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Obama’s Plan Must Be Designed To Keep Jobs at Home

Published 12/02/08 Craig Harrington - Print Article
E-mail - editor@economyincisis.org

President-elect Barack Obama has promised major action to stimulate jobs, spur economic growth and correct a generally battered system. The only way to achieve these goals is to ensure that government spending under his direction stays at home and does not flow overseas.

The new administration has promised to create 2.5 million jobs and slow the endemic outsourcing that has been so destructive to our economy. Obama has backed a second, larger, economic stimulus package in hopes of propping up consumers. The proposed stimulus package encourages spending on major infrastructure projects, health-care modernization and green technology to create manufacturing and service jobs.

However, there is a major remaining problem. The United States is unproductive and lacks the capacity to manufacture many of the components necessary for the new wave of building proposed in the stimulus package. According to the Depression-era “Buy American Act,” federally funded projects must contain a certain proportion of American made components (later laws and alterations have changed the exact ratio).

Unfortunately, when it comes to wind and solar power generation, the companies at the forefront of production are largely located overseas (specifically in Germany). Any energy initiatives will require the creation of a brand-new American manufacturing base.

The Obama administration will face major political pressure to guarantee that healthcare and energy projects create service and manufacturing jobs in the U.S. However, the U.S. has been outsourcing these jobs for over a decade and is currently in no position to jump back into the service and manufacturing sector at its previous level.

Another component of the Obama plan is a stimulus package directed at American taxpayers similar to the Economic Stimulus Act of 2008. This package will be bigger and is hoped to actually yield results – as opposed to the last $100 billion that yielded nothing more than a blip on the economic radar.

The problem with this plan – and with the previous stimulus – is that it carries no enforcement to keep spending in the United States. With gas, food and commodity prices at an all time high last spring and summer, the first stimulus package was largely sucked up by these items. A significant chunk of the $100 billion package went directly overseas and did nothing to help Americans. Will the same be true of a second effort?

While it is crucial to reclaim our manufacturing base if we ever hope to regain our former strength, we are shooting ourselves in the foot by remaining in “free trade” agreements like the North American Free Trade Agreement and the World Trade Organization. Until we get out of these agreements, the stimulus package may only serve as Band-Aid that will be ripped off as soon as the funding dries up and cheaper foreign wages drive our manufacturing back out of the country.

Source BusinessWeek:

But a giant issue lurks: How much of Obama's mammoth fiscal stimulus will "leak" abroad, creating jobs in China, Germany, or Mexico rather than the U.S? This is a question with big economic and political implications—and no easy answers.

…

One problem is that over the past 25 years the U.S. has become the "consumer of last resort" for the world economy. Imports have risen from the equivalent of 9% of gross domestic product to almost 19%. Even more astonishing, the value of imported goods now is equal to almost 40% of the output of U.S. manufacturing. For some types of consumer goods, such as clothing and consumer electronics, it's increasingly difficult to find items that were not made abroad. As a result, fiscal stimulus that boosts consumer spending in the U.S. may be diffused through the global economy, reducing its impact on jobs here.

Front Page Photo by evolvingexcellence- Google Images © Some rights reserved

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Article Comments From Readers

guest says "re: why expect change?" on 12/02/08
Why would anyone believe that the new administration would make sure any investment or stimulus money would be used for the benefit of the U.S. or U.S. workers? It has become clear that Obama intends to staff his administration with the old familiar "meet the new boss same as the old boss" corrupt corporate shills who enthusiastically promoted (and will continue to enthusiastically promote) the same disastrous "free" trade, offshoring, and insourcing policies that are wrecking the country and destroying jobs for Americans right now. Layoffs continue and unemployment is rising, yet these great patriots have made opening wide the visa flood gates a top priority. Wall Street continues to offshore jobs and replace Americans, even as it loots billions from American taxpayers. That's not going to change. And *of course* the proposed "mammoth fiscal stimulus" will be used for investment in China, Mexico, Brazil, and not here - since when does Washington not deliver handsomely on corporate investment in lobbyists? Obama isn't going to bite the hands that put him into office, any more than George Bush would. And those hands like NAFTA, the WTO, and wiping out our manufacturing base just fine.

guest says "Great News!" on 12/02/08
In reality, this is great news. If we spend money just to spend money, nothing gets done. However, if we spend money to create jobs, that creates taxes. I can't say that I don't care how much money it takes to restart US manufacturing, because there must be reasonable limits to everything. Provided these funds are paid back and not wasted, like the money dumped into Iraq. This could be great for our economy. There are some key points I think need to happen to make this work.

1. Focus on results. We need to pull the plug on this if money is just getting funneled over seas. We should also pull the plug if funds just into US corporate pockets with no tangible results. Results in this case would mean jobs and exports.

2. Regulate or eliminate unions. They have done enough to hurt us. If the government needs to step in and make these unions government run, rather than mob run, so be it. People should not be forced to join unions or forced to strike. They could wear a hat that lets people know they are unhappy. Striking hurts the whole country these days.

3. Get out of free trade deals that got us in this mess in the first place. We need tariffs to protect our now fledgling manufacturing industries. (Sad to think, we use to be a superpower-manufacturing country!) Without tariffs, once the government aid is gone, so will the jobs.

4. Stop both insourcing and outsourcing. Replace insourced job with US manufacturing plants. Let these other countries make their own goods and pay tariffs to ship them to us. We need jobs, but not ones that rip off our citizens, our states and our companies.

If we can do these four things, I think Obama's plan will work. Without them, there is not point to even try as all efforts will be doomed to failure. We need to voice our concerns to our leaders to insure we are not just digging our grave that much deaper.