the whole reason behind immigration?
If your country relies on continuous supply of heroes and not sound systems and policies, no one single person can save you.
its called being a capitalist; anyone leaving money (capital) on the table by favoring thier home country will get squashed by those who dont...
Assuming that the goal is saving the American industry (whatever that means) - if the plan is 'good people will save it' then failure is already baked in. That plan never works. The plan should be 'whoever saves it will become fabulously and disgustingly wealthy' - then greedy opportunists will save it for you and people can go protest about how greedy they are.
Relying on good people to act is dicey. Relying on greedy people to act is a safe path.
You discuss tool and die makers, a very highly skilled profession; one that I would argue takes many years of training and labor to master. I would further argue that in the manufacturing world, when it comes to hands on work, tool and die guys are near the very top.
Yet at the same time, you talk about cutting the minimum wage. Tool and die makers (of any sort) aren't going to be working for minimum wage.
While I don't disagree with the importance of American manufacturing, I think your prescription is wrong. We don't need lower wages, we need better education, more apprenticeships, more buy in from industry to spend money on training their employees. Because sooner than people think, China will have labor cost parity with the US, and we'll find that labor cost isn't solely the reason they are a manufacturing power house.
Instead companies who manufacture in China should be taxed at much higher rates to account for the negative externalities they benefit from otherwise.
As for bringing back manufacturing home, you need to find two things to make that work. First massive subsidies and tariffs to drive up the cost of foreign imports, imposing huge costs on tax payers and consumers; and tens of millions of people willing to work in factories. The US long term unemployment rate in 2019 was about a third of a percent. Where are you going to find the money, and where are you going to find the people?
I don't mean wages, I mean safety, overtime, etc. Labor needs to be valued at home and abroad.
The article points out other ways to reduce the cost of domestic labor: namely, shifting away from high payroll taxes and severing the link between health insurance and employment.
That’s not what Germany has done but there’s little doubt that Germany’s manufacturing ability is held in a higher regard globally.
So i challenge the “have to”. It’s the unproven talk of a particular tribe but i stress unproven since economics is a social science. That means there’s lots of science but is fundamentally stories we tell each other and not akin to, for example, the unassailable truth of gravitational pull.
You're not going to defeat China by cutting wages unless you address the societal issues that cause US wages to be high. We already haven't raised the federal minimum wage in decades.
We should work for slave-like wages voluntarily or have it forced upon us?
This is a poorly thought out argument. Cost of living, housing, etc. is obviously different in US, you might end up with less income than is necessary for survival. What makes you think you will be able to find any workers at all, let alone those trained to the necessary standard and skill?
It should be obvious that appropriate responce to a crime (slave labour) being committed is not to commit the same crime yourself.
Any products with stolen materials, stolen labour, or stolen taxes should not be allowed on the market at all.
Manufacturing is still moving to SE Asian countries (Viet Nam in particular), but even there producers are increasingly moving production in India and East Africa because of rising costs (e.g., wages).
I agree with you on the tariffs. China should not be able to outcompete us because they pollute and use slave labor. Force them to compete on fair terms.
There are quite a few European countries with very robust manufacturing bases who are far more regulated (both from a labor and capital perspective). So, minimum wages, labor unions etc have little to do with the US' manufacturing base. In fact, one could argue that weaker unions, if anything, have contributed to the decimation of the manufacturing base.
Not so, import taxes and one avenue that should be explored is true carbon costs/impact factored in. Why should something made locally be more expensive than something made the other side of the World and shipped all that distance. Clearly some impact costs not being factored and the whole carbon aspect should be utilised for many benefits - balancing out imports for one.
Only difference is that the wealthy in the US will carry more of the burden instead of the working class.
And that’s why we don’t have many advocates for it even though it will solve the manufacturing problem almost overnight
Moving inflation to 6% will create millions of working class jobs in the US due to both a weaker dollar and cheaper money supply for value creation.
The losers in all of this are wealthy Americans. They will see their assets depreciate and buying power diminish. And that’s why we don’t do it.
But I guess since what you want is inflation that is one way to get it, tho it will not be 6% but closer to 30%.
Yield curve control has not worked for anyone, it is a death spiral that results in zombie economies, at best.
How does this harm a working class American that derives all of their income from working wages as opposed to assets?
> it will not be 6% but closer to 30
Cite and example where a country did not default/print money for their debt payments and inflation went to 30%
> Yield curve control has not worked for anyone, it is a death spiral that results in zombie economies, at best.
How does this harm a working class American that derives all of their income from working wages as opposed to assets?
Lastly, address how any of the above prevents an increase in manufacturing jobs, which was the intent of the measures originally listed.
Their wage-dollars will now buy less stuff.
> Cite and example where a country did not default/print money for their debt payments and inflation went to 30%
The US has the world reserve fiat currency, so there are no examples because a fiat reserve currency has never existed before, but we know hyperinflation is a likely outcome. Now, from the experience we do have, ~30% inflation like in the 70s is the best we can hope for. A zombie economy like japan's would frankly be fantastic given the conditions.
>How does this harm a working class American that derives all of their income from working wages as opposed to assets?
Their wage-dollars will now buy less stuff.
> Lastly, address how any of the above prevents an increase in manufacturing jobs, which was the intent of the measures originally listed.
Don't worry, americans will have plenty of $1/hour manufacturing jobs like asians do now (or the nominal equivalente to $1 in a hyper-inflationary world). The US doesn't have the technical capacity or workforce to compete in high paying manufacturing any more and will take decades of pain to build.
Well, you don't seem to understand the fundamental problem. Whatever labor force exists in America should see rapidly growing wages because the unemployment rate is relatively low. The reality is that not only do we not see inflation the fed has set the interest rates to almost zero and injected an insane amount of money into the stock market with no change in sight. There is slack in the system, a lot of slack. This causes wage growth to stagnate while rich people in the USA still make loads money off Chinese labor. They don't have to care about Americans because there are work forces abroad waiting for them.
>The US has the world reserve fiat currency, so there are no examples because a fiat reserve currency has never existed before, but we know
This is completely irrelevant. The primary benefit of a world reserve fiat currency is running a trade surplus without financing but if you don't produce anything, not even housing that advantage is meaningless.
>hyperinflation is a likely outcome.
Banning investments into real estate might not be optimal but hyperinflation is not going to happen because the economy isn't even close to it's production capacity.
>Now, from the experience we do have, ~30% inflation like in the 70s is the best we can hope for.
There is a response to your commend that disputes that we even had this "experience".
>A zombie economy like japan's would frankly be fantastic given the conditions.
The USA is already partially a zombie. You have public companies with record stock growth despite no changes in fundamentals. It's easier to make money off the stock market because that's where the rich are using the watering can of the fed even though there are lots of withering plants surrounding the almond farm. The stock market looks significantly brighter than it should.
https://fred.stlouisfed.org/series/FPCPITOTLZGUSA
You are now outright lying.
Only if they don't find a better alternative than real estate.
I have about $20k in bank accounts. I owe $450k at 2.5%
6% inflation? Don't throw me in the briar patch!
Minimum wage already isn't really a living wage in much of the country. Rolling back regulations is jumping headfirst into slavery, whereas.. I'm very critical of China but don't see the connection between their expanding industry and slavery. Businesses are diversifying their supply chain in the face of this pandemic.
Arrogance, this is one of the factors that killed US manufacturing.
Minimum wage workers do not think they are making too much money, also there are a lot more of them then you.
He didn’t do anything that actually slowed the loss of our manufacturing base while president.
Cutting funding to certain CDC programs may also have been detrimental.
https://fortune.com/2020/02/26/coronavirus-covid-19-cdc-budg...
This is what Australia did. Except that some of the measures they used may have been unconstitutional in the US, and Australia is an island. The US has 4500 miles of porous borders with other countries.
And covid spreads asymptomatically, so the only way to get to where Australia is now is to get the number of cases down to basically zero. Which you can't do if you get 40 more from Mexico every week.
Notice that Australia is basically the only country that has managed to succeed with this; western Europe is doing little better than the US.
> Cutting funding to certain CDC programs may also have been detrimental.
This is fake news. The budget cuts were proposed (as a starting point for budget negotiations with Congress) but never actually enacted:
https://www.factcheck.org/2020/03/democrats-misleading-coron...
> Disparaging mask use is also generally considered to be harmful.
For that you can thank CNN. They were writing a national story every time Trump would appear on camera without a mask, even if he was giving a speech to a camera with no audience or was in a room with entirely people being covid tested every day. This predictably led to Trump supporters defending him and it becoming a partisan issue.
It also didn't help that the CDC was disparaging mask use early on, ostensibly in order to preserve PPE for medical professionals, which gave everybody plenty of ammunition to fight about it once CNN had made it partisan for no good reason.
Trump's so-called China ban was a farce. It didn't stop USA residents from flying into the USA, it didn't even stop the immediate family of residents from flying to the USA.
Australia closed all travel from China initially and later from everywhere else in the world. There's plenty of room for criticism as they also stopped Australians from returning home, but the results are tough to argue with.
It may be inaccurate news, but calling it fake is needlessly hyperbolic. The contention isn't that overall funding was cut, it's that certain groups within the CDC saw significant cuts, and those cuts reduced readiness.
https://mobile.reuters.com/article/amp/idUSKBN21C3N5
Regardless of whether Trump's missteps were politicized, they were still missteps. Doubling down on something after someone calls you out doesn't make them responsible for your actions.
Contagions have exponential growth. 40 people coming from Mexico after you've lifted the lockdowns means you need to continue them to keep the 40 from turning into a thousand and then hundreds of thousands. Which means lockdowns of the severity Australia used are useless here because you can never get below the floor necessary to lift them again.
> The contention isn't that overall funding was cut, it's that certain groups within the CDC saw significant cuts, and those cuts reduced readiness.
The problem with this kind of claim is that it's always the case. Priorities shift, staff gets reassigned etc. Which means that of the 1000 different units, 700 of which grew and 300 of which shrank, you'll be able to find in the list that shrank something that sounds like it might have helped against a given problem. It's just cherry picking.
> Regardless of whether Trump's missteps were politicized, they were still missteps. Doubling down on something after someone calls you out doesn't make them responsible for your actions.
The point is that they weren't missteps. Calling out someone for not actually doing something wrong in order to stir up controversy and ratings and politicize a public health issue is contemptible. Defending yourself against a baseless personal attack is not.
The problem, which CNN should have been able to predict, is that if you politicize an issue, people take sides, even if there was never any reasoned disagreement to be had. But maybe they did predict it and did it anyway, so that when less savvy political opponents predictably started making less supportable claims, it would give the instigators something to shoot down and mount on their wall. Even if people died.
What a straw man. You realize there were photos of daily meetings with large groups, bill signings, news reports on how masks were barely worn in the white house. Yes he didn't wear masks as press conferences because they entire administration was lax about mask usage. And then for you to argue and only mention the press conferences is extremely disingenuous.
And that's separate from the Mexico argument. To me, it's incredible how little responsibility certain groups of people take for their own actions. A political party that has continuously downplayed the cheapest, low effort, low cost method of stopping the virus, instead again tries to blame Mexico instead of taking responsibility for their own actions.
You're missing my point. They would follow him around with a camera and any time they could show him without a mask there would be another story, regardless of the facts or the context. They would write the same story whether or not he was doing anything wrong in that instance.
That's a recipe for creating partisan conflict. They write the story when he's not doing anything wrong and then people correctly defend him. The existence of true instances are not a defense to reporting false ones. Because this is basic psychology; once people start defending something they keep doing it. So they created a large population of people willing to defend not wearing a mask. It was totally irresponsible.
It's the old saw about how the best way to discredit an idea is to defend it loudly with transparently erroneous arguments. That's what CNN were doing throughout.
> And that's separate from the Mexico argument. To me, it's incredible how little responsibility certain groups of people take for their own actions.
Please pay attention to context.
The argument I'm making is that the severe lockdowns as used in Australia could not have been as effective here because they only work if you can close your borders in practice, which Australia can do and the US can't. We're not even talking about "low effort, low cost" methods -- the argument is that higher cost efforts, of the sort that could actually get the number of cases to zero, couldn't have worked here. Even if the US put everyone in solitary confinement for a month, attempting to reopen the day after that would have still seen dozens of new cases.
That is a different argument to the one that more severe extended lockdowns would have saved lives. Which might very well be true (though against some grisly trade offs), but it's no support for claiming that it would have been better for US manufacturing in 2020, which is ridiculous.
Come on now. Say what you will about the effect of the tax changes on inequality, they're clearly designed to make it more attractive to do business in the US, e.g. lower corporate rates and allowing capital expenditures to be deducted immediately rather than amortized over a period of years. It's hard to argue that tariffs on goods from China don't make it less attractive to buy goods from China.
It's true that tariffs will make buying goods from China less appealing, but if you look at the outcome, it's not really a win. Consumers are paying more for the same goods, companies are scrambling to move their production to India and Malaysia, and there's not a significant increase in US manufacturing.
A properly executed initiative to increase US-based manufacturing would address all of the factors necessary to restart manufacturing:
- Not only tax cuts, but subsidies and investment aimed at increasing manufacturing in specific industries
- A concerted program to identify labor and skills shortages, and address them
- A program to identify the missing parts of manufacturing ecosystems and address them. One reason why electronics are made in China is not only cheap labor, but access to a whole ecosystem of suppliers and other manufacturers. Need one million PCBs assembled, plastic casings made, half a million cardboard boxes printed, instruction manuals printed and bound, well, there's a whole ecosystem of partners ready to get all of these things done with the capacity to have a relatively short turnaround time.
- A clear bipartisan commitment that this is something that won't get deprioritized or axed one or two administrations later, but something that is of national interest and that both parties agree to push forward
- A national focus on a key differentiator from other countries' manufacturing. China has cheap, Japan, Switzerland, and Germany have good, the US has big and sturdy maybe?
- Tariffs to protect newly formed manufacturing businesses, but only in conjunction with all of the above
This is what a solid plan for restarting US manufacturing would look like.
If you look at the actual outcome, it was that China devalued their currency or otherwise lowered prices to eat the tariffs, because their nightmare is manufacturing getting a foothold anywhere else, whether it's India or the US. Which is a win for the US because we have China paying us billions of dollars in tariffs without paying significantly higher prices for goods.
That doesn't help US manufacturing directly, but it gives the US a lot of leverage in trade negotiations because now China wants that situation to stop happening. And in the meantime the money can be used for tax cuts or subsidies to US businesses.
We could also just raise the tariffs more, for as long as China decides they want to keep paying them instead of letting them push manufacturing out of China.
> Not only tax cuts, but subsidies and investment aimed at increasing manufacturing in specific industries
Tax cuts and subsidies are equivalent. And it's not clear why targeting specific industries is useful rather than giving the same incentives across all industries.
> A concerted program to identify labor and skills shortages, and address them
Address them how? With more subsidies, which is really just equivalent to tax cuts again? This is the sort of thing markets are better at than governments.
> A program to identify the missing parts of manufacturing ecosystems and address them. One reason why electronics are made in China is not only cheap labor, but access to a whole ecosystem of suppliers and other manufacturers. Need one million PCBs assembled, plastic casings made, half a million cardboard boxes printed, instruction manuals printed and bound, well, there's a whole ecosystem of partners ready to get all of these things done with the capacity to have a relatively short turnaround time.
This is certainly a problem, but it seems to imply the opposite of your other proposed solutions. You would then not want to target specific segments but rather have broad incentives to engage in all different kinds of business activity, i.e. general tax cuts.
> A clear bipartisan commitment that this is something that won't get deprioritized or axed one or two administrations later, but something that is of national interest and that both parties agree to push forward
This seems like something you need Democrats to do rather than something you need Trump to do.
> A national focus on a key differentiator from other countries' manufacturing. China has cheap, Japan, Switzerland, and Germany have good, the US has big and sturdy maybe?
What does this even mean? Countries don't need to differentiate like this. How is it even differentiation when three of the four countries you listed are using the same one?
Can you tell my suppliers this so they stop passing on 50% of the cost of the tariffs onto me please? They don’t seem to have gotten your memo that the Chinese are paying the tariffs instead of the consumers.
I literally have “import tariffs” as a line item on all my invoices that relate to goods manufactured in China. Every single supplier appears to be colluding to increase their profits, if what you’re saying is true.
The alternative is that tariffs are actually driving up costs unnecessarily.
As an aside. Most US based businesses have already moved on. It seems that alot of European-run businesses are laggards
They're not. One can't cut taxes below zero, for starters. Some industries need more than just having negligible taxes to get started, especially in capital intensive businesses.
Furthermore, the idea that the only lever that the government has to induce people to do things is lowering taxes is completely absurd. Tax cuts didn't build the Hoover dam, the interstate highway system, nor send a man to the Moon.
The government can use targeted investments, messaging, procurement, tax cuts, and so on in order to move people towards certain outcomes.
The day that the US government announces that they'll buy 100 million masks a month for a strategic reserve or replace all of the mobile devices for all federal employees, as long as they're at at most a 50% premium over the cheapest option and are fully traceable from raw materials to finished product as being fully built in the US and allied countries, is the day that people will start investigating if it's possible to do so, and start trying to do so if it's possible.
> This seems like something you need Democrats to do rather than something you need Trump to do.
It takes two to tango. Many other countries are able to pass laws and make progress, even in complex multiparty negotiations during minority governments.
This already exists, it's called a refundable tax credit.
You might want to check with the IRS, since that's exactly what the EITC does. It's also the de facto result when a company takes a tax loss (e.g. from deducting more expenses than it had in revenue, common for startups) and can then sell the tax loss to another company to offset its tax burden.
> Tax cuts didn't build the Hoover dam, the interstate highway system, nor send a man to the Moon.
As opposed to Tesla's plant at Niagara Falls, or the various privately-owned rail networks in the world, or SpaceX?
> The day that the US government announces that they'll buy 100 million masks a month for a strategic reserve or replace all of the mobile devices for all federal employees, as long as they're at at most a 50% premium over the cheapest option and are fully traceable from raw materials to finished product as being fully built in the US and allied countries, is the day that people will start investigating if it's possible to do so, and start trying to do so if it's possible.
But that's actually more expensive, and less productive, than just making it more cost effective to manufacture things domestically than somewhere else, because domestic production has low taxes and efficient regulations and production in countries that engage in currency manipulation or have inadequate environmental protections are subject to tariffs.
> It takes two to tango.
That's the problem. It doesn't matter how willing one side is to negotiate if Democrats are too busy fabricating lies about Russia collusion to come to the table. Compromise requires both sides to be reasonable.
The EITC is for individuals that have low incomes, AFAIK. Can you elaborate on how the EITC would increase the amount of US manufacturing?
> It's also the de facto result when a company takes a tax loss (e.g. from deducting more expenses than it had in revenue, common for startups) and can then sell the tax loss to another company to offset its tax burden.
Can the tax loss be sold separate from the legal entity itself?
> As opposed to Tesla's plant at Niagara Falls, or the various privately-owned rail networks in the world, or SpaceX?
Are you saying that without the TCJA, none of these would have been built?
> But that's actually more expensive, and less productive, than just making it more cost effective to manufacture things domestically than somewhere else
Making it "more cost effective" through tax cuts helps existing businesses, not starting new ones.
If a business needs $10 million in capital to buy the machinery necessary to make widget X, and has to compete with an existing factory that produces equivalent widgets and has paid off their existing machinery, how can they compete? The existing business already has relationships with suppliers, customers, and distributors, and if the new entrant looks like it will be trouble, they can just cut their profit margin such that the new entrant will be struggling to cover the extra expenses associated with building all of those relationships while paying off the loans to acquire the machinery.
Heck, both of those businesses could reduce their profit margins to zero, with both having an effective tax rate of zero, and only the established one would be able to effectively compete due to lower costs.
> That's the problem. It doesn't matter how willing one side is to negotiate if Democrats are too busy fabricating lies about Russia collusion to come to the table.
Or one could say that the Republicans are unwilling to play ball as well (eg. over COVID-19 related stimulus). The fact is, whether one party is at fault over the other, Americans and US businesses are paying the cost of the lack of bipartisan initiatives to improve the state of US manufacturing.
The EITC is an example of a "tax cut" that allows for negative tax rates.
> Can the tax loss be sold separate from the legal entity itself?
Actually selling the tax loss is generally only done for defunct companies, since a company expecting a future profit would just keep it in their pocket to use themselves later. Although you could probably still do it if you wanted to by splitting the company in two and then selling the one that "owns" the tax loss or something similar.
> Are you saying that without the TCJA, none of these would have been built?
I'm saying that private entities can build things like that.
> If a business needs $10 million in capital to buy the machinery necessary to make widget X, and has to compete with an existing factory that produces equivalent widgets and has paid off their existing machinery, how can they compete?
The real issue is that if you add a factory, you could be in a situation of overcapacity, and then you're locked in price competition and selling at thin margins, which nobody likes.
The secret is this. Factories have a finite lifetime, e.g. 30 years. So you have an incumbent that has paid off their factory. It's 28 years old. You pay $10M to build a new factory, today. They're going to drive prices below your cost for two years, but then they're going to have to build a new factory themselves... and bow out, because the alternative would mean being locked in unprofitable price competition with you for another 28 years. So you win the market and can go back to charging profitable margins. You just have to time your entry right, i.e. finish your construction just before they start on theirs.
Assuming you're even two different companies. Otherwise you just build your company's new factory in the new place whenever the old one in the old place is ready to be mothballed.
> The existing business already has relationships with suppliers, customers, and distributors, and if the new entrant looks like it will be trouble, they can just cut their profit margin such that the new entrant will be struggling to cover the extra expenses associated with building all of those relationships while paying off the loans to acquire the machinery.
To some extent this is also just a war of attrition. If a new entrant causes oversupply for any reason then it persists until somebody goes out of business. This has more to do with who has more money they're willing to set fire to in order to capture a given amount of market share than who was in the market first.
One way to help your people win is to ensure cheap access to capital (i.e. low interest rates), but that's already there in the US.
> Or one could say that the Republicans are unwilling to play ball as well (eg. over COVID-19 related stimulus).
It was your impression that the Republicans were the ones holding this up? They had every political incentive to accept any reasonable bill before the election, and even now to do it before the inauguration in order to take credit for it.
> The fact is, whether one party is at fault over the other, Americans and US businesses are paying the cost of the lack of bipartisan initiatives to improve the state of US manufacturing.
On this we agree.
Disagree. I think this is small minded. So you add a tariff on chinese goods. If they are not the cheapest, then you buy from elsewhere... which still isn't the USA.
And then China does the same thing: retaliating with tariffs, and then buying goods from elsewhere, which isn't the USA either.
So in this game, tariffs probably hurt businesses in both countries.
And, anecdotally: I still buy products from china. More today than 4 years ago. The products for sale on Amazon are often just chinese imports that have been marked up or re-branded. I think it's the exception, rather than the rule, that tariffs did anything positive for someone.
But that's still good. It provides for supply chain diversity even if it isn't in the US. Now you can buy from China and Mexico instead of only China.
Then you get a functional supply chain operating in Mexico, which has geographical proximity to the US and has greater overlap in language and culture, and you're one step closer to manufacturing in Arizona and Texas.
> And then China does the same thing: retaliating with tariffs, and then buying goods from elsewhere, which isn't the USA either.
But the US has a 3:1 trade imbalance with China, so we can use a third of the money to cancel out their tariffs on our stuff. Or threaten to raise ours 33% if they don't stop.
The US has leverage here, but only if they use it.
> And, anecdotally: I still buy products from china.
Manufacturing left the US over the course of 50 years. It isn't going to all come back in less than 5 years. We're talking about long-term here.
To be fair, Trump has been saying that since the 80s... Of course that didn't stop him from manufacturing in china himself. The guy talks the talk but rarely walks the walk.
> He didn’t do anything that actually slowed the loss of our manufacturing base while president.
And that's why he lost. But boy did he make israel safe. How many arab states did he force into recognizing israel? 4 or 5?
Trump's achievements were making israel great again and forcing mexico to extend intellectual property rights by a few years so that he can selling his "Trump" name in mexico for a few more years? Not that things are going to get any better with biden.
But then again, it's naive to think the president hold any true power. The power are held by those behind the scenes. Politicians nowadays are entertainers to keep the populace distracted. Presidents come and go, but the powerful remain.
I guess we will know for sure - if they slow or reverse (especially in India) under Beijing Biden that will be confirmation Trump was successful at least at moving manufacturing away from China. It was a start. I don't expect it to continue with the establishment Democrats and Republicans back in charge. Yippie.
Increased production in India and Brazil don't do anything for the loss of U.S. manufacturing.
Pretty depressing.
"I sincerely believe with you, that banking establishments are more dangerous than standing armies; & that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale" - Thomas Jefferson
"I have two great enemies, the southern army in front of me and the financial institutions in the rear. Of the two, the one in the rear is the greatest enemy" - Abraham Lincoln
In reality they just want to help themselves in the easiest way they can.
And funny enough our gov't (I'll let you guess which political party) struck a deal with Foxconn to produce LCDs in Wisconsin. It has failed miserably: https://www.theverge.com/2020/4/12/21217060/foxconn-wisconsi...
At what point did I ever say Republicans were dumb for wanting it? I'm mocking the idea that Republicans actively denounced corporate welfare (saying it's a Democratic thing), yet just do it themselves (and then fail at actually make the change for that matter).
Take your triggered self over to Reddit.
I don’t think your comments have added anything of value to that discussion, just bringing politics in for the sake of mocking.
> the last LCD panel manufacturer in the US closed around then and we could no longer manufacture LCD for our military vehicles
Where did they say it was a good idea or a bad idea? Where did I say it was a bad idea? My reply was commenting specifically on the fact that the party he supports literally tried to manufacture the one item he was referring to and failed at it.
Maybe YOU'RE the one with little value added to this discussion other than getting triggered.
EDIT: Just to clarify - you seem to be only focusing on one part of my comment an interpreting exactly what you want to hear. Maybe take a step back and realize what's important to you.
The entire comment made the case. But if you want specifics, how about the sentences immediately prior to the one you pulled out of context: “I argued vociferously to a Dem friend in 2000 that our inability to manufacture critical components was going to kill us. Kind of literally:”
But yeah, I’m sure the problem here is that I’m “triggered.”
For the record - manufacturing output in the US is trending upward[0] (sans recession). Manufacturing employment is down, not because it's outsourced to China, but because its being automated.
[0] - https://fredblog.stlouisfed.org/2016/05/manufacturing-up-dow...
On the other end, how do you compete with slave labor in the Chinese factories?
https://www.washingtonpost.com/investigations/in-the-early-d...
> "In the end, the government did not take Bowen up on his offer. Even today[May 9, 2020], production lines that could be making more than 7 million masks a month sit dormant."
That article was published in May 9. Even on May 9, the production lines were dormant. How could this happen? It is unfathomable. The country probably had masks shortage since March. It is so hard to believe some of the things that happened this year.
There are plenty of countries with worse working conditions yet but people seem to stick with china.
Trading blocs that ensure minimum working conditions. Companies which pay the worker a decent wage should get favorable tax treatment and procurement.
So China will just ship the goods to another country and change the Made in label. Some middle man will make money and nothing will change.
As for mass produced surgical masks? Yeah we don't have the manufacturing base for that sort of thing anymore unfortunately.
And honestly, by about April this year when China started having the virus under control and reopened their manufacturing sector at full capacity, it’s a good thing they were equipped to manufacture so many essential items. The US started running into capacity problems with some of the industries we do have like meat processing plants, if we relied more heavily on domestic manufacturing we actually would have been worse off over that period.
I'm sure that after you adjust for cost of living, the numbers more or less look equal. However, keep in mind that manufacturing is leaving Shenzhen because of rising wages.
Sources:
Shenzhen Annual Salaries: http://www.sz.gov.cn/en_szgov/news/latest/content/post_78894...
US Annual Salaries: https://www.bls.gov/oes/current/oes519199.htm
Shenzhen Manufacturing (it's a news story, but you can find a ton of them with the same theme): https://www.scmp.com/economy/china-economy/article/3108207/c...
Have as your "goal" less the desire to "win" the global competition for corporate profits & corporate headquartering of multinationals in your nation simply on grounds of labor/profit competitiveness, and take a more nationalist view of, where necessary, having state run enterprises or "free market" competition within your borders but not complete free trade in a global sense.
In other words, do no necessarily pursue as your goal to structure economy either to have most profitable companies that reduce costs by moving labor around the world to find cheapest workers, or those which try to export the most. Have as your goal at least to produce domestically as much as possible to satisfy domestic consumption demands, as well as having some minimal threshold of employed domestic workers.
As it stands, US has a massive trade deficit, and a decades long decline in working age male population, especially in "flyover" US regions where manufacturing has declined the most while not being replaced by equivalent jobs. These regions also have declining population, rising suicide & opiate death rates, declining family formation / birthrates.
The "telos" of our society should not put as its "end" an economy, especially one which pursues profit above all.
The economy should be a tool in service to outcomes we actually desire.
Like software built to do a job, not simply designed for the production of specific features.
This is where global financial capitalism (as the US has a giant capital surplus which balances its trade deficit) needs to be called into question.
Internal free markets is one thing. But not having a national industrial policy which prioritizes the well being of domestic workers and their families over well being of multinational corporations and banks makes our system quite degenerate over time.
People should really take a few minutes and watch these 2 videos explaining the current account[0] and capital account[1] relationship, and understand that how we operate now is a political choice, which has massive consequences on who benefits of this system accrue to, and who pays the costs of this system.
This system is maintained by having the reserve currency and the state using strong efforts over many years to not only maintain this GRC but strengthen it, not allowing the natural devaluation of the $ that would close these 2 imbalances and more closely balance capital and labor.
Also, it is not a requirement to have a well developed economy and run massive trade deficits or not have a thriving industrial sector. Germany and Japan are 2 examples that do not run giant trade deficits like the US [3]
https://youtu.be/dirBYVjDk7A [0]
https://youtu.be/AimYG1jYD0A [1]
https://www.conradbastable.com/essays/the-germany-shock-the-... [3]
The blind pursuit of efficiency optimizes for the macro numbers at the expense of gutting the structure of the labor market and lived experience of people.
It’s far better to have a lower per capita GDP with a more equitable distribution of resources (such as a higher household income across quantiles)
It seems clear that some level of tariffs, caps on FDI, etc are “good inefficiencies” if done correctly.
In the countries with low GDPs and highly equitable distribution of resources -- North Korea, East Germany, Cuba, the Soviet Union, for example -- the border guards' job is to prevent people from escaping.
I wouldn’t say globalisation is dead more that it’s going to be more balanced going forward with local concerns.
There should be more machining and making in the US; everyone would like to have solid US-made hardware, but success in small-business machining and manufacturing, and scaling to large scale without off-shoring, requires a discipline and commitment to self-improvement that is difficult to cultivate.
[1] https://voxeu.org/article/industry-anatomy-transatlantic-pro...
Shifting manufacturing to China makes absolute sense when you look and care about the the quarterly/yearly performance. And if you decide not to do it well tough luck because your competitor is and will have better results than you.
If you look at it with a 20/30 years perspective then it becomes obvious that outsourcing is completely the wrong move. You basically get rid of your local expertise, train your replacements, slim down your middle class (the folks buying the products!). Then your manufacturing partner starts vertically integrating and designing it's own competing products and you are pretty much left out of the equation. It's almost as if, thanks to support from the party, Chinese businesses can plan for 20 years ahead but western companies can't because they HAVE to maximize the quarterly results!
> I argued that, even in the presence of free trade, a country should have the ability to tariff imports to the extent that that country could maintain a 25% (or something) domestic market share.
Tariffs and trade wars seem completely useless to me when done between G7 countries because we're all in the same situation regarding China. To achieve any sort of paradigm shift we'd need to stop each having a 1:1 relationship with China and start negotiating as a block.
Think of the supply chain of something immensely complex like the Boeing 787, which has, quite literally, millions of parts (including LCD screens). Many if not most of those parts are imported. If there are tariffs on imports, either:
1. Boeing will pay tariffs, increasing the cost of each plane. Great for Airbus, bad for Boeing.
2. The parts are sourced locally instead. These parts will invariably be more expensive, as if there were cheaper local options, they would have been sourced locally before. Again, Boeing planes get more expensive, great for airbus, bad for Boeing.
3. Boeing, to avoid raising prices and giving market share to airbus, decides to move manufacturing outside the US.
What applies here for Boeing, is also going to apply to Tesla, Caterpillar, and hundreds of other companies. Tariffs create incentives to source locally, but they simultaneously create incentives to manufacture abroad. It is a very thin tightrope to walk and I haven't seen any evidence that Washington can.
On the topic of national security: “When goods don’t cross borders, soldiers will.”
I'm far less concerned about a war breaking out between two countries with healthy trade relations and cultural exchange. Do we want China to be our enemy? Why?
It has enough military for safely making this again and again for tens of years at least.
PPE shortages in hospitals were because of unprecedented demand levels, not because China didn't continue to export it. A country is actually a lot more likely to have problems handling that kind of short term demand shock if it relies entirely on domestic manufacturing
If not - the politics is involved in selling decision making - then the US starts a sanctions war, as China example shows. It sells in the end, but after being economically punished.
1) USD reserves allow us to import more value than we export so it offers a better standard of life for the consumer than otherwise.
2) It allows us to have a bigger consumer market than we would otherwise have and incentive for countries to partner with us to sell their stuff to. If you've lived outside the US you know every business wants to sell their stuff here either as #1 or just after their home market.
Under those purposes it seems to have worked very well. Of course theres the risks of crashes along with it too.
1. Regulations. Both the OSHA and EPA had a measurable negative impact on manufacturing productivity growth. [1] I suspect the most harmful regulations are those that constrain contract freedom by requiring employers to give unions a negotiating monopoly, aka collective bargaining, over any work unit where they emerge. This would devastate any of the bright spots in American industry today, whether it's Tesla, or Amazon, or Google. The threat of unionization also discourages these firms from expanding into areas that require employing high concentrations of less-skilled workers in immobile capital intensive projects, as these are the most susceptible to unionization.
2. The massive rise in social welfare spending [2], diverting capital from productive uses to unproductive ones.
[1] https://www.jstor.org/stable/1810223?seq=1
[2] https://fivethirtyeight.com/features/what-is-driving-growth-...
Why not just a direct subsidy to US manufacturing under the usual tax code?
I mean, I guess the point remains valid in that everyone can see that a lot of manufacturing has left the US in the past, I dunno, fifty years. But if you don't even know whether the anecdote you mention is true, why bring it up? Why comment at all?
In which sense?
To me, this is the money shot. I hadn't seen this expressed before and it makes perfect sense. I'm baffled that we (the US) caused this to happen to the US. I'm (unhappily) registered Republican but I argued vociferously to a Dem friend in 2000 that our inability to manufacture critical components was going to kill us. Kind of literally: AFAIK, the last LCD panel manufacturer in the US closed around then and we could no longer manufacture LCD for our military vehicles... (Even if this anecdote is untrue, the point remains valid...) I argued that, even in the presence of free trade, a country should have the ability to tariff imports to the extent that that country could maintain a 25% (or something) domestic market share.