On Making Our Own Stuff Again

On Making Our Own Stuff Again
Import Substitution Factor in Economic Recovery Plan

Spending on Right Infrastructure Good First Step

with John Michael Spinelli

Columbus, Ohio: The foreign trade goal of third-world countries who want to graduate to emerging economies is to substitute imports with goods made at home instead of in foreign nations. American manufacturers, spurred on by tax policy that paid them to outsource millions of middle-class jobs over a decade and more, have turned the one-time butcher into the fatted calf that China and Pacific Rim nations, where labor is cheap, have been feeding on for quite some time.

Having lost millions of jobs due to policies like NAFTA, the North American Free Trade Agreement, that a political outlier like Ross Perot, running as a third party candidate in 1992 against then-president George H.W. Bush and a young, brash governor of Arkansas who would twice be elected president, said would produce a great "sucking sound" as jobs crossed the Rio Grand, was the tipping point of American manufacturers who used to make goods with American labor, making goods with low-cost foreign labor that were then imported to a hungry nation of consumeroids trained to buy not to save.

But America is now caught in a a fierce recession that could take it down like the La Brea Tar Pits did to once-mighty creatures who inadvertently got caught in and succumbed to its sticky ooze. To extricate ourselves from the fate that met Saber-toothed Cats and other creatures of prey whose bones are testament to their misguided misfortune, maybe its time America starts doing what emerging nations have done to keep their hopes alive, their money at home and their jobs from wandering abroad: start making our own stuff again.

It might not be the best for corporate bottom lines and the shareholders that enjoy them, but it sure would be good for the top lines of American families and the communities whose survival is dependent on their incomes. Would you rather pay a dollar less for something and create a job overseas or pay a dollar more and create a job for your neighbor? The answer to me is no contest.

The nation could loose 3.5 million jobs and unemployment could be 9 percent or higher, according to Lori Montgomery of the Washington Post. Speaking on the News Hour on PBS, she said 41 states face budget deficits now, among them Ohio, where a potential $7.3 billion gap is the largest in history. Montgomery said Obama's spending payout could last two years due to the fierce recession facing the nation. Montgomery said fixing rather than building would get more money more quickly percolating through the economy. For the construction trades, who she said have the highest rate of unemployment of any sector, over 10 percent, traditional infrastructure spending would be best. But she said a "green stimulus" may well be part of the estimated $775 billion Obama's economic team is talking about now. If the plan is good "economic medicine and not just a grab bag" for politicians, she said it would be viable.

Economist Robert Frank, also interviewed for a segment on infrastructure spending, said that if the "government doesn't spend, we're in for a terrible downturn." New Jersey Governor Jon Corzine rattled off projects like the Hoover Dam, the TVA, the Golden Gate Bridge, the George Washington Bridge and the Holland and Lincoln Tunnels as WPA projects that made a tremendous contribution to reducing employment in the 1930s and still serve the nation nearly 80 years later. He said such spending won't be a panacea, but it will contribute to putting idle hands to work.

The first thing we can start making is our infrastructure. Weeks ago I wrote "Pax Obama Stars in Rebirth of a Nation," my opinion about President-elect Barack Obama's need to fix, repair and build infrastructure systems like water, sewer, roads, bridges and rail that can put lots of people to work quickly. But he also needs a grander strategy for continued job creation. World War II saved the bacon of Franklin Delano Roosevelt, whose turn to conservatism in 1936-37 nearly quashed his mighty works programs like the WPA and CCC that created much-needed jobs for the nearly quarter of the workforce out of work. Obama and the new Democratic Congress must overcome the vortex of forces driving our current economic meltdown by playing their infrastructure trump cards early and smartly.

Newly minted Nobel Prize winner and New York Time's columnist Paul Krugman seems to echo my prognosis to prosperity in his Monday column. In it Mr. Krugman opines that more will be needed than the Obama's expected pursuit of $800 billion or more in deficit spending to turn the economy around.

In so many words, Krugman appeared to endorse the Spinelli plan of "lets make our own stuff again."

"A more plausible route to sustained recovery would be a drastic reduction in the U.S. trade deficit, which soared at the same time the housing bubble was inflating. By selling more to other countries and spending more of our own income on U.S.-produced goods, we could get to full employment without a boom in either consumption or investment spending...Despite rising trade in services, most world trade is still in goods, especially manufactured goods — and the U.S. manufacturing sector, after years of neglect in favor of real estate and the financial industry, has a lot of catching up to do." [Paul Krugman, New York Times]

A growing chorus of advocates who want to see more federal and state investments in infrastructure cautions that not all infrastructure is created equal. This piece posted on the progressive Web site Daily Kos said that investments in roads and bridges, while why might be "shovel ready" would only harden America's dependence on cars and become magnets for more public spending because they don't last that long.

"The last thing, the absolutely last thing, that America needs now is more miles of highway. Pave another half a million miles of road, and you end up repaving up to fifty thousand miles of that a year. And the costs of infrastructure goes up sharply when that new highway starts to attract housing development.

"A hundred billion dollars invested in new highways is no investment at all. It's a commitment to spend another ten billion a year. Forever. Recreating the employment and energy of the WPA is a great idea. Replicating the outcome is begging for a white elephant we can't afford." [Daily Kos ]

The growing interest in rail-oriented infrastructure, as attested to when the lion's share of public transportation projects on the November 4 ballot passed, shows that America is ready to consider and pay for alternatives to cars. This may not be good for Detroit's Big Three car manufacturers, but if they got behind the ball on this, as I said they should do in "Time Right to Shake Up Detroit," they too could benefit, as could their suppliers who are thirsty for new systems and the new components needed to build them.

Making our own stuff again starts with conventional infrastructure, including roads and bridges, but must expand to new public mass transit systems that can create a bounty of middle-class jobs, the lifeblood necessary to rebuild our urban cores.

John Michael Spinelli is an economic development professional and former Ohio Statehouse political reporter and business columnist. To send a tip of comment, email ohionewsbureau@gmail.com