The US manufacturing sector has been hit by hard times but few think George W Bush's appointment of a new job czar will do much to help
In a recent Labour Day pitch to union voters, president Bush announced the appointment of a new jobs czar.
'The new appointee, an assistant commerce secretary, will focus on the needs of manufacturers to make sure our manufacturing job base is strong and vibrant,' said Bush, who has seen 2.5 million factory jobs disappear on his watch.
In the real world, targeting policies to specific constituencies is typically associated with the Democrats ' tax cuts designed to put money back in the pockets of those who will spend it, not broad-based incentives intended to increase the entire pie.
Bush was not specific about what the new manufacturing czar will do once he or she is nominated and confirmed by the Senate. Presumably, it will not be to create New Deal or Japanese-style make-work projects.
There was no mention of tax incentives to encourage manufacturing companies to hire new workers. That leaves the new bureaucrat to do what the Commerce Department already does: promote US manufactured products domestically and internationally, leading to increased output and hiring.
Federal Reserve chairman Alan Greenspan does not think manufacturing jobs and output matter as much as president Bush does. In an exchange with congressman Paul Kanjorski, Democrat of Pennsylvania, following Greenspan's semi-annual monetary policy testimony to Congress on 15 July, the Fed chief said what the US produces is irrelevant.
'What is important is that economies create value and whether value is created by taking raw materials and fabricating them into something consumers want or value is created by various different services that consumers want, presumably should not make any significant difference so far as standards of living are concerned because the income, the capability to purchase goods, is there,' Greenspan said.
'If there is no concern about access to foreign producers of manufactured goods, then I think you can argue it does not really matter whether or not you produce them.'
While the Congressman did not ask, and Greenspan did not tell, the Fed chairman's assertion that it is access to, not output of, manufactured goods that matters leads to the conclusion that running a huge current account deficit does not matter, according to Joe Carson, director of global economic research at Alliance Capital Management.
Bush's appeal to manufacturing workers is pure politics: Bush is running for re-election, Greenspan is not. His next term is already secure. If reappointed to another four-year term as chairman next year, his fifth, Greenspan said he will serve.
Manufacturing as a share of the overall economy has been in decline for half a century.
As a percentage of nominal gross domestic product, manufacturing output shrank from a peak of 29.6% in 1953 to 13.9% in 2002, according to the Commerce Department's Bureau of Economic Analysis.
On an absolute basis, manufacturing jobs fell to 14.612 million in July from their apex of 19.553 million in June 1979, a time when the US economy was producing less with more (productivity was falling). In percentage terms, manufacturing jobs went from 21.7% of the total in 1979 to 11.3% today.
Some of the attrition is the result of increased productivity. On a fourth-quarter over fourth-quarter basis, manufacturing productivity fell 1.8% in 1979. That compares with a 4.9% increase in the four quarters ended with the second quarter of 2003. Manufacturing productivity has been growing faster than economy-wide productivity. The number of service producing jobs is virtually unchanged from when Bush took office in January 2001. Most services ' medical, legal, transportation and so on ' are not accessible overseas.
The US has no comparative advantage in producing clothing. That's why apparel is manufactured in China, where labour is cheap.
When the unemployment rate was 3.9% three years ago, no one was whining about China taking jobs away from US workers. Now, with the unemployment rate at 6.2%, it is a big issue and Bush is showing sympathy for laid-off manufacturers by doing something, even if it is just for appearance's sake.
'If Bush is under pressure to do something about a problem over which he has no control and the only thing he can do, reauthorising steel tariffs, causes harm, to throw the unions a bone by creating an assistant commerce secretary is no big deal,' said Bruce Bartlett, a senior fellow at the National Centre for Policy Analysis.
'Commerce is already loaded with people studying manufacturing. To organise them under a new assistant secretary does not matter.'
Bartlett is much more concerned about the administration's irresponsible approach to creating a new prescription drug benefit.
'They do not care about the details of the largest new entitlement programme in 30 years,' he said. 'There is not one iota of leadership.'
Perhaps a new assistant secretary for Health and Human Services is in order.
Bloomberg newsroom, San Francisco
'How to buy protection insurance'
As this year has proved
European markets down after Brexit news
2,000 clients to go
Challenging parliamentary arithmetic