Source: Blog – Alliance for American Manufacturing

President Joe Biden delivers remarks at an announcement with Siemens on a “Future Made in America”, Friday, March 4, 2022, in the South Court Auditorium of the Eisenhower Executive Office Building at the White House. Official White House Photo by Adam Schultz

Alliance for American Manufacturing President Scott Paul reflects on President Joe Biden’s manufacturing legacy.

Decades from now, economic and political historians may well look back at the Biden administration as being a transformational one for the American economy.

Here’s how they’ll know: Our nation will have robust supply chains, unbothered by tsunamis or canal blockages. We’ll be global leaders in the development and manufacture of technologies that haven’t even been imagined today. We’ll have restored balance in our trade relationships, no longer racking up trillion-dollar trade deficits in goods. We’ll have airports and other infrastructure that are the envy of the world, rather than feeling (and looking) like our best days are behind us. And finally, our middle class will be growing and thriving.

That’s a best-case scenario.

President Joe Biden’s 21st century industrial policy may prove to be temporary, in which case we’ll continue to see the erosion of our status as an economic and geopolitical superpower. That would be an enormous mistake, whether the rollback occurs for political or philosophical reasons.

But whatever your view of Biden’s accomplishments, flaws, and actions on other policy matters, one fact is unassailable: He reinvigorated the idea of a modern and uniquely American industrial policy, based on a thesis first offered centuries ago by Alexander Hamilton.

In 1790, Congress tasked Hamilton, America’s first Treasury Secretary, with developing a strategy for manufacturing in America; no small task considering the states’ agrarian bent, the industrial dominance of Great Britain, and our fledgling federal system.  

His 1791 Report on Manufactures laid out a rationale for industrial policy, and its initial composition – right-sized tariffs, “bounties” (aka subsidies), internal improvements (aka infrastructure), along with safety and intellectual property protections – formed a basis for economic policy that was championed in the future by Henry Clay, Abraham Lincoln, and Franklin Delano Roosevelt. There’s a strong likelihood that America’s status as the second industrial power after Great Britain would have been delayed or denied if Hamilton’s recommendations had been ignored.

These pragmatic underpinnings bring me back to Biden.

Biden, as both a U.S. Senator and Vice President, certainly identified with working-class concerns, but he possessed a neoliberal outlook on trade policy and voted for all the disastrous trade deals. Not a likely candidate to lead an economic revolution. When I heard his 2020 campaign rhetoric and read his trade and manufacturing policy platform (which looked a lot like AAM’s own wish list), I was skeptical. Lots of candidates talk a good game on “Made in America,” but few from either party have delivered on it.

Biden proved me wrong. He embraced crisis like no president since FDR to change our economic arc. In the wake of the 2020 pandemic, Trump and his administration had launched temporary income support for desperate families and Operation Warp Speed to produce a Covid-19 vaccine, but those were acute measures. So was President Obama’s response to the Great Recession.

Biden, over the course of his first 19 months, set in motion steps designed to transform the economy. Right away, he established a Made in America office in the White House to show he meant what he said, and despite loud calls from his own party, he largely kept tariffs in place on an array of Chinese products, as well as steel and aluminum. He ordered a sweeping review of our vulnerable supply chains in February 2021. Those actions set the tone for things to come.

In November 2021, Congress passed a $1.2 trillion infrastructure investment. Purely rhetorical “infrastructure weeks” morphed into a durable infrastructure decade. The size, scope, and terms of the investment are all notable: the largest investment of its type in our history, an expansion of infrastructure from roads and bridges to clean water, broadband, and energy systems, and a permanent mechanism to ensure we’re sourcing the materials for all of this building from American factories – a policy called Build America, Buy America. While infrastructure funding is sure to be targeted by future austerity hawks, and the Buy America requirements can get “loopholed” so much that they stop being effective, this public investment is likely to help America compete globally and add jobs for years.

For many presidential administrations, the infrastructure law would be viewed on its own as an extraordinary accomplishment. But for Biden, that was just the beginning. In February 2022, the White House released its review of critical domestic supply chains, providing a framework for interventions designed to safeguard American economic and national security. The value of this report, updated in December, should be durable; It can shape policy, expose vulnerabilities, and reveal market and investment opportunities for entrepreneurs. After all, semiconductors aren’t the only products we should be looking to make more of in America. Think pharmaceuticals, batteries, and critical minerals.

Speaking of semiconductor chips, thanks to a bipartisan group of lawmakers and the Biden administration, we have a CHIPS and Science Act. The law was enacted in August 2022 after years of legwork, and it led to an immediate surge in domestic factory construction. CHIPS is important for several reasons. First, it aims to restore American leadership in semiconductor manufacturing. Second, it should help to guard against disruptions in the microelectronics supply chain, which roiled the economy a few years ago. Finally, it represents an overdue and necessary return to industrial policy outside of traditionally favored interests such as petroleum, agriculture, and defense.

Just a week after CHIPS was signed, the Inflation Reduction Act (IRA) made its way to Biden’s desk. Most relevant for manufacturing are its numerous tax credits, incentives, and capital supports for manufacturing clean energy technologies. The law itself was the result of a delicate compromise suitable to then-Sen. Joe Manchin (D-WV) and within the allowed framework of a legislative mechanism known as budget reconciliation. That’s the long way of saying it’s far from perfect, but it has unleashed massive private investment in clean energy vehicles and infrastructure, solar and wind manufacturing, and new industrial facilities with fewer carbon emissions. We can debate all we want about climate change and various types of energy, but America will get left behind if we don’t aggressively invest in the technologies and industries of the future.

In sum: Over the course of just 19 months – a Made in America office, critical supply chain review, and roughly $2 trillion for infrastructure, microelectronics, and clean energy manufacturing.

Importantly, Biden was backstopping these internal efforts with a trade policy that differed radically from prior Democratic administrations. He kept in place most Trump-imposed tariffs and added new and preemptive tariffs on a number of Chinese products, such as electrical vehicles and batteries. He imposed sanctions and limitations to keep cutting-edge technologies away from the Chinese Communist Party. He refused to play ball with the deeply flawed World Trade Organization and instead relied on American-led efforts to contain unfair Chinese trade practices. He did not put forward a single free trade agreement or auction off access to America’s markets at the expense of working people. His administration repeatedly utilized a mechanism in the USMCA to support workers’ rights in Mexico. And his administration accepted or initiated important trade cases on Chinese shipbuilding and semiconductors.

We should recognize there were plenty of missed opportunities to go further, do more, or change course. While Biden will be the first president since Bill Clinton to leave office with more manufacturing jobs than when he started, that likely won’t be the way he’s remembered. Americans still clearly felt anxiety over inflation, prices, and scarcity. The goods trade deficit is still $1 trillion. We’re still having challenges keeping factory jobs on an upward trajectory. And we’re still dangerously vulnerable to Chinese control over critical supply chains and materials.

No president can regulate the macroeconomic and global forces that impact the U.S. economy, which can wash away the impact of industrial policy. There are still too many national Democrats who clutch neoliberalism, reject tariffs, and prioritize the wrong sectors of our economy. And don’t forget the vigorous opposition of many Republicans to these initiatives. There’s a real question about how sustainable this Biden industrial policy will be.

My hope is the incoming Trump administration will recognize the unspoken alignment on containing China and finding smart ways to boost domestic production. I believe they’ll see it’s in their interest to avoid a landscape of half-finished chip factories, monthly employment reports showing factory job losses, and the prospect of Chinese EVs dominating the world.

Until that debate comes: Accept this note of gratitude for the pragmatism of Joe Biden when we needed it the most.

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