The single item most responsible for the decline in manufacturing has been the Republican tax cuts
Lifted from comments, Spencer England says:
What Reagan managed to accomplish was to turn the US from the worlds largest creditor nation into the worlds largest debtor nation.
Why don’t people see that the expanded deficit will reduce savings and expand the savings-investment gap which is equal to the current account deficit? So crowding-out works much more through the dollar than through interest rates. The single item most responsible for the decline in manufacturing has been the Republican tax cuts.
When you say manufacturing I assume you are talking about manufacturing employment, as actual manufacturing output continues to grow.
ANd while that gragh is about total number of employees, the % of manufacturing workers has declined steadily since the early 50s.
So how does this thought deal with those facts?
the first time i read this i didn’t understand it:
Why don’t people see that the expanded deficit will reduce savings and expand the savings-investment gap which is equal to the current account deficit? So crowding-out works much more through the dollar than through interest rates.
i still dont see the mechanism for that consequence, so i guess i’m one of the people Spencer is calling out…
“The single item most responsible for the decline in manufacturing has been the Republican tax cuts”.
Assuming you mean employment in mfg’ing..
Wish it were so but that’s’ a pure simplistic cop-out.
The single most responsible cause is free flow of capital.
When you couple this with the fact that most of the globe’s labor supplies are available at ultra low wage, and U.S. tax policy not collecting taxes on foreign earned income as it occurs then why employ domestic labor in mfg’ing if it’s not economically producing more roi than not using domestic labor or automating at lower costs (which is technology driven, independent to politics and tax policy)?
Referring to my prior comment, a simple case in point .. before Reagan!
The U.S. steel industry was outcompeted by the 1970’s after WWII by the reconstruction of Steel mfg’ing in Europe and Japan using more modern processes and new factory’s.
The cost in capital to replace the no longer competitive pre-WW II steel mfg’ing n the US far exceeded the costs of simply importing the lower cost higher quality Steel from Japan and Europe’s newer methods and using that capital for other pursuits which would bring higher roi on capital investment.
This had nothing to do with domestic politics and solely to do with capital flow — investing in new modern foundries where the old one’s had been destroyed in Europe and Japan then importing lower cost steel was greater roi with lower capital costs.
You can say this was an outgrowth of the U.S. war effort in producing Steel during the war for war materials… lots of it was needed very fast… cost wasn’t the problem in that pursuit so capital was used to build foundries and expand existing ones as fast as possible…. part of incurring more national debt for the war effort.
After the war, Japan and Europe rebuilt their industries with an eye to the U.S. consumption markets … hence competition drove import prices down and forced the U.S. domestic industries to either offshore, eliminate U.S union leverage or automate. Pretty simple economics.
Union leverage was reduced as the options to automate or offshore to lower costs labor became available.
When new more productive mining equipment became available the United Mine Workers fought it tooth and nail, but lost simply because they could retain half the jobs by accepting it, or lose 3/4’s of the jobs and lower wages for the remainder by owners shutting down U.S. mines and importing instead…. that same more productive equipment was being used with low cost plentiful supply of labor abroad already.
As foreign competition (capital investments) increased, the U.S. industry increasingly had to either compete by domestic automation or investing in offshore automation and importing.. US. labor unions were increasingly subject to either competing with capital investment in automation (foreign or domestic) and lower costs of foreign labor.
GOP tax cuts my ass.
Ah, the schadenfreude of seeing those who support them get their just desserts. More please.
Does anyone still believe in crowding out? I thought that whole idea vanished with the confidence fairy.
I think the tax cuts, Ronald Reagan and his ilk have been terrible for anyone who has to work for a living, but manufacturing has been going through its own cycle of increasing efficiency independent of it.
Spencer is a pretty credible source. Having done tons of work in throughput, process improvements, brownfield analysis, and systems; I tend to agree increased efficiency or Overhead cost avoidance by moving has played a huge role in defeating manufacturing Labor requirements in the US. However Spencer’s point still has validity.
Some people’s minds have not evolved since the authors of The Book of Genesis. These people today blame EVERYTHING on Reagan.
Jay, not me (I don’t blame it on Reagan).
I blame it on the fictitious imagined god that humans made up in the book of Genesis… which not parenthetically was largely lifted from the first monotheism, long before and a much larger one in fact long before the ancient Jews made up more stories.