Obama's "Framework for Revitalizing American Manufacturing" a Step in the Right Direction

Blog Post | January 04, 2010 - 4:13 pm

On December 16, 2009, President Obama released a report on revitalizing manufacturing in the United States. The report lays out the current state of manufacturing in America, discussing seven key cost drivers, how government action—or inaction—can affect those costs, and how the Obama Administration plans to use government influence to improve American manufacturing.

Some key backgrounds discussed in the report are:

  • the successes of American manufacturing: "the United States has had the largest increase in manufacturing output among major developed countries" since 1978
  • that manufacturing directly provides quality jobs: manufacturing employees earn 22% more than service sector employees and are more likely to have employer-provided health care
  • that manufacturing creates three jobs in other sectors for each job in manufacturing.
  • the reasons for the decline in manufacturing employment
  • the effect of manufacturing on communities

The report details seven ways in which government can impact manufacturing costs and lays out specific policy proposals that will aid American manufacturers. The seven items are:

  1. Provide workers with the opportunity to obtain the skills necessary to be highly productive
  2. Invest in the creation of new technologies and business practices
  3. Develop stable and efficient capital markets for business investment
  4. Help communities and workers transition to a better future
  5. Invest in an advanced transportation infrastructure
  6. Ensure market access and a level playing field
  7. Improve the business climate, especially for manufacturing

While none of the individual policies are new (many call for increased funding for certain programs or cutting bureaucratic red tape for small businesses), this is the first time an administration has acknowledged the impact government has on manufacturing and has made a coordinated effort to ensure the effect is a positive one.

ACEEE applauds this report as a vital first step in improving American manufacturing. However, the report underrates the role role energy efficiency can play in increasing manufacturing competitiveness. Energy efficiency lowers energy costs, which are typically higher in the U.S. than in many competing countries. This makes energy efficiency a key target for improving American manufacturing. Additionally, producing advanced energy-efficient products, much like producing renewable energy equipment, can allow American manufacturers to retool and serve a much needed market segment.

This is not to say that energy efficiency is absent in the Obama plan. There are a number of policies that would improve manufacturing energy efficiency in America, such as:

  • Job training—while not directly targeting efficiency, a more educated and better trained workforce is a key need for improved industrial energy efficiency.
  • Doubling R&D budgets—unfortunately the report does not mention the important research done through DOE's Industrial Technologies Program.
  • Doubling funding for Manufacturing Extension Partnerships—the MEP program focuses on improving competitiveness more broadly, but also achieves gains in energy efficiency.
  • Advanced Energy Manufacturing Tax Credit—encourages manufacturers to retool to produce clean energy technologies, including energy-efficient products
  • Investments in advanced transportation infrastructure—lowers the cost of transporting freight.
  • Modernizing the electric grid—enables energy efficiency through greater controls, among other benefits.
  • Next-gen information and communications technologies—ICT has already been one of the largest contributors to manufacturing energy efficiency in the last 20 years.
  • Passing comprehensive energy and climate legislation—if a climate bill like ACESA in the House or an energy bill like ACELA in the Senate is passed, it will mean billions of dollars for manufacturing energy efficiency. However, both bills fall short of what truly comprehensive energy legislation could accomplish.

One policy not mentioned in the report is DOE's Industrial Assessment Center (IAC) program. Expanding this program (as directed under the ACELA bill) would establish workforce training at universities and community colleges, improve competitiveness of American manufacturing, and reduce energy use.