The bold, transformative Barack Obama, painter of grand vistas, is gone, replaced in his State of the Union address by a Clinton-esque figure, reciting laundry lists of small-bore proposals. There were some very good ideas for attacking the crisis of mass unemployment. Extending the payroll tax cuts without another round of policy riders and protracted negotiations should be a no-brainer. Legislation to make it easier for millions of Americans to refinance their mortgages at today’s low interest rates is a great idea that should bolster consumer demand and make it easier for the entrepreneurially inclined to start businesses. His call to avert a massive spike in student loan debt interest payments is sound, and the promise to create a federal task force on foreclosure fraud seems very smart.
But framing the entire economic message of the speech was a strikingly retrograde, self-contradictory, and confused agenda of reviving American prosperity through mercantilism.
Think of it this way. One idea for putting Americans back to work would be to raise the gasoline tax and use the proceeds to buy manufactured goods that we then dump into the middle of the Atlantic Ocean. This would, I promise you, work perfectly well. The previously unemployed folks with the new factory jobs would thank us for our trouble. But it would be a curiously prosperity-destroying way of bolstering the economy. When Obama brags that “over 1,000 Americans are working today because we stopped a surge in Chinese tires,” he’s implementing a small-scale version of a similar idea. Blocking an influx of cheap Chinese tires does, indeed, preserve jobs for tire-makers. But tire-buyers pay higher prices and presumably curtail their purchases of some other goods or services in exchange. Meanwhile, Chinese tire-makers have lost jobs and are now less likely to buy American soybeans or DVDs of our movies.
There’s no doubt that globalization has inflicted massive harms on individual American families and even whole communities. The reality that Chinese economic growth—in many ways the greatest success story of our time—has been painful for many should be a great teachable moment for a progressive president to make the case for a generous social safety net. The conservative article of faith that hard work and determination guarantee economic security is a now a cruel lie. People lose jobs because of shifts in global trade patterns, because of new technologies, and because of macroeconomic currents beyond their control. This is the nature of a dynamic capitalist economy, and to acknowledge it and the need for government countermeasures is in no way to repudiate the considerable virtues of the system.
Instead, Obama wants to shelter American industry from competition abroad. He notes that his administration has “brought trade cases against China at nearly twice the rate as the last administration” and promises to rejigger the tax code to reward or punish firms based on where they locate jobs.
This line of thinking swiftly stumbles into self-contradiction. After lambasting companies that “ship jobs overseas,” Obama launched into a feel-good anecdote about how “Siemens opened a gas turbine factory in Charlotte and formed a partnership with Central Piedmont Community College.” Is a politician in Germany giving a speech lambasting Siemens for shipping jobs to the U.S. and complaining, as Obama did, that it’s “not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized,” perhaps through partnerships with community colleges.
Later, Obama pledged to support “every risk-taker and entrepreneur who aspires to become the next Steve Jobs,” perhaps making him the only person in America who didn’t read the New York Times story over the weekend about how Apple’s products are all built in Asia.
The right lesson to take from Apple might be that an economic agenda whose “blueprint begins with American manufacturing” is misguided. South Korea, Taiwan, and China all have us beat as builders of electronics. But the world’s leading mobile electronics maker is headquartered in the United States of America and it’s insanely popular. That’s because the greatest value in the electronics business is in the industrial design, the software engineering, the marketing, and the combination of research and intuition that help you figure out what products people will want. Manufacturing, as a statistical category, is more arbitrary than people realize. There’s no inherently greater virtue in putting tuna into a can (the "seafood canning” subsector of manufacturing) than in preparing a seared tuna appetizer (the “full service restaurants” subsector of accommodation and food services). If people aspire to remodel kitchens or teach yoga or treat illness or be hair stylists or be chefs or, God forbid, Internet columnists (the mysterious “other information services” sub-sector) there’s nothing wrong with that. Indeed, even in the fabled industrial juggernaut of Germany, 68 percent of the population works in services.
Most of all, as the president well knows, it’s simply not the case that the typical middle-class American family is severely troubled by a lack of manufactured goods. And if we as a whole aren’t suffering from a shortage of manufacturing outputs, why would we orient our economic structure around making more? The real problems afflicting American families don’t relate to a dearth of manufactured items in the home. The president got at this in his brief remarks on college tuition and his vague allusion to his signature health-care initiative. It is here, rather than in the struggle to manufacture cost-competitive tires, that the American future will be either won or lost. Will the digital revolution that’s transformed publishing and put all the world’s information at our fingertips open the doors of education wider, or will prices keep spiraling out of control? Will America’s enormous health-care spending drive improvements in quality of life or just higher revenues for hospitals and device makers? These questions, along with the still-urgent need to fight the short-term plague of joblessness, were once at the center of the Obama agenda. But as Election Day, dawns they’re at risk of being largely sidelined in favor of cheap and muddled economic nationalism.
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