Washington Insider-- Thursday

Tough Fight to Save Manufacturing

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

GOP's Thompson Criticizes Sudden Partisanship on House Ag Panel

House Ag Committee Ranking Member GT Thompson, R-Pa., Wednesday asked the Democrats why they turned partisan in latest ag aid measure. “It is with a measure of regret that we begin our tenure together marking up this reconciliation bill,” Thompson said. “The members of the Ag Committee have long prided ourselves on our bipartisanship.”

While the two sides have been work together, Thompson expressed disappointment at the actions being pursued on the COVID-19 aid plan. “Rather than spending time to work with Republicans, the Democratic leadership in the House and Senate are abusing the reconciliation process to jam through a very narrow, partisan agenda with the barest of majorities,” Thompson said. “Unfortunately, this flawed approach is now being adopted by this Committee. What we are marking up today was written behind closed doors; Republicans were cut out of the process. The first time we saw this $16 billion proposal was less than 48 hours ago. “

Thompson also was critical of the panel not holding any hearings on the COVID response efforts that were deployed by USDA. “We cannot fully account for what was spent and whether it was helpful,” he stated. “What's worse, we don't know what the new needs are and if we're meeting them with this package today.”

Restaurants, Small Businesses Get Fresh Relief In Draft Package

The House package includes $7.5 billion in additional funding for the Paycheck Protection Program (PPP) of forgivable loans for small businesses.

The House Small Business Committee released its draft language for its elements of President Biden's COVID-19 relief plan. The PPP only just re-opened last month, thanks to fresh funding approved in the December aid bill. The House Small Business Committee will vote on the text today. The new proposal creates a $25 billion program for restaurants and other food and drinking establishments.

A fifth of the funding will be set aside for the smallest firms — those with 2019 revenue of less than $500,000. The grants, available in amounts as large as $10 million per entity, may be used for expenses including payroll, mortgage, rent and utilities. The new initiative would be welcome news in the hospitality industry, which has been among the hardest hit during the pandemic crisis.

Washington Insider: Tough Fight to Save Manufacturing

Bloomberg is reporting this week that President Biden is beginning to approach the challenge of rebuilding the nation's manufacturing jobs—that are some 582,000 below pre-pandemic level. The report says Biden, like several predecessors, began by “promising to restore hope to a blue-collar middle class battered by decades of relentless job losses from automation and foreign competition.”

But it warns that the realities of trying to stoke U.S. manufacturing employment in the wake of an economic crisis may risk “endangering his plans.”

After a period of recovery last year, U.S. factory payrolls stagnated in recent months, then went into reverse in January. The country is on course to repeat a pattern seen in every recession since manufacturing jobs peaked in June 1979: a structural step-down in employment even amid a sustained expansion in output.

As President Biden starts to lay out plans for the long-term economic rebuilding program designed as a follow-on to his $1.9 trillion COVID-19 relief bill, “the business calculus of American manufacturing looms as a headwind,” Bloomberg thinks.

Bloomberg then presents an “analysis” of plant-closure notifications sent by companies to state officials around the country that shows that fallout from the pandemic is far from over. Employers, who have already cut a net 582,000 factory jobs compared with the pre-COVID-19 level, aim to emerge leaner and meaner from the crisis.

For example, in Ferndale, Washington, Mayor Greg Hansen watched Alcoa, the biggest U.S. aluminum producer, close a smelter last year that operated for more than half a century. The decision put 700 workers, the equivalent of 5% of the town's residents, out of work without any obvious pathway to another job.

In nearby Bellingham, Safran Cabin, which makes overhead baggage compartments and ceiling panels for Boeing airplanes and Mitsubishi regional jets, will be shutting its local plant by year-end, laying off another 250.

That left Hansen confronting the same problem plaguing small American factory towns for decades. “We need to try to figure out what do we do now and make sure we have good blue-collar jobs” for those affected, Hansen says. “That's a much bigger, more difficult puzzle to figure out.”

Bloomberg notes that even companies like Caterpillar Inc., one of the world's largest machinery makers, are trying to plan for what remains an uncertain recovery. Wall Street analysts don't expect its sales to return to pre-pandemic levels until at least 2025. In a move intended to boost morale, the company has reinstated employees' annual salary increases and kept health care premiums unchanged for at least some employees for the first time in years. But its 2020 annual government filing will likely show employment dropped for a second straight year.

How much U.S. industrial capacity will end up being cut is unclear, Bloomberg says. Industrial production in December was 3.6% lower than a year earlier, with capacity usage 5.3 percentage points below its 1972-2019 average. More recent data from purchasing-manager surveys show orders for manufactured goods expanding at the start of 2021.

But there are bigger questions over the return of jobs--and the political reverberations that would accompany a failure to bring them back in important swing states like Michigan and Pennsylvania.

United Steelworkers President Tom Conway is already worried about a jobless recovery. “That's what happened in 2009,” Conway says. “We'll see productivity take a big pop with no significant increase in the workforce” and remaining employees “working 12-to-16-hour days for months on end,” he fears.

Biden and his team are well aware of the danger, Bloomberg says. Even as the president woos business support for his relief plan – showcased in an Oval Office meeting Tuesday with chief executives – he's planning a bigger role for the government in this recovery, with money for both research and demand creation, via infrastructure programs, procurement policies, reshoring initiatives and long-term priorities including climate change.

Biden is due to visit the industrial state of Wisconsin next week. That's in the run-up to a congressional address in which he is expected to lay out his “build back better” plan, including components to create more manufacturing jobs that advisers hope will spark some bipartisan action.

“In the area of manufacturing and infrastructure – and they are related – there could be and should be some bipartisan interest,” Biden economic adviser Jared Bernstein said in an interview. “There are lots of states that are red, blue and purple that would very much be interested in signing on to a jobs agenda with high-value-added manufacturing jobs.”

U.S. manufacturing still faces plenty of long-term challenges. A forthcoming study of Indiana by the Brookings Institution and the American Enterprise Institute found that the most manufacturing-intensive U.S. state was plagued by declines in productivity and investment and a rotation from production jobs to warehousing ones.

Between 2001 and 2019, Indiana lost 72,000 manufacturing jobs, the report found, a number that “puts the last year in perspective:” there were 36,000 fewer factory workers in Indiana in December than just one year before.

So, we will see. The drivers of competitive success are highly complex and often arise from better technologies. How well those mesh with the needs of the labor force are difficult to anticipate, and clearly will pose large challenges for the new Biden team—and will lead to intense debates regarding new policies that producers should watch closely as they emerge, Washington Insider believes.

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