Bring manufacturing home

During the U.S. Presidential primary campaign, John McCain famously told a group of workers in Michigan that the jobs that they lost were not coming back, but that they could be retrained for other jobs: "I've got to give you some straight talk: Some of the jobs that have left the state of Michigan are not coming back," he said. "They are not. And I am sorry to tell you that." What McCain didn't address was what jobs they could be retrained for. Most of the productivity gains registered in the U.S. for the past ten years have come from international outsourcing, not new technology or better-trained workers. In return, real personal income has been dropping since 2003.

We're not going to get the economy back on track until we dramatically increase the amount of manufacturing done in the U.S. The fundamental logic of moving production to China and other countries was that you could get something for nothing, but as always, you get what you pay for. Outsourcing services to India has backfired on companies such as Dell, which has had to introduce a U.S.-based service option in order to keep customers happy. (Dell learned that customers would pay more for good service--who would have thought?) There's just so many corners that you can cut before you've cut one too many--witness the melamine poisoning that first claimed the lives of pets in the U.S., and is now claiming the lives of infants in China. Over time, always aiming for the lowest possible price will result in disaster.

There's talk of a second stimulus package. It needs to have serious measures to encourage manufacturers and service companies to bring jobs back to the U.S. And, lowering the capital gains tax isn't going to do it. It requires a combination of carrots (tax incentives on a per-U.S. based-employee basis) and sticks (duties on goods and services purchased from outside the U.S.) to provide companies with the encouragement to build here rather than buy from there. These incentives and penalties have to be long-term, in order to encourage the capital investments necessary to rebuild the country's manufacturing infrastructure.

I'm as much a believer in free trade as anyone, but the "hollowing out" of the American economy can't continue if we're to maintain a decent standard of living. We can't rely on some future technology or market to come along and bail us out. The question remains: What do we retrain our workers for if there's nothing for them to do?