Making News: Back on National Radio Talking Midterms and Trade…& a New Podcast!

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agriculture, Biden, CBS Eye on the World with John Batchelor, Congress, Democrats, election 2022, environment, fast track, Federal Reserve, friend-shoring, interest rates, Kevin Brady, labor rights, MAGA Republicans, Making News, manufacturing, midterms 2022, monetary policy, recession, regulation, Republicans, reshoring, taxes, Trade Promotion Authority, U.S. content, U.S.-Mexico-Canada Agreement, unions, USMCA

I’m pleased to announce that I’m scheduled to return tonight to the nationally syndicated “CBS Eye on the World with John Batchelor.”  Our subjects: yesterday’s midterm election and how it might affect Washington’s approach to international trade.

I don’t know yet when the pre-recorded segment will be broadcast but John’s show is on between 9 PM and midnight EST, the entire program is always compelling, and you can listen live at links like this. As always, moreover, I’ll post a link to the podcast as soon as one’s available.

In that podcast vein, the recording is now on-line of yesterday’s interview on the also-nationally syndicated “Market Wrap with Moe Ansari.” The segment, which dealt with what the midterm results (which aren’t all in yet!) will mean for the U.S. economy – and the manufacturing sector in particular. It begins about 22 minutes into the program, and you can listen at this link.

Note: My forecast of significant Republican gains in the House and Senate seems to have been on the over-optimistic side, but of course, many key races remain undecided.

And keep on checking in with RealityChek for news of upcoming media appearances and other developments.

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Im-Politic: Major U.S. Ukraine Policy Puzzles on the Home Front Remain Unsolved

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Biden, Democrats, gasoline, Iran, Iran deal, Iran nuclear deal, JCPOA, oil, oil prices, Our So-Called Foreign Policy, rural areas, Russia, sanctions, taxes, Ukraine, Ukraine invasion, Ukraine-Russia war, Vladimir Putin

Maybe you readers can help me out here, because I am really confused about what President Biden and other Democrats are saying about the biggest political and ethical issues surrounding his Ukraine war-related decision to ban oil imports from Russia and its likely effect on gasoline prices.

On the one hand, Mr. Biden and his party have portayed the higher oil prices as a sacrifice that Americans should be proud to pay in order to support Ukraine’s unexpectedly stout resistance to the Russian invasion, and one that the nation will agree to pay.

On the other hand, these Democrats have taken to blaming the higher pump prices on the Russian aggression itself, to the point of pushing the social media hashtag #PutinPriceHike.

Unquestionably, the Russian dictator’s decisions are ultimately responsible for the recent shake up in the global oil market that’s driven up prices for oil and all its derivatives (like gasoline) the world over. But now that he’s taken these steps, it seems that some fundamental consistency should be displayed in the Democrats’ case for the response they favor. For example, they could tell the public something like, “Yes, our response to the Russian attack will raise the price of oil. But higher pump prices are a sacrifice we should be proud to make for the cause of global security and freedom.” Why haven’t they?

Something else noteworthy about the stance of the President and his party. The effect of higher oil prices is the epitome of a regressive tax. In other words, because Americans at all income levels will face the same percentage increase when they pump gasoline (and when they heat their homes, if they rely on oil). So the bite on household budgets is deepest for the poorest and shallowest for the richest of us.

Higher oil prices will also surely kneecap any Democratic hopes of improving their political performance in rural America. After all, residents of the nation’s small towns and farming areas use much oil for transportation than their urban counterparts. So do the enormous number of voters in the suburbs, who played such a big role in Mr. Biden’s victory in 2020.

And let’s not forget an mammoth irony about higher U.S. and world prices for oil – as well as natural gas, another major Russian export. As has been widely observed, without steps that dramatically reduce the volume of Russian sales  globally, the more importers pay per barrel, the more revenue flows into Vladimir Putin’s treasury – and war machine. The same goes for Saudi Arabia and Venezuela, along with Iran if the President succeeds in his apparent aim of negotiating a deal aimed at preventing Tehran from building a nuclear weapon in part by lifting economic sanctions on its economy.

Whatever you think of President Biden’s approach to the Ukraine war, it should be clear that it can’t succeed for any length of time until firm support on the home front is secured. These unsolved puzzles and outright contradictions make clear how far his administration remains from achieving that essential goal. 

(What’s Left of) Our Economy: Strong Crosswinds Roil the New U.S. Manufacturing Jobs Figures

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aerospace, air travel, automotive, CCP Virus, chemicals, coronavirus, COVID 19, Employment, fabricated metals products, infrastructure, Jobs, machinery, manufacturing, miscellaneous durable goods, miscellaneous non-durable goods, non-farm jobs, pharmaceuticals, PPE, private sector, regulation, semiconductor shortage, semiconductors, stimulus package, taxes, vaccines, wood products, Wuhan virus, {What's Left of) Our Economy

It’s tough to imagine a U.S. official monthly jobs report giving off so many conflicting signals about the health of domestic manufacturing and its outlook than the one that came out this morning (for April).

On the one hand, the sector’s 18,000 jobs loss was its worst monthly performance since the identical January setback. On the other hand, the problem was heavily concentrated in the automotive sector, which has been forced to cut back production due to the ongoing global semiconductor shortage. On the other, other hand (!), this shortage is unlikely to ease for many months. On still another hand, the revisions were strong. And some key manufacturing industries continued a recent pattern of solid results. At the same time, even removing the automotive results would still leave the rest of domestic manufacturing’s April employment performance decidedly weak.

I could go on in this vein – and will below.

The decisive automotive/semiconductor effect on the April manufacturing figures becomes clear enough upon realizing that this sector’s 27,000 sequential employment loss was considerably greater than manufacturing’s total on-month job decline. Nonetheless, even had automotive held its employment line, the consequent 9,000 manufacturing job increase would have been unimpressive at very best.

And yet there are those revisions. March’s initially reported 53,000 monthly manufacturing payroll increases – the best such figure since last September’s 55,000 – are now pegged at 54,000. Even better, February’s initially downgraded (from 21,000 to 18,000) monthly employment increase has now been revised all the way up to 35,000.

As a result, domestic industry has now regained 63.83 percent (or 870,000) of the 1.363 million jobs it shed during the height of the CCP Virus pandemic in spring, 2020. It’s still behind the private sector overall (which has recovered 66.88 percent of its pandemic peak employment loss), but still ahead of the overall economy’s (called the non-farm sector by the Labor Department, which issues the monthly jobs reports) 63.26 percent.

The only major April manufacturing jobs loser other than automotive was the small wood products sector (7,200). The big fabricated metals products industry saw employment fall by 2,900 on month in April, but the drop followed a large March gain that’s been downwardly revised but still stands at a strong 10,400.

The machinery numbers were downright encouraging, and that matters because as I keep reminding, this subsector’s products are used not only throughout the rest of domestic manufacturing, but in other important parts of the economy like construction and agriculture. Its April employment boost of 3,700 followed March job creation that was upgraded strongly to 5,400.

In the big miscellaneous durable goods sector, a catchall category that includes everything from surgical equipment and supplies (like personal healthcare protection equipment – PPE – more on which later) to jewelry to gaskets and fasteners to musical instruments, payrolls jumped by 12,600 – their best monthly performance since its 15,300 advance last July.

And two other significant manufacturing employers –miscellaneous non-durable goods and the big chemicals sectors (whose output is also used all over the economy) – each generated enjoyed healthy payrolls increases of 4,300 in April.

Even the industries closely related to the fight against the CCP Virus, whose employment performance since the pandemic’s arrival generally have disappointed, showed some signs of job-creation life in April.

The overall pharmaceutical industry added 1,500 jobs on month in March (the latest available figures) and Februay’s improvement remains a strong 1,700. Since the last pre-pandemic month (February, 2020), this sector’s payrolls have grown by 3.11 percent.

Hiring slowed in the pharmaceuticals subsector containing vaccines – from 1,300 sequentially in February (unchanged from the first estimate) to 500 in March (also the latest available figures). But these companies’ employment is still 6.77 percent higher than in that last pre-pandemic month of February, 2020.

The employment signals were mixed in the manufacturing category containing PPE goods like facemasks, gloves, and medical gowns. Monthly job creation in February was downgraded from zero to a loss of 100, but March’s results (also the most recent) came in at 900, and this sector now employs 8.75 percent more workers than in February, 2020.

In an aerospace industry troubled for years by Boeing’s safety woes, the recent jobs figures are literally all over the place. The latest (March) results show that payrolls for aircraft fell month-to-month in March by 1,800 – surely reflecting the continuing virus-generated slump in air travel. But February’s upward revisions were nothing less than stunning – skyrocketing from a jump of 1,000 to one of 11,700. Fluctuations – though more modest – were also evident in aircraft engines and parts, and non-engine aircraft parts.

Yet as confusing as the new manufacturing jobs figures have been, the future seems just as cloudy. Optimism remains justified by developments like the enormous amounts of stimulus still pouring into the U.S. economy, by the apparent certainty that a major injection of infratructure spending is (finally) on the way, and by the continuing reopening of the economy spurred by vaccinations and less consumer caution.

Even so, the semiconductor shortage is not only here to stay for some time, but has affected many other industries other than automotive. The rate of U.S. vaccinations is slowing and the virus – including the new variants – appears likely to stage something of a comeback when the weather cools again in the fall. Air travel may never recover to pre-virus levels, which will harm not only the aerospace industry per se, but its vast domestic supply chain. And higher taxes and many more regulations could well hit U.S.-based manufacturers – at least until the Congressional elections of 2022.

On balance, I’d still bet on a bright future for domestic industry – mainly because all the sentiment surveys show that manufacturers themselves are full of confidence, and because President Biden has kept in place all the Trump China and metals tariffs that have priced much foreign competition out of the U.S. market. But I’m far from willing to bet the ranch.

Making News: Podcast On-Line on Biden’s Infrastructure Plan and China…& More!

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American Jobs Plan, Biden, CCP Virus, China, competitiveness, coronavirus, corporate taxes, COVID 19, Donald Trump, Gatestone Institute, Gordon G. Chang, green energy, green manufacturing, IndustryToday.com, infrastructure, Making News, manufacturing, recession, tariffs, tax policy, tax reform, taxes, The John Batchelor Show, Wuhan virus

I’m pleased to announce that the podcast is now on-line of my latest interview on John Batchelor’s nationally syndicated radio show. Click here for a timely discussion among John, co-host Gordon G. Chang, and me on whether President Biden’s infrastructure and competitiveness package really will strengthen America’s position relative to China. Oh yes – we also speculated about the fate of former President Trump’s China tariffs in the Biden era.  

In addition, yesterday, Gordon quoted my views on the matter in a post for the Gatestone Institute. Here‘s the link.

Finally, on March 31, IndustryToday.com re-published my RealityChek post on recent U.S. manufacturing data strongly indicating that those Trump tariffs have greatly helped domestic industry weather the CCP Virus pandemic and subsequent recession in impressive shape. Click here to read (or re-read!).

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

(What’s Left of) Our Economy: A Record U.S. Trade Gap – & Cause for Trade Optimism??

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American Jobs Plan, Biden, Buy American, CCP Virus, Census Bureau, China, coronavirus, corporate taxes, COVID 19, Donald Trump, exports, goods trade deficit, green energy, imports, lockdowns, Made in Washington trade flows, Pacific Rim, reopening, semiconductor shortage, services trade, subsidies, supply chains, tariffs, tax policy, taxes, Trade, trade deficit, vaccines, West Coast ports, Wuhan virus, {What's Left of) Our Economy

Despite the overall U.S. trade deficit hitting an all-time monthly high in February, the new trade figures released by the Census Bureau this morning contained lots of encouraging news – including for fans of the Trump tariffs on China and on aluminum and steel (like me). I’m wary of running or continuing a victory lap, because there’s still too much short- and perhaps longer term economic noise surely masking the underlying trends. But the case for trade optimism and its possible policy causes deserves attention.

As for that economic noise, it comes of course not only from the ongoing stop/start CCP Virus- and lockdowns-/reopenings/vaccinations-related distortions of all economic data, but from the harsh winter weather that depressed February economic activity in key areas of the country like Texas; the global shortage of semiconductors that’s impacting output throughout the manufacturing sector (and that’s due in part to the pandemic); and the big backups at the West Coast ports that are greatly slowing the unloading of container ships containing lots of imports from China and the rest of Asia.

As for the data, the combined goods and services trade shortfall of $71.08 billion in February surpassed the previous record, November’s $69.04 billion, by 2.95 percent, and represented a 4.80 percent increase over January’s downwardly revised level of $67.82 billion.

The increase resulted both from a rise in the goods trade gap (of 3.27 percent, to its own record of $88.01 billion) and a shrinkage of the services surplus (of 2.93 percent, to $16.93 billion – the smallest since August, 2012’s $17.08 billion).

Trade flows not setting records, though, notably included any of the imports categories – despite numerous reports of the rapidly rebounding U.S. economy sucking in massive amounts of products (though not services, which have suffered an outsized CCP Virus blow) from abroad.

For example, total merchandise imports actually fell on month in February – by 0.89 percent, to $221.14 billion, from January’s record total of $221.12 billion. Still, the February figure remains in second place historically speaking.

Non-oil goods imports inched up by 0.38 percent sequentially in February – from $85.36 billion to $85.68 billion. But they still fell short of the November record of $86.40 billion. As known by RealityChek regulars, this trade category sheds the most light on the impact on trade flows of trade policy decisions, like tariff changes and trade agreements. (Hence I call the resulting shortfall the Made in Washington trade deficit.) But despite the lofty level, they’re actually down on net since November. Could it be those West Coast ports snags or the harsh winter storms of February or semiconductor-specific problems? Maybe.

The evidence for those propositions? U.S. goods imports from Pacific Rim countries – which are serviced by the West Coast ports – did sink by 11.81 percent on month in February. That’s a much faster rate than the 1.54 percent decrease in overall non-oil goods imports (a close proxy).

But goods imports from China dropped by a greater 13 percent even, which points to some Trump tariff effect as well. In fact, the $34.03 billion worth of February goods imports from China was the lowest monthly number since pandemicky last April. And February’s $24.62 billion bilateral merchandise trade deficit with China was 6.22 percent narrower than the January figure, and the smallest such total since April, too.

America’s goods deficit from Pacific Rim countries in total fell slightly faster than the gap with China (6.84 percent). China’s economy and its exports, however, are supposed to be recovering at world-and region-beating rates, so if that’s the case, it appears that the Trump trade curbs are preventing that rebound from taking place at America’s expense.

U.S. manufacturing trade numbers were encouraging, too, though again, the impact of tariffs as opposed to that of the virus distortions or the February weather or the ports issues or the semiconductor shortage or some combination thereof  is difficult to determine. But industry’s trade shortfall did tumble by 10.53 percent in February, from January’s $99.79 billion to $89.29 billion. That figure also was manufacturing’s lowest since June, 2020’s $89.16 billion and the 10.52 percent decrease was the by far the biggest in percentage terms since November, 2019’s 12.70 percent.

February manufacturing exports declined by 2.64 percent sequentially, from $81.66 billion to $79.51 billion. But the much greater volume of manufacturing imports sank by 6.98 percent, from $182.46 billion to $168.79 billion.

The China and manufacturing numbers could certainly change – and boost these U.S. trade gaps and the overall trade deficit – as Americans begin to spend their latest round of stimulus checks, as the U.S. recovery continues, and as the West Coast ports and semiconductor issues clear up. 

But especially due to those Chinese exports, this worsening of the U.S. trade picture was reported late last year. And the official U.S. trade figures show that such a surge simply never took place. Moreover, if executed properly, President Biden’s Buy American plans for federal government procurement and support for strengthening critical domestic supply chains could boost American manufacturing and other goods output without increasing imports. His budget requests for major subsidies for key U.S.-based manufacturing operations could help brighten the trade picture, too. Mr. Biden has also decided for now to retain the Trump trade curbs. And P.S. – those clogged West Coast ports hamper American exports as well.    

In addition, trade problems could reappear at some point due to the President’s proposed green energy mandates and corporate tax increases that would inevitably hike the relative cost of producing in the United States. But right now, it looks like due to ongoing and possibly upcoming economic nationalist American policies, the burden of proof is on the U.S. trade pessimists. And that’s quite a switch.

(What’s Left of) Our Economy: Why Biden’s Trade Policies are Looking Trump-ier Than Ever

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America First, arbitrage, Biden, China, economic nationalism, environmental standards, global minimum tax, globalism, globalization, infrastructure, Jake Sullivan, Janet Yellen, labor rights, race to the bottom, subsidies, tariffs, tax policy, taxes, Trade, trade Deals, trade wars, {What's Left of) Our Economy

As the author of a book titled The Race to the Bottom, you can imagine how excited I was to learn that the main rationale of Treasury Secretary Janet Yellen’s new proposal for a global minimum tax on corporations is to prevent, or bring to an end, a…race to the bottom.

But this idea also raises a question with profound implications for U.S. trade and broader globalization policies: Why stop at tax policy? And it’s made all the more intriguing because (a) the Biden administration for which Yellen surprisingly seems aware that there’s no good reason to do so even though (b) the trade policy approach that could consequently emerge looks awfully Trump-y.

After all, the minimum tax idea reflects a determination to prevent companies from engaging in what’s known as arbitrage in this area. It’s like arbitrage in any situation – pitting providers and producers that boast little leverage into competition with one another to sell their goods and services at the lowest possible price, and usually triggering a series of ever more cut-rate offers.

These kinds of interactions differ from ordinary price competition because, as mentioned above, the buyer usually holds much more power than the seller. So the results are too often determined by considerations of raw power, not the kinds of overall value considerations that explain why market forces have been so successful throughout history.

When the arbitrage concerns policy, the results can be much more disturbing. It’s true that the ability of large corporations to seek the most favorable operating environments available can incentivize countries to substitute smart policies for dumb in fields such as regulation and of course taxation. But it’s also true, as my book and so many other studies have documented, that policy arbitrage can force countries to seek business with promises and proposals that can turn out to be harmful by any reasonable definition.

Some of the most obvious examples are regulations so meaningless that they permit inhumane working conditions to flourish and pollution to mount, and encourage tax rates to fall below levels needed to pay for public services responsibly. Not coincidentally, Yellen made clear that the latter is a major concern of hers. And the Biden administration says it will intensify enforcement of provisions in recent U.S. trade deals aimed at protecting workers and the environment – and make sure that any new agreements contain the same. I’ve been skeptical that many of these provisions can be enforced adequately (see, e.g., here), but that’s a separate issue. For now, the important point is that such arbitrage, and the lopsided trade flows and huge deficits they’ve generated, harm U.S.-based producers and their employees, too.

But as my book and many other studies have also documented, safety and environmental arbitrage aren’t the only instances of such corporate practices by a long shot. Businesses also hop around the world seeking currency arbitrage (in order to move jobs and production to countries that keep the value of their currencies artificially low, thereby giving goods and services turned out in these countries equally artificial, non-market-related advantages over the competition). Ditto for government subsidies – which also influence location decisions for reasons having nothing to do with free markets, let alone free trade. The victims of these versions of policy arbitrage, moreover, have been overwhelmingly American.

The Biden administration is unmistakably alert to currency and subsidy arbitrage. Indeed a major element of its infrastructure plan is providing massive support for the U.S. industry in general, and to specific sectors like semiconductors to lure jobs and production back home and keep it there. Revealingly, though, it’s decided for the time being to keep in place former President Trump’s steep, sweeping tariffs on China, and on steel and aluminum.

So it looks like the President has resolved to level these playing fields by cutting off corporate policy arbitrage opportunities of all types with a wide range of tools. And here’s where the outcome could start looking quintessentially Trump-y and America First-y. For it logically implies that the United States shouldn’t trade much – and even at all – with countries whose systems and policy priorities can’t promote results favorable to Americans.

Still skeptical? Mr. Biden and his leading advisers have also taken to talking about making sure that “Every action we take in our conduct abroad, we must take with American working families in mind.” More specifically, the President’s White House national security adviser, Jake Sullivan, wrote pointedly during the campaign that U.S. leaders

“must move beyond the received wisdom that every trade deal is a good trade deal and that more trade is always the answer. The details matter. Whatever one thinks of the TPP [the proposed Trans-Pacific Partnership trade deal], the national security community backed it unquestioningly without probing its actual contents. U.S. trade policy has suffered too many mistakes over the years to accept pro-deal arguments at face value.”

He even went so far as to note that “the idea that trade will necessarily make both parties better off so long as any losers could in principle be compensated is coming under well-deserved pressure within the field of economics.”

But no one should be confident that economic nationalism will ultimately triumph in Biden administration counsels. There’s no doubt that the U.S. allies that the President constantly touts as the keys to American foreign policy success find these views to be complete anathema. And since Yellen will surely turn out to be Mr. Biden’s most influential economic adviser, it’s crucial to mention that her recent speech several times repeated all the standard tropes mouthed for decades by globalization cheerleaders about U.S. prosperity depending totally on prosperity everywhere else in the world.

Whether she’s right or wrong (here I presented many reasons for concluding the latter), that’s clearly a recipe for returning trade policy back to its pre-Trump days – including the long-time willingness of Washington to accept what it described as short-term sacrifices (which of course fell most heavily on the nation’s working class) in order to build and maintain prosperity abroad that would benefit Americans eventually, but never seemed to pan out domestically.

Nor is Yellen the only potential powerful opponent of less doctrinaire, more populist Biden trade policies. Never, ever forget that Wall Street and Silicon Valley were major contributors to the President’s campaign coffers. Two greater American enthusiasts for pre-Trump trade policies you couldn’t possibly find.

And yet, here we are, more than two months into the Biden presidency, and key pieces of a Trump-y trade policy both in word and deed keep appearing.  No one’s more surprised than I am (see, e.g., here).  But as so often observed, it took a lifelong anti-communist hardliner like former President Richard M. Nixon to engineer America’s diplomatic opening to Mao-ist China. And it took super hard-line Zionist Menachem Begin, Israel’s former Prime Minister, to sign a piece treaty with long-time enemy Egypt. So maybe it’s not so outlandish to suppose that a died-in-the-wool globalist like Joe Biden will be the President establishing America First and economic nationalism as the nation’s new normals in trade and globalization policy.  

(What’s Left of) Our Economy: March U.S. Manufacturing Job Gains Lagged – For a Good Reason

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aerospace, aircraft, aircraft engines, aircraft parts, American Jobs Plan, automotive, Biden, Build Back Better, CCP Virus, coronavirus, COVID 19, Donald Trump, Employment, fabricated metal products, Jobs, Labor Department, lockdowns, machinery, manufacturing, non-farm jobs, pharmaceuticals, PPE, recession, recovery, regulation, semiconductor shortage, semiconductors, tariffs, taxes, Trade, travel services, vaccines, Wuhan virus, {What's Left of) Our Economy

This morning’s figures from the Labor Department show that U.S. domestic manufacturing was a bit of a jobs creation laggard in March – and that was good news. The reason? The employment gains for the rest of the economy were so enormous.

This latest monthly U.S. jobs report showed that non-farm payrolls (the definition of the U.S. jobs universe used by the Labor Department, which tracks these data), rose by 0.64 percent in March – to 144.210 million. Job-creation in the private sector advanced at a virtually identical rate.

Payrolls in manufacturing were up by a lower 0.43 percent – to 12.284 million. But they still increased by 53,000 – their best performance since September’s 55,000. It’s also possible that hiring in the automotive sector was held down by a global shortage of semiconductors – which has led to production cutbacks and even some layoffs.

The only disappointment in the new manufacturing jobs numbers concerned revisions – which were mostly negative. February’s initially reported 21,000 net employment gain is now estimated at 18,000. January’s 14,000 job loss (already downgraded from an initially judged 10,000) is now pegged at a still greater 18,000. But December’s improvement was upwardly revised again – from 34,000 to 35,000.

As a result, manufacturing has now regained 63.83 percent (870,000) of the 1.363 million jobs the sector shed during the peak CCP Virus lockdowns period of last March and April. That’s fewer relatively speaking than the recovery in private sector employment – 66.88 percent (14.172 million) of the 21.191 million jobs it lost during that period.

But because of continuing weakness in the public sector – which has recovered just 66.42 percent of its 22.362 million job loss last spring – manufacturing’s payrolls’ rebound is still ahead of the entire economy’s. In fact, manufacturing jobs now account for a higher (8.52 percent) of total non-farm employment than during the last full pre-pandemic data month (8.39 percent in February, 2020).

The biggest manufacturing jobs winners in March? Far and away the champ was the big fabricated metals products industry, which expanded employment by 13,700 – more than a quarter of the manufacturing total. Next came two smallish sectors – miscellaneous non-durable goods and printing and related support activities (up 7,400 and 5,900, respectively). Encouragingly, jobs increased by 3,500 in the big machinery sector – whose products are used throughout not only the rest of manufacturing but the entire economy.

The worst performers were transportation equipment – whose 3,000 lost March jobs included 1,000 in the automotive sector, which has been forced into production cutbacks and some layoffs due to the global semiconductor shortage – and furniture (down 1,300).

Unfortunately, these latest figures indicate that employment in many CCP Virus-fighting goods continues to lag. To be sure, their payrolls seem to be up from the last pre-pandemic levels whereas overall manufacturing jobs are down (by 4.02 percent). But given the nature of the emergency, and the shortages it revealed, it’s surprising they’re not higher still.

The relevant numbers only go through February, and in the broad pharmaceuticals sector, employment rose by 1,600 sequentially. And January’s initially reported 700 job loss has been upgraded to a decrease of only 100. But the sector’s payrolls have grown by a mere 2.60 percent since that last pre-pandemic month of February, 2020.

The performance of the pharmaceuticals subsector containing vaccines was considerably better. February payrolls expanded by 1,300 sequentially, and January’s gains are now estimated at 500, not 100. As a result, this vaccine-related sector’s employment levels are now 6.23 percent higher than in February, 2020.

The story, however, has been more discouraging lately in the manufacturing category containing personal healthcare-related protection devices (PPE) like facemasks, gloves, and medical gowns. Payrolls were flat on month in February, and the initially reported January job loss of 800 was only upgraded to a decline of 700. Still, payrolls in this sector have climbed by 7.98 percent since February, 2020.

Interestingly, despite the rebounding orders for Boeing’s popular but previously grounded 737 Max jetliner, the recovery of national and global travel, and the resumption of deliveries of its also-troubled 787 Dreamliner, none of these positive developments has shown up in the aerospace jobs numbers.

For example, aircraft employment in February (also the latest available figures) grew by only 1,000 on month and not only remains down 10.66 percent on year, but substantially lower than all of last year’s safety crisis- and the worst of the CCP Virus-plagued months. Similar trends hold for aircraft engines and engine parts, and non-engine aircraft parts.

The outlook for domestic manufacturing job creation still seem bright, as vaccinations are being administered rapidly, reopenings are spreading, igniting renewed overall economic activity, Boeing does seem to be emerging from its safety and manufacturing-related troubles, and the high, sweeping Trump tariffs keep pricing many Chinese goods out of the U.S. market, thereby creating new opportunities for American producers.

But that global semiconductor shortage, which will eventually affect much more than automotive output, may not end until late next year. It’s tough to know the overall impact of the Biden administration’s American Jobs Plan and other Build Back Better virus recovery proposals on the one hand, and the tax increases proposed to pay for them on the other, as well as the new regulations that will be involved – assuming even that they pass Congress reasonably intact. And vaccines production won’t be booming forever.

So no one concerned about domestic manufacturing’s health and prospects has any excuse not to peruse carefully all the industry-related data and news that are in store in the weeks and months ahead.

(What’s Left of) Our Economy: U.S. Manufacturing Revival Plans Still Need Trump-like Tariffs

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Buy American, carbon tariff, carbon tax, Dan Breznitz, David Adler, health security, infrastructure, Joe Biden, manufacturing, manufacturing trade deficit, research and development, supply chains, tariffs, taxes, technology, The New York Times, Trade, {What's Left of) Our Economy

I was thrilled to see today’s op-ed piece on U.S. manufacturing in The New York Times, and not just because co-author David Adler is a good friend. I was also thrilled to see it because a careful reading reenforces the essential notion that all the worthy proposals made by policy analysts and politicians lately (including apparent President-elect Joe Biden) on reviving industry will either come to naught or greatly underperform without steep, and indeed Trump-like, tariffs to shut a critical mass of imports out of the economy.

Those domestically-focused manufacturing revival measures have included more federal funding for research and developments, greater federal efforts to help smaller manufacturers in particular learn about and access research breakthroughs in academia and existing government labs, measures to help these smaller industrial firms access capital more easily, tax breaks to foster production and innovation in the United States, and more ambitious and better enforced Buy American requirement for federal purchases of manufactured products. In general, I’m strongly supportive, and have even criticized the Trump administration for giving them short shrift (even on the tax front, where the big 2017 cuts should have come with more investing and hiring strings).

From knowing David, I feel sure that he backs these intiatives, too; indeed, the article concentrates tightly on the Buy American slice of this agenda. And the piece gratifingly (but probably unknowingly) endorses an idea that I’ve made for many years, but that has gotten zero traction: requiring “all manufacturing industries to disclose how much of their sourcing and critical production takes place in the United States.” After all, how can Washington make the right manufacturing policy decisions when it relies so heavily for such crucial information from crumbs self-servingly cherry-picked by offshoring-happy companies themselves?

Yet as also suggested by David and co-author Dan Breznitz – who studies innovation policies at the University of Toronto – except for the Buy American proposals, the standard raft of manufacturing revival plans could work to  stimulate more production and supply, but pays inadequate attention to ensuring that all that supply is actually bought – which would eventually make companies think twice about producing more.

The authors place much stock in government’s ability to soak up this output, and so does Biden – who on top of making sure that more of what government currently purchases is American-made, has pledged to spend “$400 billion in his first term in additional federal purchases of products made by American workers, with transparent, targeted investments that unleash new demand for domestic goods and services and create American jobs.”

The former Vice President correctly contends that these measures will “provide a strong, stable source of demand for products made by American workers and supply chains composed of American small businesses.” The history of U.S. industrial policy also shows that early guaranteed government purchases helped new industries demonstrate the usefulness of innovative products that eventually interested the private sector and produced enormous new markets for their products on top of federal contracts. (Think “computers” and all the hardware and software used pervasively now not only in technology sectors but in virtually the entire economy.)

But U.S.-based manufacturers turned out just over $2.35 trillion worth of goods in 2019 (the last full pre-CCP Virus year). And the manufacturing trade deficit that year was $1.03 trillion. So unless it’s supposed that that 2019 level of domestic manufacturing production is remotely adequate (and clearly, the manufacturing policy reform supporters don’t), or unless they believe that government should buy much more of the output than the $400 billion Biden proposes over not one but four years (to sit in warehouses?), generating more private demand for industry’s output will be essential as well.

As indicated above, David and Dan Breznitz argue that more detailed, accurate labeling will help by enabling more consumers and private businesses to act effectively on their naturally strong preferences for Made in the USA goods – not only out of patriotism, but because of reasonable convictions that their quality and safety are superior. I remain all in favor, but the immense popularity of imports among both classes of customers (made clear by the huge and chronic manufacturing trade deficits) despite numerous news accounts over the years of shoddy, outright dangerous foreign-made products (especially from China), demonstrates that much more will need to be done to spur demand for U.S.-produced manufactures.

RealityChek regulars will not be the slightest bit surprised that I’m ruling out overseas demand as a promising net new source of customers for American domestic manufacturers. Unfortunately, the persistence of the huge manufacturing trade deficits is also evidence that most of America’s international trade partners are far too devoted to the health of their own industrial bases to permit major U.S. inroads. In fact, if anything, they’re likely to step up their own efforts to strengthen their own domestic industries by further curbing U.S. and other foreign competition. And that’s where the tariffs come in.

Not that David and Dan Bernitz, or Biden, overlook the need for U.S. market protection entirely. The former, for example, call for “Stopping predatory pricing by foreign manufacturers” – which entails slapping tariffs on these usually government-subsidized artificially cheap goods. The latter makes similar points, and has also mentioned a carbon tariff on products from countries that base their competitiveness on ignoring “their climate and environmental obligations.” (At the same time, Biden could use a similar levy to punish domestic companies that don’t measure up in his administration’s eyes climate-wise, leaving the net benefit to U.S.-based manufacturing minimal.)

Moreover, to ensure adequate domestic supplies of the healthcare goods needed to fight the next pandemic, simple stockpiling of products by government will be necessary. And since practically everything wears out over time, or becomes outmoded, lots of re-stockpiling will be necessary. Meanwhile, it should go without saying that many of the government purchases of manufactures will be used for critical national purposes – like repairing and building all kinds of traditional and technology infrastructure systems, and producing whatever new military equipment or refurbishing of old equipment the new Congress and the likely new administration wind up supporting.

But these are of course public purposes, and since the United States is still a strongly private sector-driven economy, that’s what’s inevitably going to determine the success of most manufacturing revival efforts. So unless manufacturing revivalists want government to play a veritably dominant role in production and consumption decisions, their strategy will employ tariffs – but not in a targeted, sector-specific, and reactive way, much less as an afterthought to domestic initiatives. Instead, they’ll be proactive, come in a flat-rate form, and stand high enough to encourage plenty of new market entrants that it makes sense to join established enterprises in vigorous, overwhelmingly domestic competition for America’s immense pool of customers.

Making News: (Re)Unveiling a Revolutionary U.S. Tax Policy Proposal

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CCP Virus, coronavirus, COVID 19, deficits, fiscal policy, Henry George, Henry George School of Social Science, InsideSources.com, Land-Value Tax, LVT, Making News, municipal finance, recession, taxes, Wuhan virus

And now for something completely different. (Apologies to the Monty Python crew.)

As some of you may know, when I’m not blogging here at RealityChek or Tweeting like a house on fire, I’m serving as a Trustee of the Henry George School of Social Science. This economic education institution seeks to apply some of the truly revolutionary insights reached by George, a Gilded Age/Progressive Era American economist about issues of his day, that strongly resemble some of the biggest challenges of our own times – for example, the rise of economic inequality amid extraordinary wealth creation and technological progress, the replacement of so much productive activity with financial speculation, and the weakening of competition throughout American business as enormous industries grow more monopolistic.

George’s signature proposal was a “land-value tax” (LVT), which he wrote boasted great potential to penalize casino-type finance; reward productive investment and thereby foster production-based, broadly shared prosperity; and break up economically and politically dangerous concentrations of wealth.

Folks associated with the School and with “Georgism” have advocated for this proposal ever since, but we believe that the LVT creates yet another advantage that’s especially important today: Its adoption could place the finances of state and cities devastated by the CCP Virus-induced recession and collapse of tax revenues on a healthy, sustainable footing.

As a result, we’ve launched an effort to show exactly how the LVT could eliminate budget gaps in states and localities across the country, and I’m pleased to announce that the first of these offerings has just been published (as an op-ed I’ve co-authored) by the news syndicate InsideSources.com). Here’s the link.

Moreover, we’ve recently issued a policy brief containing much more data relating to New York City and New York State that you can read here. And in the coming weeks and months, we’ll be sending off locally customized versions of this piece to news organizations in dozens of financially squeezed regions, including detailed projections of exactly how much revenue entirely affordable LVTs could raise.

So keep checking in with RealityChek for info on these articles, and news of other upcoming media appearances and developments.

Im-Politic: Trump-ism Without Trump for America as a Whole?

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"Defund the Police", allies, CCP Virus, China, climate change, coronavirus, court packing, COVID 19, Democrats, election 2020, enforcement, Executive Orders, filibuster, Green New Deal, Huawei, human rights, Im-Politic, Immigration, Joe Biden, judiciary, lockdowns, mask mandate, masks, metals, multilateralism, Muslim ban, Phase One, progressives, Republicans, sanctions, Senate, shutdowns, stimulus, Supreme Court, tariffs, taxes, Trade, trade wars, Trump, unions, Wuhan virus

Since election day, I’ve spent some time and space here and on the air speculating about the future of what I called Trump-ism without Donald Trump in conservative and Republican Party political ranks. Just this weekend, my attention turned to another subject and possibility: Trump-ism without Mr. Trump more broadly speaking, as a shaper – and indeed a decisive shaper – of national public policy during a Joe Biden presidency. Maybe surprisingly, the chances look pretty good.

That is, it’s entirely possible that a Biden administration won’t be able to undo many of President Trump’s signature domestic and foreign policies, at least for years, and it even looks likely if the Senate remains Republican. Think about it issue-by-issue.

With the Senate in Republican hands, there’s simply no prospect at least during the first two Biden years for Democratic progressives’ proposals to pack the Supreme Court, to eliminate the Senate filibuster, or to recast the economy along the lines of the Green New Deal, or grant statehood Democratic strongholds Puerto Rico and the District of Columbia. A big tax increase on corporations and on the Biden definition of the super-rich looks off the table as well.

If the Senate does flip, the filibuster might be history. But big Democratic losses in the House, and the claims by many veterans of and newcomers to their caucus that those other progressive ambitions, along with Defunding the Police, were to blame, could also gut or greatly water down much of the rest of the far Left’s agenda, too.

CCP Virus policy could be substantially unchanged, too. For all the Biden talk of a national mask mandate, ordering one is almost surely beyond a President’s constitutional powers. Moreover, his pandemic advisors are making clear that, at least for the time being, a sweeping national economic lockdown isn’t what they have in mind. I suspect that some virus economic relief measures willl be signed into law sometime this spring or even earlier, but they won’t carry the total $2 trillion price tag on which Democratic House Speaker Nancy Pelosi seems to have insisted for months. In fact, I wouldn’t rule out the possibility of relief being provided a la carte, as Congressional Republicans have suggested – e.g., including popular provisions like some form of unemployment payment bonus extension and stimulus checks, and excluding less popular measures like stimulus aid for illegal aliens.

My strong sense is that Biden is itching to declare an end to President Trump’s trade wars, and as noted previously, here he could well find common cause with the many Senate Republicans from the party’s establishment wing who have never been comfortable bucking the wishes of an Offshoring Lobby whose campaign contributions it’s long raked in.

Yet the former Vice President has promised his labor union supporters that until the trade problems caused by China’s massive steel overproduction were (somehow) solved, he wouldn’t lift the Trump metals tariffs on allies (which help prevent transshipment and block these third countries from exporting their own China steel trade problems to the United States) – even though they’re the levies that have drawn the most fire from foreign policy globalists and other trade and globalization zealots.

As for the China tariffs themselves, the latest from the Biden team is that they’ll be reviewed. So even though he’s slammed them as wildly counterproductive, they’re obviously not going anywhere soon. (See here for the specifics.) 

Later? Biden’s going to be hard-pressed to lift the levies unless one or both of the following developments take place: first, the allied support he’s touted as the key to combating Beijing’s trade and other economic abuses actually materializes in very convincing ways; second, the Biden administration receives major Chinese concessions in return. Since even if such concessions (e.g., China’s agreement to eliminate or scale back various mercantile practices) were enforceable (they won’t be unless Biden follows the Trump Phase One deal’s approach), they’ll surely require lengthy negotiations. Ditto for Trump administration sanctions on China tech entities like the telecommunications giant Huawei. So expect the Trump-ian China status quo to long outlast Mr. Trump.

Two scenarios that could see at least some of the tariffs or tech sanctions lifted? First, the Chinese make some promises to improve their climate change policies that will be completely phony, but will appeal greatly to the Green New Deal-pushing progressives who will wield much more power if the Senate changes hands, and who have demonstrated virtually no interest in China economic issues. Second, Beijing pledges to ease up on its human rights crackdowns on Hong Kong and the Muslims of Xinjiang province. These promises would be easier to monitor and enforce, but the Chinese regime views such issues as utterly non-negotiable because they’re matters of sovereignty. So China’s repressive practices won’t even be on the official agenda of any talks. Unofficial understandings might be reached under which Beijing would take modest positive steps or suspend further contemplated repression. But I wouldn’t count on such an outcome.

Two areas where Biden supposedly could make big decisions unilaterally whatever happens in the Senate, are immigration and climate change. Executive orders would be the tools, and apparently that’s indeed the game plan. But as Mr. Trump discovered, what Executive Orders and even more routine adminstrative actions can do, a single federal judge responding to a special interest group’s request can delay for months. And these judicial decisions can interfere with presidential authority even on subjects that for decades has been recognized as wide-ranging – notably making immigration enforcement decisions when border crossings impact national security, as with the so-called Trump “Muslim ban.”

I know much less about climate change, but a recently retired attorney friend with long experience litigating on these issues told me that even before Trump appointee Amy Coney Barrett joined the Supreme Court, the Justices collectively looked askance on efforts to create new policy initiatives without legislating. Another “originalist” on the Court should leave even less scope for ignoring Congress.

The bottom line is especially curious given the almost universal expectations that this presidential election would be the most important in recent U.S. history: A deeply divided electorate could well have produced a mandate for more of the same – at least until the 2022 midterms.