Just a theory

Just a theory

Everything is theoretical to the policymakers and elected officials who see the ongoing recession as a giant puzzle for them to solve, according to the insights of their philosophies and the demands of their favorite constituents.

REB
Robert Brooks
Editor

For those keeping track, it has been 22 months since the global economy collapsed, and 18 months since the American Recovery and Reinvestment Act of 2009 (“the stimulus bill”) was implemented. If that suggests to you that it’s time for another stimulus then you’ve learned over the past two years to evaluate everything in political terms. Determining the appropriateness or effectiveness of stimulus spending or any of the remedies being applied to the U.S. economy is subordinated to the rhetorical advantage it provides to office holders.

For me, the frustration is not that there is such a blatant political dimension to addressing these truly critical matters. It is the broad assumption that economic growth, when it comes, will be the product of some federal action. Organic growth, a recovery that results from creative business efforts and authentic consumer demand gets no consideration.

But, according to several reliable reports another stimulus effort is coming soon. This time, rather than channeling dollars to backlogged construction projects — which was the general understanding of the $800-billion, 2009 stimulus — the strategy will be to promote domestic manufacturing by raising taxes on multinational corporations with overseas production centers. There still will be targeted support for favored industrial efforts like “clean energy” projects, expanded broadband service, and roads-and-bridges projects, but the new emphasis will be on using federal regulations to define and enhance the “Made in America” brand.

Most important to the proponents of this new stimulus is that they believe they can create the conditions that will persuade manufacturers to site their plants in the U.S., rather than in lower-cost labor markets offshore.

Last year’s stimulus fell far short of its promises, but one aspect of it that seems to have worked was to stabilize large manufacturers who produce capital equipment. Some these companies have metalcasting operations, or rely on foundries and diecasters for critical components — so that much progress is worth noting.

However, smaller metalcasters, or those producing castings for other applications, are still waiting for some growth indicators. Companies of all sizes and types are waiting for indications of economic stability, too: they want banks to lend again and customers to book orders again, and they want to gain some confidence that these things will continue for several quarters. If what manufacturers want is confidence in the economy, they won’t be encouraged by the prospect of a new set of federal eyes watching how (and where) they produce their goods.

All of this federal maneuvering is part of the elected officials’ determination to fulfill the unreasonable expectation that many manufacturers and all labor groups have about global competition: they want the U.S. to continue being a major exporter of high-value goods, but they blink at the notion that any foreign producer would challenge their domestic market positions.

The manufacturers and labor groups can be excused: they’re only defending the turf they know. But, devising and promoting federal policies that will punish some manufacturers may just as likely drive more operations offshore to avoid the penalty. Any such loss of business would mean a loss of jobs, as well as lost opportunities for those manufacturers’ domestic suppliers.

In a global market, goods and opportunities flow through and around borders. A better strategy would be to encourage all types of manufacturers, regardless of their headquarters locations, but that would dictate a smaller regulatory role — and that’s not in the plan.

The Obama Administration’s State-of-the-Union goal to double U.S. exports over five years raises hopes of manufacturers and workers, but it has been a promise without much definition. And, it introduced more questions: how can the U.S. currency remain at a rate of exchange that’s low enough to promote exports without punishing domestic consumers? Or, how can we avoid a price-cutting competition with other large industrial nations, like China, without adopting tariffs that will impede export efforts?

But this is all theoretical, and that’s why it’s so frustrating. Everything is theoretical to the policymakers and elected officials who see the ongoing recession as a giant puzzle for them to solve, according to the insights of their philosophies and the demands of their favorite constituents.

On the other hand, for millions of individuals and thousands of companies still saving their resources and reserving their ideas as they wait for a glimmer of confidence, it’s all very discouraging – and very real.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish