Why US Manufacturing Matters


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A concise description of why the US cannot afford to loose its manufacturing base.

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Why US Manufacturing Matters

  1. 1. Can the US afford to continue its decline in manufacturing?<br />Glenn S. Daehn<br />Director, Ohio Manufacturing Institute<br />December 2009<br />
  2. 2. governing question:<br />Is it a problem if US manufacturing disappears?<br />Disclaimers:<br />Not a formal economic analysis.<br />Based on easily-available data and interactions with manufacturers. <br />
  3. 3. national debt<br />Bottom 2<br />
  4. 4. primary losses in US wealth<br />Cost of foreign conflicts (Iraq, Afghanistan)<br />Oilimports<br />Net imports ofmanufactured goods<br />Let’s compare magnitudes…<br />
  5. 5. military intervention<br />Iraqi Conflicts<br />Afghan Conflicts<br />Source: “Cost of Afghanistan, Iraq and other Global War on Terror Operations Since 9/11”, Congressional Research Services (RL33110)<br />http://www.fas.org/sgp/crs/natsec/RL33110.pdf<br />
  6. 6. oil imports<br />Net Imports 105 Barrels/day<br />Crude Cost / Barrel<br />Net cost oil imports<br />Net imports of oil from: US Govt Energy Information Administration: http://tonto.eia.doe.gov/country/country_energy_data.cfm?fips=US (sourced Dec 5, 2009)<br />Price/Barrel from: Illinois Gas and Oil Association: http://www.ioga.com/Special/crudeoil_Hist.htm (sourced Dec 5, 2009)<br />
  7. 7. hope for the service economy<br />Data from Bureau of Economic Analysis (US Department of Commerce) http://www.bea.gov/international/index.htm , Sourced Dec 5, 2009<br />
  8. 8. goods & services balance of payments<br />Net Balance on Services<br />Total Net Balance<br />Net Balance on Goods <br />Data from Bureau of Economic Analysis (US Department of Commerce) http://www.bea.gov/international/index.htm , Sourced Dec 5, 2009<br />
  9. 9. summary in round numbers<br />Cost of Conflicts $175 B/Year<br />Net Oil $300 B/Year (declining)<br />Net Services $140 B/Year<br />Net Imports of goods $850 B/Year<br />Other Initiatives:<br />ARRA – 2009 Stimulus Package -- $787 B<br />Health Care Bill -- “$1.5 Trillion over 10 Years”*<br />*Common Media Quote – exact estimate not possible. <br />
  10. 10. graphically, where’s our money going?<br />
  11. 11. importance<br />&quot;The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil... Right now, the rest of the world owns $3 trillion more of us than we own of them.” <br />Warren Buffet, AP, 1/20/2006<br />
  12. 12. conclusions<br />Trade balance in manufactured goodsrepresents the largest hemorrhage of wealth andpossibly THE biggest challenge to American economic security.<br />This may be the easiest of the primary sources to control.<br />
  13. 13. optimism<br />The US is still the largest manufacturing country in the world.<br />We have the most transparent business environment and still a great manufacturing infrastructure.<br />Companies, equipment and a skilled workforce remain. <br />Modern manufacturing is not terribly labor intensive. High wage countries can compete! (note Germany, Japan)<br />Modern operational methods and energy costs favor short supply chains.<br />Midwestern American manufacturing is central to the largest markets in the world. <br />
  14. 14. pessimism<br />• Manufacturing companies are highly-interdependent (think ecosystem or coral reef).<br />• Many types of manufacturing have fully left the US, greatly damaging the network.<br />• The machine tool industry has been especially hard-hit and used machine tools are selling for pennies on the dollar and leaving the country. <br />
  15. 15. OMI postulates<br />Local manufacturing is centrally important in national security and prosperity.<br />Local investment in a trained workforce and new processes, R&D and equipment is key in local manufacturing competitiveness. <br />The marketplace is global. We must stay globally competitive locally.<br />