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August 1, 2017

Wouldn’t It Be Great if We Could Buy ‘Made in America’ Again?

It has a different meaning in our modern global economy, but that label is more than just a label.

Part of President Donald Trump’s “Make America Great Again” mission is to reinvigorate U.S. manufacturing, and like nearly everything Trump says or does, that idea produced much criticism. A lot of that is the automatic Trump-hater response, but some resulted from reasoned thought and philosophical differences.

National Review’s Kevin Williamson discussed this in an essay titled “Made in America: Not Important in the 21st Century.” He offered examples of products assembled in America that actually contain some or perhaps most parts made in other countries. The question is: Do these products really deserve the “Made in America” label? And does it matter?

Meanwhile, calling Trump’s encouragement for us to buy products “Made in America” to support our manufacturers “a good slogan … [but] bad and incoherent policy,” Reason’s Nick Gillespie went on to note that using more expensive American labor would increase the price of our products, and protectionist measures to exclude foreign-made materials from our markets run counter both to the personal freedom the USA provides us and the very concept of free trade.

America is a “post-industrial nation,” Gillespie noted, and “the fact is that manufacturing jobs as a percentage of the work force peaked in 1943 and has declined ever since.”

He then urged pursuing policies that create new jobs, new opportunities and new wealth through “lower government spending, flatter and less distorting taxes, and less regulation.” Which just happens to be a large chunk of Trump’s agenda.

Opposition to Trump’s “Made in America” idea also includes the Chamber of Commerce and major players in the energy sector. As the Commerce Department worked to meet a late July deadline to present a plan to the president requiring oil and gas pipelines to be made with American-made steel, Trump’s allies in the energy sector warned that this might play havoc with his goal of energy dominance.

Gillespie is correct about the low percentage of manufacturing jobs. This decline occurred over many years, largely through natural efficiency gains, but as Gillespie hinted, external factors have also contributed. They had a significant negative effect that increased the decline, and removing those influences can provide some relief to manufacturing job losses.

Whereas technological advancement reduces the need for human work, natural progress in foreign countries is also a factor. In poor nations, people gladly work for pennies or quarters a day. While it may seem cruel to some of us to pay people so little for their efforts, those pennies or quarters are what enable them to achieve a better life in the less developed economy of their country.

If those workers can produce things that cost a fraction of what they cost when made by American workers, even after shipping them across the waters, businesses will go for the less expensive product in order to both enhance their economic situation and to keep the price of their products lower.

But DC elitists do things that artificially increase our costs compared to other countries. High taxes and over-regulation on businesses, both of which pressure American companies to reduce costs, especially through automation, to remain competitive, help push manufacturing jobs overseas.

The coal-mining sector is a good example of the effect of unnatural external factors. While natural gas usage was already increasing and coal use was trending down, Barack Obama’s war on coal sped up that process through artificial and capricious new anti-coal regulations. That forced a dramatic damaging decrease in coal use, wreaking havoc and harm much greater than if natural economic forces had been allowed to work.

Like coal mining, other manufacturing jobs are also affected by the artificial negative factors of over-regulation and high taxes. As Gillespie suggested, flatter and less distorting taxes and less regulation would easily and quickly help make American steel and other products more competitive.

Indeed, lower the 35% corporate tax rate to something near that of nations to which American businesses have moved jobs. This will encourage those companies to bring back to America some, perhaps a lot, of the $2.5 trillion that they currently hold offshore to avoid the high U.S. corporate tax.

While American manufacturing almost certainly cannot return to 1943 levels, we can repatriate manufacturing jobs lost to arbitrary and capricious anti-business policies. Doing so will create thousands of new jobs, increase productivity levels, bring in new tax revenue and, most importantly, make it easier and smarter to buy products “Made in America.” That label is far more than just economic. It’s a matter of feeling like America is great again, and that’s incredibly valuable.

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