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1 John A. Tatom, Manufacturing Employment Productivity and the Business Cycle 1 (2004)

handle is hein.taxfoundation/bpecxz0001 and id is 1 raw text is: -----------February 2004, Number 42 Mailufacturinlg EMlyment, John ATatom MhAM Executive in Residence, DePaul University Visiting Scholarj ax Foundation The U.S. manufacturing sector has become the poster child of the jobless recovery, portrayed by columnists and politicians as the latest victim of the Bubble Economy Manufacturing employment has fallen 2.6 million since the last recession began in March 2001, accounting for the lion's share of the 2.7 million decline in payroll employment from March 2001 to its trough in August 2003.The overall decline in manu- facturing employment has actually been even larger, 3.0 million, because it began in July 2000, eight months before the recession began. On Labor Day 2003 President Bush called for the creation of a new position of Assistant Secretary for Manufacturing in the Department of Commerce.The National Association of Mamfacturers has called for a new strategy for renewal of U.S. manufac- turing, referring to the sector as being in jeopardy. Congress is even considering legislation, such as the American jobs Creation Act (H.R. 2896), that would lower the corporate income tax rate for the nation's manufacturing sector. Treasury Secretary Snow has succeeded in reversing long-standing U.S. exchange rate policy, calling for flexibility of Chinese and Japanese exchange rates. Notice that the focus is on two countries where he believes that flexibility would lead to a lower value of the dollar (and not, for example, Hong Kong, where it would not).The new U.S. policy has succeeded in pushing down the dollar sharply against the currencies of nearly all our major trading partners. The administration has certainly been responsive to manufacturers' concerns, notably by imposing steel tariffs despite the evidence that they hurt 'U.S. manufacturing and employment overall. Duesterberg (2003) provides a long list of factors that have contributed to industrial decline, including Japanese and Chinese currency manipulation and relatively high taxes. The political and economic polie situation is becoming critical. In the 1980s, the deindustrialization of America and the hollowing out of the American corporation supposedly threatened to turn us into a nation of hamburger flippers and promised a Day of Reckoning. 'The irony was that manufacturing and the economy as a whole The view that the LS was losing its competitive advantage and that the manufacturing sector was in. permanent decline or disappearing was popular in the 1980s. See Marris (1985), Cline (1986) and Peterson (1987) lor some earlier examples NAM (2003) and Duesterberg (2003) provide updated reincarnations of these earlier claims. Strauss (2003) points out many of the recent claims' shortcomings.

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