It’s the Economy, Stupid! 

Wow — what a week it was. It started on Monday, Labor Day, with a visit by President Obama to speak in front of a raucous audience including the AFL-CIO in a parking lot just outside the General Motors Renaissance Center in downtown Detroit, Michigan.

The topic ... jobs!

Wednesday night found eight hopeful Republicans at the Ronald Reagan Presidential Library in Simi Valley, California, for their third Primary debate. The event got off to a fast and furious start when they started discussing...

You guessed it ... jobs!

The very next night, the President stood in front of a joint session of Congress to pitch his $447B American Jobs Act.

American What Act, now? Oh yes ... JOBS!

Jobs, jobs, jobs!

In 1988 George H. W. Bush waltzed into the White House on the coattails of Ronald Reagan. Many assumed he would easily win reelection in 1992 when he ran for a second term against Bill Clinton. But while Bush was riding high on foreign policy issues, the economy had been heading downhill, and Clinton campaign strategist James Carville made popular a phrase that became synonymous with that election.

"It's the economy, stupid!"

This phrase, while not explicitly stated, made its importance known in all of the recent speeches by President Obama and the Republicans working to unseat him in 2012. It is reverberating loud and clear as the country struggles through the aftermath of the worst economic downfall since the Great Depression. With fears mounting amidst speculation about a looming "double dip" recession, the economy is the elephant in the room, but with a twist: typically people go out of their way to avoid remarking on the presence of an elephant in a room. "Don't encourage it," they think. But this elephant is all anyone's talking about.

An article in the National Journal states,

I guess it should not be surprising that the meat of the American Jobs Act proposal reflects what President Obama said in his State of the Union speech earlier this year. What may be surprising is how both speeches follow the economic strategy laid out in a book published just weeks before the State of the Union by the CEO of DOW Chemical titled, "Make It In America."

I tend to agree.

While you may not know DOW Chemical CEO Andrew Liveris, he clearly has a voice at 1600 Pennsylvania. Mr. Liveris participates on a variety of panels, working groups and initiatives for the current Administration. Just this past June, the President appointed him co-chair to the newly-formed Advanced Manufacturing Partnership, in which the government will invest nearly $500 million into many advanced manufacturing initiatives. (Find more details about the Advanced Manufacturing Partnership in this DM-Report article).

In regards to the book, "Make It In America," It is an easy read that I had a hard time putting down. I found myself agreeing with a majority of what Liveris said. Of course, there may be a reason for that. The thoughts he outlines in his book have been around for quite some time, but I will get to that in a moment.

Liveris states that "the United States is at a strategic inflection point." He asks the question, "Does manufacturing matter to our future?" And then answers, "Yes, it does. It absolutely does." However, he stirs the pot a bit when he takes the stand that "we actually need more government, not less." He goes on to say that, "I want government more involved." He is not talking about corporate welfare, but having government as a partner with business.

Here is a brief summary of his key points:

The substantial loss of US manufacturing jobs will be felt in every corner of our nation. Unemployment remains around 9 percent, and it is manufacturing, more than any other sector, that has the most significant impact on job creation. Manufacturing has the biggest job multiplier effect of any segment — typically around 1.5. That means that for every manufacturing job created, one and a half other people are put to work as well. So 50 manufacturing jobs isn't 50 jobs, it's 125 jobs. Jobs!

Job loss is not primarily due to lower off-shore wages or higher productivity at home, as some espouse. While both of these do contribute to the reduction in manufacturing jobs here and overseas, Liveris demonstrates the reality of the problem: the real reason the US is hemorrhaging manufacturing jobs is that other countries are now competing for those jobs, and winning! The weapons they are using to win this battle are the very tools addressed in his balanced short term / long term strategy.

The United States needs to fight fire with fire. The United States needs to retool and re-equip itself with effective means to compete for manufacturing jobs on a global basis. These include a significantly more competitive corporate tax rate to keep and attract industry, incentivized R&D tax credits to fund future innovations, sweeping reforms to the quagmire that is regulations — making them clear and consistent pursue and prioritize free trade agreements to help our nation's manufacturers trade our way to prosperity, and build an education pipeline to ensure the right skills for tomorrow's manufacturing jobs.

Finally, Liveris recognizes the size of the challenge. As I have often said, we have a unique opportunity as a nation, but it will take commitment. Short term changes, investments and partnerships are required, but our eye must remain on the long term goal of restoring American leadership in manufacturing. To retool our nation and restore our dominance it will take a generation of effort.

While I agree with Liveris on most topics, including those above, I'm not without certain points of contention: He fails to point out the many other sources that agree with his set of tools. The uninformed reader is left to believe these ideas are novel to the author. It could be that he assumes that the majority of his audience would recognize this fact, but explicitly referencing the many other studies saying mostly the same thing would go a long way toward both substantiating his claims and driving home the fact that no personal or single corporate agenda is behind them.

In addition, Liveris then wraps these long-agreed upon actions that the US government needs to take around a very narrow definition of what he calls "tomorrow's manufacturing." He associates advanced manufacturing almost solely with energy — actually renewable energy. In general I can't argue with his statement that "energy drives the world," but advanced manufacturing must be defined much more broadly. For every new manufacturing plant (DOW's, in this case), fabricating "solar shingles," there is a Solyndra, which accepted over $500M in loan guarantees as part of the Obama stimulus plan, who filed for bankruptcy and then laid off over 1,000 employees.

I do not believe that we have the luxury of putting all of our eggs into one basket. While renewable energy and the associated green jobs may be vital to our nation's future, that is only a part — possibly a very small part for the near future — of the potential that is advanced manufacturing. Advanced manufacturing occurs whenever our country translates technology innovation to value-added manufacturing. When it uses innovation to make things better, faster, cheaper, more efficiently, with fewer resources, and so on.

Tomorrow's manufacturing will leverage digital manufacturing tools and smart manufacturing processes. They will include next generation materials (tomorrow's DOWs and BASFs, for example) and robotics. Tomorrow's manufacturing, advanced manufacturing, will be where innovations are not only developed but also manufactured. While alternative energy is most definitely on the list, it is also definitely not alone.

The recommendation of this Administration's current Manufacturing Council, discussing education, trade, competitiveness and energy, mirror those of the book. This council represents a healthy cross-section of US manufacturing: big and small, with leaders who vote both Republican and Democrat. I am quite sure the author leveraged these recommendations, particularly given that Michael Gambrell, DOW Chemical's Executive Vice President, is a member.

But the key message of "Make It in America," the key message of the Manufacturing Council, the key message of many other studies, task groups, committees, consultancies, think tanks, and business leaders is that we need public/private partnerships to address the very real challenges facing our nation. And that key message is one I agree with completely. The book lays out a very well thought out short term and long term strategy to move towards implementing very real solutions. These ideas are not new, and they are definitely not limited to just one manufacturer, or one political party, but they're still good ideas.

In the short term, what Liveris calls the "Immediate Impact Agenda," he outlines a handful of objectives to focus on advanced manufacturing. Focusing the next generation workforce for a sustainable economy and enabling the US to be competitive globally. Sounds good, but it will not be easy. To move in this direction, Liveris (and many others) call for immediate changes to the corporate tax code, dramatically improved incentives, regulation reform, and passing existing Free Trade Agreements (South Korea, Columbia and Panama) while engaging others that are mutually beneficial.

Beyond these immediate steps, Liveris says we must take long term action to look at our nation's educational infrastructure, as well as its approach to innovation and competitiveness. Many of his points are captured in the American Jobs Act.

The problem is not that we don't know what to do; the problem is that we cannot agree on how to do it. This should not be a partisan issue, and I truly hope it will not become mired in the politics as usual that has come to symbolize Washington DC for more than a decade. With that said, I do not expect, nor would I promote, the idea that Washington simply sign up for every piece of legislation presented. However, I hope that an all or nothing approach can be shelved for things that we all know are desperately needed.

In a letter to President Obama leading up to his speech before Congress last Thursday, Speaker John Boehner (R-OH) and House Republican Leader Eric Cantor (R-VA) stated that they share common ground regarding the Free Trade Agreements and are willing to support the passage of the pending FTAs with Panama, South Korea and Columbia. That's a start, but only a start. Congress is suffering from a historically low approval rating, and the President's numbers are not much better. The American people want them to come together and work for the good of our nation. Yes, free trade agreements are a good start, but the sweeping improvements required by the system, the changes that will restore American competitiveness in this generation, demand more than just that common ground. We need to put our country back to work. We need an Energy Policy. We need a Manufacturing Policy. We need the House, Senate and Administration to take off the kid gloves, put on their work gloves and do their jobs — there's that word again.