On American manufacturing, Biden plays offense

On American manufacturing, Biden plays offense
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Joe BidenJoe BidenTrump says he is 'seriously' considering a capital gains tax cut Why Joe Biden is in trouble Harris favored as Biden edges closer to VP pick MORE released his manufacturing plan last week. President TrumpDonald John TrumpTeachers union launches 0K ad buy calling for education funding in relief bill FDA head pledges 'we will not cut corners' on coronavirus vaccine Let our values drive COVID-19 liability protection MORE’s supporters are furious, accusing the presumptive Democratic presidential nominee of stealing from the Trump playbook. Peter Navarro, the White House manufacturing czar, called Biden a “poll-driven plagiarist.” 

I have a different perspective. Both candidates are promoting industrial policy the likes of which the nation hasn’t seen since Alexander Hamilton first proposed one in 1791. Back then, the debate was whether the United States should foster a manufacturing sector. Today, the debate is how to compete with the industrial policy of China, which has become the “factory of the world.” And while Trump has chosen to play defense by challenging China’s most egregious practices using every tool at his disposal, Biden wants to emphasize offense. 

To do so, Biden would invest heavily in R&D, infrastructure, procurement and workforce training, and he would ensure that these investments benefit small and minority-owned businesses. He would emphasize “Buy America” through changes in domestic and international law. He would bring back critical supply chains to reduce U.S. reliance on China and other nations. Such actions, Biden says, would unleash innovation and ensure shared prosperity.

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How good is this manufacturing plan? Let’s start by listing criteria important to national competitiveness: 

First, a focus on capabilities, not jobs. Capabilities provide resilience to supply chain disruptions and allow nations to build upon their expertise when developing new products and improved production processes. A focus on “bringing back” jobs – a mantra from all the major presidential candidates over the past year – suggests that all jobs are equally valuable to society. But they aren’t. We should seek to grow productive, high-skilled jobs, and this comes from a focus on building capabilities we currently lack or will need in the future. 

Second, a desire to keep the opportunity cost low. What is the United states willing to give up in order to bolster its capabilities? Do we produce fewer automobiles to increase production of personal protective equipment? Do we shift R&D dollars from biomedicine to processes for making stronger steel? Do we invest less in four-year colleges and more in trade schools and community colleges? The best investments enhance capabilities without mortgaging the future.    

Third, an appropriate role for government — doing what otherwise would not be done but should be done. For example, the government could provide information that the private sector needs to better compete or more efficiently manage the dozens of federal programs across 11 federal agencies that benefit domestic manufacturers. 

Seen through the lens of competitiveness, the Biden plan has significant merits: New investment (on the order of hundreds of billions of dollars) in R&D and infrastructure. The private sector tends to underinvest in such public goods. As a percentage of GDP, the United States government spends much less than other advanced economies. We need to catch up.

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Biden’s focus on small and medium-sized firms is especially important; three quarters of U.S. manufacturers have fewer than 20 employees. And investing in workforce training and career pathways for all workers is imperative to address the skills gap. Manufacturers find it increasingly difficult to fill open positions as baby boomers retire and manufacturing processes become more technology-driven.

Biden seeks to foster supply chain resilience by rebuilding critical stockpiles and by tasking the government with reviewing supply chains to identify those at highest risk for disruption — a small investment with a potentially big payoff.

But the plan is far from perfect. Some of its elements would hurt U.S. competitiveness: For example, Biden seeks to raise income taxes on manufacturing firms. The plan is missing key elements. Biden ignores smart manufacturing – the digitalization of the production process – seen as the next industrial revolution and one that the United States can win, but only if the federal government plays an appropriate role. And we shouldn’t expect the Biden plan to be implemented as envisioned. Biden will be unable to achieve some items (e.g., significantly reforming labor law) without support from Republicans in Congress. 

The big take-away from the Biden plan: It’s a rejection of the globalization and trade liberalization that’s been prevalent since the mid-1990s and which Joe Biden himself championed throughout his career. 

So, is Biden stealing a page from the Trump playbook on manufacturing? Absolutely. But if the result is a better playbook that enhances American competitiveness, then I say: Good for him — and good for us all. 

Keith B. Belton is director of the Manufacturing Policy Initiative at Indiana University.