How to get manufacturing back to the States

These are a bunch of random thoughts from my lunch break today. This argument will be framed under a hypothetical scenario: imagine if Apple would relocate its production to the United States. What would need to happen for this to occur? Two factors.

1. How do you convince a middle class person to consider a manufacturing job as middle class? First off, manufacturing has always had a respectable ethos (the satisfaction of building stuff with your hands); it just never was a signifier of upper class access to sex. The middle class strives for a white-collar job where you don’t get dirty and “brains over brawn” predominates. Fair enough. At the very least, manufacturing has to be able to pay an attractive middle class wage before tackling the other social image issues. If you could make $25-35 an hour building iPhones, you might jump at that opportunity.

2. How do you maintain profit margins when paying middle class wages? Apple goes to China for the labor, pure and simple. There are three potential excuses when dealing with logistics: do you have a labor force, do you have infrastructure, and do you have a site. With the modularity of construction techniques today, as well as the vast network of US Highways and Interstates, both the infrastructure and site issues are a non-issue. Apple could whip up a factory building and ship over the tools and machinery within a few months. A labor force is clearly the limiting factor.

Here is my theory on how we could blast US manufacturing into the next dimension and solve the recession easily.

Make a pact with manufacturing companies like Apple. Promise to cut all operating taxes if they relocate operations to the United States. Part of the pact is that they must offer consumer products as close to current market prices as possible while turning prior tax revenue into employee salaries. Seriously. As of right now, taxes get dumped into entitlement programs(medicare), defense, and state budgets. Fuck that. Send the government check to the company to make their (and our) wildest dreams possible. Its not trickle-down economics if your boss is physically handing you a $25-35 an hour paycheck. The current tax sinks would work just as well coming from a society that produces so much that it has time for philanthropic expenditure into said social programs. But if this could happen, everyone would be jumping to work, thereby greatly reducing demand on social programs- a perpetuating cycle.

If they could find a balanced budget way to do this, the company would be free to skim profit from the reduction in transportation costs. Tack on an associated incentive for creating growth around the immediate vicinity. Find ways to initially make the switch income-neutral (and completely patriotic, aka “We don’t really need to do this, but it would look really good and people would embrace us returning to the USA”). Make the switch income-positive in the long term future.

 

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5 Responses to How to get manufacturing back to the States

  1. Rotten says:

    That’s a recipe for cronyism. The business’ exemption from taxes is worth more than the actual business. Potential profits will be reinvested in politicians instead of R&D. Taxes should be lower and overall business climate (regulations) should be better, but they need to be better for everybody.

    To really get manufacturing back to the state what is required is either (1) protectionism, which will dramatically lower the standard of living of everybody, or (2) making the US business climate internationally competitive plus dismantling the excesses of feminism and the welfare state.

    As to the business climate, if the average corporate tax rate of our competitors is 14%, with 0% on profits earned overseas and brought back into the country, then the USA needs to beat that. If the average competing country has simple regulations that make sense and don’t require armies of lawyers to do business, then the USA needs to beat that.

    Obviously, feminism and the welfare state are driving up the demands for revenue and causing some of the more expensive regulations. So, balance the budget at 9% of GDP for best growth, if that is unreasonable in the short term, aim for a Clinton era balanced budget at 19% of GDP. Start cutting programs if you go over this.

    And special attention has to be paid to how female hypergamy interacts with the welfare state.

    A single mother of 2 earning $28,000 takes home an income equal to what a single man earning $72,000 makes. (the income + benefits – taxes are equal. Both will get a net after tax income of about $57,000). Actually, she will make more than the man if her state has an income tax, plus, since she has kids, she is getting child support payments. The overall point is, in order for a man, any man, to attract such a woman by being a good provider, that man has to beat her income, and the number required to beat that income is unrealistically high.

    And if a man is married to such a woman, the income he needs to bring in in order for her to value his work is equally high. Now women value many things in a man other than his ability to work hard and provide for her (it probably isnt even top 10). But current interactions of the welfare state and female hypergamy have destroyed the value of work. Unless the income number for the man is high enough, he will have to be attractive in some nonproductive other way (being a bad boy gangsta would count). The only reason that men ever work in low status jobs is to get laid and provide for families, and if they can’t get laid or provide for their families, them they will not do these jobs.

    • Grit says:

      Good points about hypergamy. Cronyism might be bad- cutting deals with corporations- but we essentially operate cronyism for single mothers like you point out.

      Can you clarify that point comparing a 28k salary vs a 72k salary. How does a single mom take home 57k -twice her paycheck?

      • Rotten says:

        Most of it is direct welfare payments, child care credits, housing credits, Medicaid benefits, food stamps, earned income tax credits, and all of the other welfare transfers. Obamaphone would count too.

        This leads to a separate problem known as the dependency trap. Google ‘dependency trap for academic literature on this. Direct welfare transfers from the government phase out at the same income levels that progressive tax rates (thanks Bush!) kick in. So just as you earn enough to get off Medicaid, you are getting hit with higher marginal tax rates. In other words, It just isn’t worth it to take those extra shifts. But how are you ever going to get the promotion, if you never take the extra shifts.

        Here’s an article from 2009 on the phenomenon. http://mises.org/daily/3822 This article does not include the child care credits, but be aware that welfare payments have only increased since 2009.

  2. Matt Strictland says:

    A good concept doomed to fail. Making a deal with a corporation is like making a deal with a T-Rex. They might think they took the the deal but in the end they’ll just eat you.

    Also automation is whats killing manufacturing as much as outsourcing. Even if we clawed back every lost job, we’d still need far fewer people and with the immigration driven population growth, we still will not have enough work.

    Wtach some old footage on assembly lives vs say How its Made and you’ll see a big difference.

    The only reason China has the jobs now is the labor s cheaper than the machines.

    When that stops being the case, they won’t have them either, something that for other reasons is slready a-foot.

    If an actual long term solution were possible (and in the US its not) it would involve Nationalism, Distributionism, Social Credit, Work Sharing and a real National Health Care System all in a non rigged market. Given our corruption levels , internal ethos and cultural issues that will happen after Guatamala has a Mars colony.

  3. Doc says:

    Most people do not know that Apple used to make everything in the US – CA no less… Wanna know why they stopped? They were building a plant – and the cleaning solvents were all expensive, and the machinery was specific for those chemicals. Right before Apple was to open it’s doors, CA changed the rules making all of those chemicals illegal to use – basically making all of that money Apple spent wasted since now the machinery was worthless since it could only be used with those specific chemicals.

    So what to do? Sell the land… Move your manufacturing to China and don’t worry about CA’s stupid laws…

    That is what is wrong with the US – the laws change and put you out of business… I can’t plan for that – what I can do is figure out the cost of moving overseas and the rest if profit. The US is doomed when everyone wants to save a “snail-darter” that has been going extinct for 10,000 years… It was going extinct before we moved in, and we are just wasting money trying to stand in the way of other – more successful creatures…

    The US economy is what is ultimately going extinct, and for a good reason… They are non-competitive, and when you can’t compete, either due to lack of resources, or a Government that is Anti-business, you are doomed…

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