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Offshoring became a mantra for corporate America in the past decade, as companies shifted production abroad to save on wages and overhead. Now, a halting recovery in manufacturing employment in the United States — fueled by low domestic energy costs and rising wages in emerging economies — has pushed the industry to the front of a new bipartisan drive to spur job creation before the 2014 elections.
President Barack Obama signaled his party’s pivot to manufacturing jobs during a visit to an ArcelorMittal steel mill in Cleveland on Nov. 14. “We should do everything we can to revitalize American manufacturing. Manufacturing is, that’s the hub of our economy. When our manufacturing base is strong, the entire economy is strong,” Obama said. Partisan firefights over implementation of the health care law and on fiscal priorities have left little room for big-ticket items in the 113th Congress and with the prospect of stalemates on legislative action on immigration and a tax overhaul, lawmakers may see the continued revival of domestic manufacturing as an opportunity to move less-divisive provisions.
They may move measures that have already been written that would provide incentives for research, job training and investment, and tax cut extensions such as those in the fiscal-cliff agreement.
Supporters have seized on the 4 percent expansion to 12 million manufacturing jobs since 2010 to make the case for more incentives to sustain, and build on, the growth. Although the growth is relatively modest, it follows a shakeout in the industrial sector that saw the loss of a third of all manufacturing jobs between 2000 and 2010, as companies turned to outsourcing and later dealt with the 2008 financial meltdown.
While some of the recent job gains may be part of a cyclical rebound, labor experts such as Martin A. Schmidt, acting provost of the Massachusetts Institute of Technology, said it signals that the industrial sector is anxious to expand and that the “reshoring” of jobs can accelerate if companies can generate new products, find skilled workers and raise more capital. “We need to find ways to strengthen our supporting infrastructure in the manufacturing sector,” he said.
With that goal in mind, Mark Begich of Alaska, chairman of the Democratic Steering and Outreach Committee, said job training and research would be top priorities in early 2014. “We’ll come back from the holidays, start the year fresh and talk about jobs,” he said.
Sen. Chris Coons of Delaware, the point person for the Democratic manufacturing agenda, said incentives could move on different vehicles, such as a job training reauthorization, a proposal to raise the hourly minimum wage from $7.25 to $10.10, and a replacement for the continuing resolution that expires Jan. 15 .
He has been discussing with allies such as Sen. Roy Blunt, R-Mo., possible strategies for structuring and moving bills. “The goal is not one big package, but a series of bills that make sense,” Coons said.
“We’re trying to see what we can come up with that might have broad bipartisan support,” Blunt said.
Other conservative Republicans, such as Sen. John Hoeven of North Dakota, said they would prefer to focus on two priorities that raise red flags for Democrats: easing regulatory curbs and expediting trade deals. “Regulatory relief, that’s the biggest thing,” Hoeven said.
Others see expanding trade opportunities as the best path to foster a U.S. manufacturing revival.
House Ways and Means Chairman Dave Camp, R-Mich., and Senate Finance Chairman Max Baucus, D-Mont., have announced they will try to renew fast-track trade promotion authority for Obama. But some lawmakers in both parties are leery of ceding authority for sweeping deals such as the pending 12-nation Trans-Pacific Partnership. And both parties disagree on how to structure a possible extension of trade adjustment assistance for displaced workers.
Despite such disputes, Rep. Tom Reed, R-N.Y., a co-chairman of the 106-member House Manufacturing Caucus, said bipartisan proposals could gain ground as both sides hunt for accomplishments before the 2014 elections. “Jobs is the No. 1 issue in America, on top of Obamacare. There are so many districts on the Republican side that rely on U.S. manufacturing,” he said.
Reed and others point to recent factory expansions and domestic sourcing deals in red states. For example, Apple Inc. announced plans this month for a new consumer electronics factory with 700 workers in Arizona. Chinese computer-maker Lenovo opened its first U.S. assembly plan with 115 workers in North Carolina in June. And Arkansas-based Wal-Mart Stores Inc. has agreed to buy an additional $50 billion in U.S.-made goods over 10 years.
As more announcements roll out, Reed and other lawmakers are betting there will be more consensus for manufacturing incentives.
In his visit to Cleveland, Obama made the case for a proposal by Blunt and Sen. Sherrod Brown of Ohio to expand a network of manufacturing research hubs backed by private-public partnerships to develop new processes, materials and products. They would be similar to the National Additive Manufacturing Innovation Institute in Youngstown, Ohio, which is developing three-dimensional printing technology. But the bill faces hurdles because of its $600 million price tag, which would be offset by a rescission of Commerce Department funds.
Key players in both parties also have their eyes on grants for energy-efficient equipment, repeal of the medical device tax and an extension of the research and development tax credit. Tax breaks could move on their own, if a tax overhaul loses traction. Coons also hopes to move sweeteners for startup ventures such as a research-and-development credit with tax measures, and he has his eye on a new batch of House GOP proposals to ease securities regulations.
House Rules Chairman Pete Sessions of Texas said Republicans are skeptical of new mandates and write-offs and would prefer to remove hurdles to investment. One proposal by Rep. Michael G. Grimm of New York would loosen limits on business development companies. “The key issue that we have is getting capital, and being able to get a loan,” Sessions said.
Other lawmakers in both parties are trying to address the skills gap in the labor force. A 2012 study by the Deloitte consulting firm found that industry could not fill 600,000 positions because workers lacked training.
One proposal by Brown and Sen. Susan Collins, R-Maine, would expand on partnerships of businesses, agencies and colleges to focus on job training for specific industry sectors. Another bipartisan proposal by Sen. Kay Hagan, D-N.C., would encourage development of industry-recognized training credentials.
Last spring, the National Association of Manufacturers made the case for bold measures to ease regulations, slash taxes and broaden trade to fuel a manufacturing revival. Speaker John A. Boehner of Ohio called for similar measures in June to “unleash our nation of builders.”
Tom Duesterberg, a researcher at the Aspen Institute, said favorable changes and trends might create 3.7 million manufacturing jobs by 2025.
With both parties deadlocked on big bills, such a scenario seems unlikely, for now. Still, Jay Timmons, NAM’s president and CEO, said modest proposals could provide “a critical path towards bipartisan agreement.”
But with or without such action by Congress, Robert LaLonde, an economist at the University of Chicago, envisions slow growth in manufacturing employment.
The Bureau of Labor Statistics reported that the economy added 204,000 jobs in October, including 19,000 jobs in manufacturing. But it also said manufacturing employment had been roughly flat since February.
“It will grow, but it won’t grow by much,” LaLonde said.