AAM Letter to Congress: Pandemic Response Should Include Industrial Policy

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We must be better prepared for the next crisis, and that requires taking bold action.

The coronavirus is settling into America like an unwelcomed house guest. We only got a week of the welcome distraction of baseball (even with the weird, unnecessary, pumped-in crowd noise) before the Miami Marlins all got it, and it doesn't take a lot of close reading to realize the season’s back on the brink. Plus, we only got a week of President Trump taking the virus seriously before he started tweeting about hydroxychloroquine again.

Worse yet: The economic recession is settling in along with the virus. Even with unemployment at 11 percent, the expanded federal unemployment benefit that has been a lifeline to millions of Americans will run out unless Congress figures out a way to get a deal done in the next couple of days.

The Democrats want something like $3 trillion spent on a lot of different types of economic aid. The Republicans want something like $1 trillion.

The economy is moribund. A lot of our fellow Americans are out of work. Something must be done.

It’s time to consider an industrial policy.

In a letter to Congress, the Alliance for American Manufacturing has outlined a plan for a bona fide industrial policy that will promote growth and shared prosperity in the months ahead – when we’ll likely be still dealing with the Covid-19 pandemic.

Among the policy’s proposals are infrastructure spending:

“Past stimulus spending on infrastructure has focused on 'shovel ready' projects, which overlooks larger projects that are critical to preventing bottlenecks of economic activity. While bridges, locks and dams, and other large-scale projects may take longer to complete than repaving roads, materials-intensive projects generate a greater multiplier return with benefits rippling throughout the supply chain of domestic suppliers while preventing debilitating bottlenecks to the U.S. transportation system and economy.”

Expanded Buy America coverage:

"While existing Buy America laws are of immeasurable importance to American manufacturing, they are nonetheless limited in their application and have been eroded over time with loopholes and weak agency enforcement–leaving billions of U.S. tax dollars spent annually on foreign products. There are numerous infrastructure programs that have no Buy America coverage whatsoever, and those that do apply to only a limited amount of material inputs with as much as 95 percent of capital spending on a highway project, for example, not covered by Buy America. Unfortunately, the 'Buy American, Hire American' executive orders signed by President Trump–including one directed at energy infrastructure –fall short and have not resulted in any discernible improvements to the application of our Buy America laws."

A ”Whole of Government” approach to reshoring critical manufacturing capacity:

"We must shore up suppliers of key materials, such as electrical steel, that are essential to our energy grid and EV charging infrastructure. There is currently only one manufacturer capable of making the electrical steel necessary for power transformers left in the United States. It makes little sense to exchange one energy dependency, oil from the Middle East, for another dependency on (electric vehicle) batteries, ships, steel, solar panels and other key components of our evolving energy needs from China and other foreign sources."

And tying the awarding of recovery money to domestic job creation:

"Federal relief assistance granted to multi-national companies should be conditioned on commitments that those dollars be allocated to U.S. operations along with robust reshoring plans. Jobs created or supported should be those of American workers; and critical supply chains strengthened by federal dollars should be those here in America."

The letter also includes recommendations on ongoing trade negotiations and policy, trade enforcement, demand stimulus for the domestic automobile industry, and greater transparency in country-of-origin labeling for consumer-facing products.

Read the whole thing here. And wear a mask please!