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 Richmans' Trade and Taxes Blog

Obama's Failing Industrial Policy
Howard Richman, 11/5/2010

In October, U.S. manufacturing employment declined for the third straight month while overall unemployment remained unchanged at 9.6%. The graph below shows the number of workers employed in U.S. manufacturing since January 2008:

President Obama has pinned his hopes for a manufacturing revival upon industrial policy, the idea that government bureaucrats should pick the companies of the future and subsidize them. His Export Promotion Cabinet is supposed to manage this policy. But the latest anecdotal report, from the Oakland Tribune, explains why it is not working:

Solyndra Inc., the high-flying solar panel maker once touted by President Barack Obama as a model for a green energy future, said Wednesday it has scuttled its factory expansion in Fremont, a move that will stop the company's plans to hire 1,000 workers.

Solyndra said it will also close an existing factory in the East Bay. That will leave the company with one Fremont factory, a new plant visible from Interstate 880....

The company's fortunes sparkled in September 2009, when the Obama administration announced $535 million in taxpayer loans to finance construction of a new solar-equipment factory....

Solyndra ... is behind its competitors in cutting costs, [GTM Research analyst Shyam] Mehta said.

There is an alternative that would actually revive American manufacturing, the scaled tariff. Instead of relying upon bureaucrats, it relies upon the marketplace to choose winners and losers. It's rate goes up when our trade deficit with a country goes up, down then our trade goes down, and goes to zero when trade approaches balance. Such a tariff would increase American exports to the trade-manipulating countries, reduce American imports, and revive American manufacturing investment.