The Key to Prosperity: Manufacturing American Jobs

In his recent major speech at the American Enterprise Institute (AEI), House Majority Leader Eric Cantor (R-VA 7th District) called for Republicans to "focus our attention really on what lies beyond the fiscal debates" and to create "conditions for health, happiness and prosperity."

It appears that the national conversation may be about to pivot from an almost obsessive concentration on big government and expense reduction to a concern for the well-being of the individual citizen and revenue generation. That's good news because while the majority of the politicians and pundits have been talking about the fiscal cliff the American public has been staring at an economic abyss.

This abyss is a slow to no growth economy, a job vacuum, stagnating wages, and substantial and increasing income inequality. We will not be able to avoid the abyss by cutting government spending or reducing the nation's debt and deficit.

To do that, we need to implement a national agenda to manufacture American jobs. There is nothing more important than a plentiful supply of good paying jobs to create the conditions for individual and national prosperity.

That is why we need a jobs agenda. That agenda needs to be designed to address the abyss and the factors that are shaping it. These include but are not limited to: sequestration; declining small business start-ups and job creation, a sluggish construction industry; lack of break-through innovations; and, the structure of our economic rewards system.

What is the current nature of the abyss? Here are a few facts and figures:

The GDP in Q4 of 2012 was 0.1 percent, the first quarter of negative GDP since the second quarter of 2009. Some freakish factors such as a 22 percent reduction in defense spending accounted for this and economists didn't feel that the performance was signaling a recession. On the other hand, Bank of America was only forecasting GDP growth of 1.0 for Q1 of 2013 -- hardly the sign of a robust recovery.


The Bureau of Labor Statistics official unemployment rate stood at 7.9 percent. When workers who have fallen out of the workforce are taken into account that rate is 9.3 percent. The Federal Reserve that the unemployment rate will not fall to 6 percent or below until 2015 or later.

From 2000 to 2011, the median income for working age households shrank 12.1 percent to $55,640. According to the Economic Policy Institute, since 2000, productivity has increased by 23 percent but wages have stayed essentially the same.

The share of wages going to the top 1 percent went from 7.3 percent in 1979 to 12.3 percent in 2010. Emmanuel Saez, an economist at the University of California at Berkeley, found that 65 percent of the nation's income growth from 2002-2007 went to the top 1 percent of households.

What is the future nature of the abyss? Here is what some experts and indicators are suggesting:

The Congressional Budget Office projects the across-the-board sequester process could eliminate 1.4 million jobs. The Bipartisan Policy Center says the process will eliminate at least one million jobs in this year and next. The Pew Research Center notes that "Overall, about one fifth of federal grant funding to states will be subject to the sequester. But, the percentage of funding in each program area that would be vulnerable to any cuts varies greatly."

Small Businesses: Start-ups and Job Creation:

According to the Bureau of Labor Statistics, the number of "new establishments" rose until 2006, then from 2007 through 2010 they declined by an average of 40,053 per year with a slight increase in 2011 of 29,316. A Gallup poll released in December 2012 reported that small business owners expect to add fewer new jobs in 2013 than at any point since the depths of the recession in 2008.

The McGraw Hill Construction Industry Forecast for 2013 projects a total U.S. construction increase of 6 percent to $483.7 billion. This compares to $641 billion in 2007. As Juan Rodriguez notes in writing for, however, these projections are "completely unpredictable as funding for construction projects will become the most important factor." Anirban Basu, chief economist of Associated Builders and Contractors, makes a similar observation, noting, "... the fiscal cliff represents a nonresidential construction industry cliff as well."

Innovation Stagnation:

Economists Tyler Cowen of George Mason University and Robert Gordon of Northwestern University argue that the United States economic growth has been and will be retarded into the future because of the lack of transformative technological breakthroughs comparable to other industrial eras. Cowen labels this the "Great Stagnation." Gordon in his paper titled, "Is U.S. Economic Growth Over? Faltering Innovation Confronts Six Headwinds" asserts that "continuous economic growth is not inevitable" and speculates that "future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades."

A recent study revealed that one-third of the overall increase in income going to the richest 1 percent has resulted from increased corporate profits. In contrast, wages which have typically been around 50 percent as a percent of GDP have been on a steep decline since 2001 and hit a record low of 43.5 percent in 2011. There is nothing we have seen to indicate a reversal of these trends going forward.

Sum them all up and the bottom line from these prognostications is that -- unless some positive intervention is made -- the abyss deepens and the future for the average American will look more abysmal rather than less.

This should be unacceptable. We need a national Manufacturing American Jobs Agenda and we need it now. That agenda should build upon traditional American strengths such as manufacturing, innovation, quality, productivity and entrepreneurship. We will present some of our thoughts and recommendations for that agenda in our next blog.

The title of Majority Leader Cantor's AEI speech was "Making Life Work." The best way to make life work is to put Americans to work in jobs that promote their self-worth and economic well being. A jobs agenda does that. It is an idea whose time has come.

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