Manufacturing Is Key to Economic Recovery: Opinion
NEW YORK (TheStreet) -- Barack Obama and his Republican challengers don't agree about much, but they do agree that the U.S. economy can't be turned around -- and middle class prosperity saved -- without a strong contribution from manufacturing.
Since 2000, the economy has grown only 1.6% annually, not its 3% potential, as defined by productivity and population growth. It has not created a single additional private sector job. But for the alarming increase in prime-working-age adults choosing not to look for work, unemployment would be close to 13%.
Economists agree weak demand for U.S.-made products are the cause. Dependence on foreign oil and manufacturing are at the center of the challenge.
The trade deficit is about $600 billion or 3.8% of GDP. Each dollar that goes abroad to pay for imports but does not return to purchase U.S. exports is lost demand and lost jobs. Eliminate the trade deficit, GDP would increase $1 trillion, and 10 million new jobs would be created.
Currently, oil accounts for 44% of the trade deficit, and manufactures from China, Germany and Japan the rest.
Oil imports are about 8 million barrels a day and gasoline consumption is about the same. Increased domestic production from the Gulf, Alaska and other offshore deposits could cut imports in half, and genuinely exploiting fuel efficiency opportunities and better use of natural gas for transportation in cities and heating could do much of the rest.
Manufacturing has been the bright star of the recent economic recovery, recouping 470 thousand of the 5.3 million jobs lost since 2000, but it could do a lot better. Yet, so many bogus arguments are offered as to why it shouldn't.
Improvements in productivity have certainly cut manufacturing employment in Europe, the United States and China, but improvements in productivity occur in all sectors, every year -- those are the very essence of progress.