Business and Industry

Biden's Manufacturing Plan Is $700 Billion Worth of Protectionism

Never let a good manufactured crisis go to waste

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A seemingly effective way for politicians to justify our need for their services is to fabricate or exaggerate a problem, promise to fix said problem with a new program or lots of spending, and then claim victory in the form of public acclaim and reelection.

A good example of this behavior is President Joe Biden's Build Back Better plan, which reflects a tweet by then-candidate Biden that he does "not buy for one second that the vitality of American manufacturing is a thing of the past."

His plan asks for $400 billion to purchase American-made equipment, along with $300 billion in government spending on research and development. Hundreds of billions of dollars' worth of additional subsidies will be used to encourage the production and sale of other domestically manufactured products.

Yet this money won't be spread thinly and equitably across all sectors. It will be focused on preferential, politically sexy, and privileged sectors such as electric vehicles and wind turbines.

If this sounds like a good old industrial policy, that's because it is. This idea isn't new; it has been on every left-wing politician's platform for decades. What is actually a bit unique is that support for industrial policy is also coming from many conservatives this time around. They may not care so much about building green cars, but they share in the goal of reviving American manufacturing by constraining globalization and subsidizing favored industries.

Here's the rub: American manufacturing is generally healthy, especially prior to the trade wars and the pandemic. A data- and chart-rich new paper by the Cato Institute's Scott Lincicome about a "Manufactured Crisis: 'Deindustrialization,' Free Markets, and National Security" documents American manufacturing's excellent health. It disproves the alleged justification for industrial policy and debunks all the national security arguments trotted out to justify protectionism. And Lincicome's analysis and data also apply nicely to Biden's case for industrial policy.

The claim that we need a national industrial policy because U.S. manufacturing is in decline is usually based on two trends: the fall in both U.S. manufacturing employment and the sector's declining share of total U.S. economic output (measured by gross domestic product). Each of these trends, however, started decades ago. And neither tells you anything about the productive capacity of the nation overall or the vitality of the industries being targeted by the industrial policy.

As Lincicome shows, the reduction in manufacturing employment is occurring in every industrialized nation, including those countries with economies more centered on manufacturing than the United States. It's also occurring in nations with longstanding trade surpluses in goods, and even in those countries that already have aggressive industrial policies. The real reason for a decline in manufacturing employment is mostly due to labor-saving technologies that raise worker productivity. In fact, anyone who wants to understand this reality ought to visit contemporary steel mills. They look nothing like mills of the past, as they're automated, clean and employ highly skilled and well-paid workers.

The decrease in the share of GDP generated by manufacturing is mostly the result of the fact that our modern economies are increasingly service economies. That's consumers' choice. This trend, too, exists in all developed countries. Lincicome also demonstrates that when compared to other countries' sectors (and contrary to pro-industrial policy advocates), U.S. manufacturing continues to be at or near the top of most categories, including output, exports and investment. Industrial capacity is also growing, and industry-specific data show strengths where it counts (durable, high-value-added goods).

I can only scratch the surface of all the data presented in Lincicome's excellent paper. The bottom line is this: If you're anxious about U.S. manufacturing and wondering whether its health or perceived decline justifies industrial policy, you must read Lincicome's work. Even the U.S. semiconductor industry, which is often used as an excuse for subsidies and protectionism, "is profitable and expanding—in many ways still globally dominant—and is investing billions of its own dollars to stay that way," as Lincicome explains. The same is true for pharmaceutical and nonpharmaceutical medical goods, along with many other industries commonly targeted for support.

Winston Churchill once said, "Never let a good crisis go to waste," to emphasize that a crisis gives leaders an opportunity to do the things they couldn't get away with doing before. As it turns out, manufactured crises can do the same for eager legislators.

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  1. “What is actually a bit unique is that support for industrial policy is also coming from many conservatives this time around. ” Has this writer been living in a cave?

    1. It’s always 1992 here at Reason.

    2. What’s unique is that conservatives are supporting Democrat-led industrial policy.

      1. And democrats are supporting Cold War era CCCP led industrial policy.

  2. A good example of this behavior is President Joe Biden’s Build Back Better plan

    As opposed to his Buy Black Beans plan, his Bring Back Barbarians plan, and his much lauded Big Black Butts plan, aimed to combat diabetes in the Afro-Hungarian communities.

    1. Supported by the Better Business Bureau.

  3. All this money flying around, and he still hasn’t sent me the $1,400.00 check for my vote.

    1. No but he did convince you it’s $1,400 and not $2,000.

      1. The sent us 600 as an advance before Trump left office

    2. Preach it!

      Trump sent me TWO welfare checks that I didn’t even ask for. Obama and Biden ain’t sent anyone shit.

      1. Oops, that was Pelosi. My Bad.

      2. Life for Americans would be so much better if democrats were mostly in landfills.

  4. MY SHOCKED FACE IS SHOCKED!!!

  5. Nonsense – the Chinese are on the verge of eating our lunch on the manufacture of trains and windmills and high-performance tennis shoes and we’re just expected to sit here and do nothing about it?

    1. Who cares about Chinese eating our lunch shit? Duchess Megan is going to give birth to another royal twit – that was worth five minutes on the “Today” show this week.

    2. No! We’re supposed to let morons like Trump and Biden do something about it!

  6. Union welfare.

  7. I want my fucking money.

    1. ^Prostitute

      1. Aren’t we all?

  8. Biden and RINO’S use Gov-Guns to threaten the working people of the USA into *FORCING* them to pay $4,666/ea for green-energy manufacturing (i.e. the equivalent of counting jelly beans; because the value of it can’t support itself)..

    Taking MORE of the working peoples labor (i.e. MORE SLAVERY) in this country will expand manufacturing explains the slavers.

    It’s DUE time to start saying things exactly as they ARE…

    1. … Where does the U.S. Constitution give the ‘federal’ the authority to Steal your Money for their Revolutionary Nazi (syn; National Socialist) “PLANS”tation again?

  9. I always imagine my friend Bob as speaking in a phony Russian accent because he sounds like an American commissar decrying the loss of heavy manufacturing and construction in the USA.

  10. Here’s the rub: American manufacturing is generally healthy, especially prior to the trade wars and the pandemic. A data- and chart-rich new paper by the Cato Institute’s Scott Lincicome about a “Manufactured Crisis: ‘Deindustrialization,’ Free Markets, and National Security” documents American manufacturing’s excellent health. It disproves the alleged justification for industrial policy and debunks all the national security arguments trotted out to justify protectionism. And Lincicome’s analysis and data also apply nicely to Biden’s case for industrial policy.

    The claim that we need a national industrial policy because U.S. manufacturing is in decline is usually based on two trends: the fall in both U.S. manufacturing employment and the sector’s declining share of total U.S. economic output (measured by gross domestic product). Each of these trends, however, started decades ago. And neither tells you anything about the productive capacity of the nation overall or the vitality of the industries being targeted by the industrial policy.

    This is a very complicated post which and as such, I’m not sure I can address it in a comment, but I’ll try.

    I just read over the main points in the CATO paper directly. I have no dispute with its numbers. I have no dispute about the fact that despite America’s decline in manufacturing employment that our economy continues to grow and output remains high.

    But all of that fails to address a deeper underlying point.

    Now, to be sure, I am incredibly skeptical of any national politician who attempts to “create jobs” through a complex policy that will be all but guaranteed to be rife with corruption, graft and in the end, be completely ineffective.

    So I’d like to simply focus on the numbers.

    I work for an American Manufacturing company. I’m a network engineer. I also know how to code. I am in the high skill tech sector. Am considered part of the manufacturing employee? I can never seem to suss that out in any of these studies.

    Next, the CATO paper points out that all industrialized countries show a steep decline in manufacturing jobs as their economies become more advanced– and these trends began decades ago. No one disputes that. However, one should not ignore the fact that ALL of these advanced countries are arguably seeing a trend where the lower end of the employment band: non-technical, lower skilled people who nominally work with their hands are being sidelined.

    Let me give you an analogy around the numbers of the CATO paper.

    The year, 2900. The United States is a hyper-advanced economy with a population of 600,000,000 people. Population growth has slowed due to declining birthrates. Most population increase has been due to immigration of high skilled workers. The economy consists almost entirely of very high skilled technical jobs in areas such as AI development deployed in advanced robotics and nanotechnology, jobs international trade, finance and law or political positions.

    The air is clean, the water is clean as most heavy manufacturing is done on a Martian colony by advanced robots, moving goods and supplies between earth and mars by an AI-driven network of automated space cargo flights.

    The GDP of the United States remains not only incredibly high, but continues to grow at a dizzying pace, despite an unemployment rate of 65%. Those that are unemployed enjoy generous welfare benefits and free healthcare.

    What might that 65% of the population live like? What might be their level of life satisfaction?

    1. The 65% won’t be “unemployed” as such, they’ll just have jobs in the booming interpretive dance sector of the economy.

    2. B.S. Your assumptions are unfounded in yesterday, more-so today, and will be even more-so tomorrow.

      In your ‘hyper-advanced’ economy everyone would work 4-hrs a day and be able to live comfortably. That doesn’t require a 65% unemployment rate.

      Yet today we have both parents working two jobs each and barely putting food on the table because 90% of their labor goes to Power-Mad Gov-Gods pointing their guns at working people while burning your labor *earnings* in the fire-pit of a waste swamp.

    3. High quality post, Paul.
      Thanks

      1. Full of typos because I was on the phone when I wrote it.

        It requires a much deeper dive. Too much for a comment.

    4. I work for an American Manufacturing company. I’m a network engineer. I also know how to code. I am in the high skill tech sector. Am considered part of the manufacturing employee? I can never seem to suss that out in any of these studies.

      I forgot to add the most important part here, I work for an American Manufacturing company that does its manufacturing in China.

      1. …..because; China doesn’t have a $15USD minimum wage? 🙂

      2. China owns a minimum of 54% of chrysler…
        How does that figger?

    5. Worker bee laborers are not assets that increase in value. Capital can move around the world and is worth more especially with interest rates so low.
      Billionaires are selling to 8 billion people in a global economy -sell to the masses, sit with the classes. Worker bees sell labor to some some business or even a larger corporation that can move somewhere else. The bees are not worth a lot.
      A failure of education magnifies any disparity problems.

    6. What might that 65% of the population live like? What might be their level of life satisfaction?

      Today we take things for granted that were science fiction when I was a kid. At the turn of the twentieth century people thought they’d figured it all out and there would be no more scientific advancement.

      Hundreds of years from now people will be taking things for granted that we can’t even imagine, and they’ll be bitching about it just like people bitch about smart phones today. There will be inequality and people will be bitching about that too.

      Life satisfaction is always comparative. So I imagine it won’t be much different than today. Just more technological.

      1. With Democrats in charge; I won’t be surprised if everyone is riding horses and sitting around camp fires while their ‘green energy’ solar panel charges there propaganda AM radio’s.

        Democrats; Oil is evil, We own media, Obama killed the local TV, The ‘green energy’ will never supply heat or transportation so stop using them. etc, etc, etc….

        AND the worse part; The [WE] mob using the threat of Gov-Guns to FORCE their delusional ideas on ALL people because all ‘science’, ‘society’, and ‘progress’ must be FORCED not evaluated.

  11. I was wondering where the sun would rise this morning.

  12. “If this sounds like a good old industrial policy, that’s because it is. This idea isn’t new; it has been on every left-wing politician’s platform for decades. What is actually a bit unique is that support for industrial policy is also coming from many conservatives this time around.”

    Those are not conservatives. Those are Trumpocrats. Reviving and surrendering to, while hiding the betrayal and cowardice of so doing with name calling, every bad old East Coast Democrat and Dixiecrat idea was always the worst curse of this “Republican” Workers’ Party. Now that both big parties are nothing but Democrats and Dixiecrats, even though some are wearing Republican drag, damned few remain with any power to resist the coming Five Year Plans.

  13. Politicians and their media cocksuckers seem to be the only ones stupid enough to believe that manufacturing jobs will return to what they were before the 1970s or 80s. The people they think they are helping know that they their future is a nursing home assistant, dog walker, beauty technician. The dems promise to give them jobs as what, coders? Sorry, but coders are a dime a dozen in India, so nobody is going to pay $30 an hour for a 50 year old laid off autoworker to write code. Electric cars require far fewer parts (made in China) and maintenance than gas cars, so forget about that too.

    1. Sorry, but coders are a dime a dozen in India…

      And you get what you pay for.

      1. For most purposes, their coding is adequate, for more sophisticated coding, they would hire someone right out of college who knows the stuff but they don’t have to pay much. The ones who will be getting the jobs will be administrators to oversee the jobs program and community college instructors to teach supposedly marketable skills.

  14. I am shocked that Biden is doing the things Biden said he would do if he was elected.

    Shocked.

    He may be the first honest President we’ve had.

  15. But is it a 5 year plan?

  16. Too bad all you Reason jerks care about is mean tweets.

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