U.S. Manufacturing, Alexander Hamilton, and the Presidential Election

In addition to giving rise to a great Broadway hip-hop play, Alexander Hamilton was the founding father of the U.S. pro-manufacturing movement. In 1791, he wrote a report to the Congress extolling the virtues of U.S. manufacturing.
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In addition to giving rise to a great Broadway hip-hop play, Alexander Hamilton was the founding father of the U.S. pro-manufacturing movement. In 1791, he wrote a report to the Congress extolling the virtues of U.S. manufacturing: "Not only the wealth, but the independence and security of a country, appear to be materially connected with the prosperity of manufactures. Every nation, with a view to those great objects, ought to endeavor to possess within itself all the essentials of a national supply. These comprise the means of subsistence, habitation, clothing and defense." Report on Manufactures, 1791, Alexander Hamilton, Secretary of the Treasury.

Much of this remains true today, and both Presidential candidates seem to agree on that at least, but they have not come up with the formulas to solve the problem. To that end, the Indiana University School of Public and Environmental Affairs (IU SPEA) has created a Manufacturing Policy Initiative, the first and only program at a United States University dedicated to developing the best public policy solutions for U.S. manufacturing. On Wednesday, September 14th, the IU SPEA Initiative held a major public policy conference at the National Press Club in Washington, entitled "What the Next President Should Do About U.S. Manufacturing, An Agenda for the First 100 Days."

One hundred and eighty-five people gathered for the event and panels were held on the key public policy issues we need to solve to revitalize U.S. manufacturing: Education and the Skills Gap, International Trade, Manufacturing and National Security, Tax Policy, Regulatory Policy, and Innovation. Representatives from business, labor, academia, and the public policy community made presentations, as did two Senators, the Co-Chair of the Manufacturing Caucus from the House of Representatives, and senior policy advisors from both the Clinton and Trump campaigns.

Why do we need a strong manufacturing base? There are at least six reasons:

oFirst, the jobs. Manufacturing jobs are important for the job base of the United States. Depending on when you start and stop, the United States has lost over six million manufacturing jobs, bringing us down to about 12 million. And it isn't that things aren't being made any more. There are over a hundred million people employed in manufacturing in China.

oSecondly, technology. The United States will not have a robust technology and R & D base without manufacturing. People say we can keep the research here and manufacture somewhere way off-shore. Over time, that will not work. The United States is already seeing research migrate off-shore as high technology industries are migrating off-shore. According to the Information Technology and Innovation Foundation, manufacturers pay for and perform approximately 70 percent of U.S. industrial research and development, and they are about three times more likely to create innovations than other firms. Manufacturing firms receive 90% of the issued patents. If we don't have manufacturing here, we'll lose that.

oThird, the overall health of the U.S. economy. The impact of the manufacturing sector on the U.S. economy is very large--and disproportionately large in terms of its multiplier effect. According to the Manufacturers Alliance for Productivity and Innovation, the manufactured goods value chain accounts for one-third of U.S. GDP. It's a real driver of the whole U.S. economy.

oFourth, national security. As was discussed at the conference, the United States will not be able to maintain our national security without a strong manufacturing base. You cannot build aircraft carriers, advanced weapons filled with sophisticated semiconductors, and fighter jets that are protecting us from ISIS without a very robust United States manufacturing base.

oFifth, manufacturing jobs have traditionally been high paying jobs with benefits, and a way out of poverty and into the middle class. Our economy is not in a state where we can say we don't need more high paying jobs and we don't need jobs that pave the way out of poverty. The United States needs both of these things.

oAnd sixth, manufacturing creates enabling technology which changes the world. For example, the microprocessor, the desk top computer, and the software related to that enabled the IT revolution and later the internet. If we had not had major manufacturing technology companies in the United States these breakthroughs might never have happened, and they certainly would not have happened in the U.S. The next economic revolution won't happen here if we don't have manufacturing here.

So what are the solutions? At the IU SPEA Conference six recommendation papers were prepared by the panel moderators on the topics mentioned above, Education, International Trade, National Security, Tax, Regulatory Reform, and Innovation. They are available on the IU SPEA website: https://spea.indiana.edu/mpp/2016-conference.html

To summarize, some of the key ideas proposed at the conference include pausing all international trade negotiations for one year, while the United States undertakes a top-to-bottom review of the effect of international trade agreements on U.S. manufacturing. If they are not beneficial, in what way should we change our trade policy? On education, we should promote apprenticeships and skills training, with the same vigor we emphasize a four year college degree. On national security, we need to make more of what we need for defense on-shore and revitalize our defense supply chains. U.S. business tax rates have to be lowered to competitive levels so manufacturing is less likely to move off-shore. We have to assure that government regulations on manufacturing do more good than harm, and the permitting process needs to be streamlined. Finally we have to fund innovation at high levels in the United States, equal to or more than our manufacturing country competitors. If we do all these six things right, it will make a real difference.

The recommendation papers were provided to each Presidential campaign, as well as to the moderators of the upcoming televised Presidential and Vice-Presidential debates. We hope this will be an active area of discussion in the rest of the campaign and in the first 100 days of the new administration.

As to Alexander Hamilton, we have one final recommendation, not yet part of the official papers of the conference, directed to Lin-Manuel Miranda, creator of the hit musical. Could you add a new act to the play? Just one short act, having it focus on U.S. manufacturing public policy and Alexander Hamilton's devotion to that cause? We think that could really help us move this forward. (Even just one song--if that's all you can do--would be very helpful.) Thanks!

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