The myth of "bringing back manufacturing"

Answering a question I get repeatedly on Twitter and on the radio

A guy on Twitter named Matt threw this at me.

BTW, do you believe bringing back American manufacturing is bad policy? If so, why? And why don’t you want more Americans to have jobs?

I’m responding at length because I get a lot of these.

I believe that if America can manufacture things in ways that make us competitive (i.e. so that customers want the combination of cost and quality of what is made here) then the market will move that manufacturing here.

I do not believe in government policy designed to tax the population and remove consumer choice in order to subsidize businesses that are otherwise too inefficient or non-cost-competitive to justify being here.

You talk as if we have 20% unemployment because we've lost manufacturing jobs. But of course that's nonsense. Unemployment is low and has been for a long time, even as we were losing manufacturing jobs.

We used to be a nation where something like 95% of people were farmers. Now it's around 2% or 3%. Do you think we should impose government policy to ban the use of motorized and mechanized farm equipment so that we "bring the farm jobs back?"

I also note that manufacturing employment has been plummeting around the world for a few decades now due to the use of automation. We, and every other country, makes more with fewer people than ever before so even "bringing back manufacturing" will create fewer jobs than you think.

And where will those workers come from if we're only at 4% unemployment which is below what the Fed used to call the "natural rate"?

And do YOU want to work in a factory? Did you see the @FrankLuntz thing a couple of weeks ago when he asked two questions: 1) should the US create more manufacturing jobs (vast majority said yes) and 2) do you want to work in a factory (vast majority said no.)

Are you aware that US industrial output is at an all-time high? (Although it has been fairly stagnant for the last 20 years as compared to the steady up-trend for decades prior.)

There's no doubt that the US and the industrialized west lost manufacturing jobs to China. BUT, my understanding (and you're welcome to try to prove me wrong) is that there's also no country that has lost more manufacturing jobs than China in the past 25 years or so (due mostly to automation though also partly to losing some businesses to other parts of Asia as the price of labor rises in China and as American and European companies look to diversify supply chains to reduce the risk of exposure to China.)

Also, remember that the stuff is being made in China (or Mexico or Canada or Vietnam or Thailand, etc) because that allows American consumers to save money. This leaves us with more money to buy other things, save for retirement, get a nicer house, put our kids through college, etc. What Trump is saying is, "I don't care about any of your personal goals. I want to tax you so that we can create a handful of manufacturing jobs because I think the 1950s economy was a better type of economy."

And if you look at the data, you'll find that jobs "created" this way cost consumers and/or taxpayers FAR more than the incomes to those workers whom you claim to care so much about. Is it reasonable to tax Americans $200,000 for each $70,000 job? That's how it works.

There are two ways to increase manufacturing jobs in the US if that's important to you. (It's not important to me, though I do want to weaken China and not to be dependent on enemies for critical materials.)

First is Trump's way, which is the stupid way: punish American consumers, raise prices, take away consumer choice by "protecting" American manufacturing which ALWAYS results in industries that are less efficient and less innovative and which often then fail despite being protected.

Or, second, incentivize coming here through better tax and regulatory policy. It's true that we have high labor costs here and that's unlikely to change. So we will never be able to compete, and shouldn't try to compete, in highly labor-intensive manufacturing like inexpensive clothing or inexpensive furniture. (High-end stuff is a different question, but there aren't many jobs in that.)

But where much of the ability to produce is based on technical skill and productivity, the US worker can justify a higher cost to employ...but not infinitely higher. Think about the incredible cost to employers of our health insurance mandates and laws. A cheap health insurance plan now costs more than an expensive plan used to cost. That's ALL due to government. Endless rafts of regulation, including stuff that explodes the cost of building facilities, are a huge problem. The US should get rid of as much of that stuff as possible so that the US worker can actually compete on his/her own merits.

I also note that we need to do a MUCH better job of educating kids in math and science in high school so that we get more American kids into STEM studies in college. As was discussed on my radio show the other day, a massive percentage of the best researchers and scientists and engineers in America are not American.

To be clear: I love that very smart people from other countries want to come here. We should welcome them. We should make it easier for them to stay here after graduation. (We must be VERY careful with Chinese students because of their government's willingness and ability to use them as spies and thieves.) AND we should also do a much better job getting more American kids into these fields because in our high-tech global economy we should be in a stronger position than we are. (I don't mean we're weak, but not as strong as we should be.) If we bring a lot of high-tech manufacturing to the US (which the CHIPS Act aims to do), where do you think those workers will come from? High-tech companies considering expanding here consistently mention the shortage of qualified workers.

Matt, as your question proves (with your ridiculous "why don't you want more Americans to have jobs?") this entire conversation from Trump and others is based on a complete lack of understanding of economics.

I encourage you to do two things: read more about economics, maybe starting with Thomas Sowell. And remember that almost everything Donald Trump says about economics, but especially about trade, is wrong.