ReMaking America Excerpts

Energy Manufacturing: The Linchpin for America’s Future
Carl Pope

…It is fair to say that America’s destiny depends on getting on the right side of history: the side of energy innovation. This is not only vital for the global climate, it’s also the key to both national security and economic recovery. But the United States is not united on this issue, not by a long shot.

Fortunately, the odds are that even the successful destruction of the Department of Energy loan-guarantee and finance programs for clean energy would not stop American manufacturers. Manufacturing is coming back, and it’s going to be driven by clean energy. The underlying economics of innovation are just too good, and the public desire for a new way of powering the economy is too strong.

… The energy sector has long lagged behind the rest of the U.S. economy in innovation. It’s not that energy and related sectors somehow failed to attract creative minds—think Edison, Ford, and the Wright brothers. Many of the great names in innovation pioneered one or another of today’s key energy technologies. And at the upstream end of energy, resource extraction, innovation roars along at a stunning pace:

… It’s a common mistake to think of manufacturing as somehow separate from innovation upstream and markets downstream. As a couple of recent U.S. examples show, the energy supply chain is an integrated one, and manufacturing rests on strong support for both innovation and open markets.

… But if anyone is still dubious about the appropriateness of a big federal role in infrastructure that gets the country off imported oil, think about it this way: If the price of oil were to decline back to $30 per barrel, the decrease in federal oil costs alone—$350 billion over 10 years—would pay for most of the needed investments in the nation’s transportation infrastructure at the level sought by the Obama administration.

… the United States is at risk of squandering this opportunity. Shale gas poses three challenges: It must be produced responsibly, used widely, and priced fairly. Failure approaches on all three fronts.

Why is this important? Because if the United States gets it right, it will dramatically reduce both electricity and process-heating costs for American industry; return to the country’s petrochemical industries the big competitive edge over the Middle East, Russia, and the like that they lost in the 1980s; enable the U.S. to kick the curse of coal in the utility sector; set the stage for the use of natural gas in transportation; and slash oil imports. Plus, the upstream manufacturing impact of gas drilling and exploration for supply chains in steel pipe, for example, is already taking up some of the slack caused by the mismanagement of the equally exciting American wind opportunity.

… The United States has just finished an ugly, vapid election. At least it was one in which manufacturing got more attention than it had in recent years. But neither candidate demonstrated a real commitment to doing what it will take to bring back U.S. manufacturing, even in the energy sector, where the case seems clearest.

… They need to be held accountable not for their rhetoric, but for their results. The next time a politician says, “Now, I like clean energy as much as anyone,” remember, this is code for, “I’ve been rewarded for helping to slow it down.”

The energy sector is too big to be sluggish and too important to remain in the last century. Energy innovation is too central to America’s manufacturing future to be sacrificed for the interests of the financial and extractive economies of the past.

The Role of Innovation Challenges and Opportunities
Sridhar Kota

…The United States still leads the world in two of the three steps to innovation, often being “first to acquire” and “first to introduce,” but it has been steadily lagging in applying the knowledge that its creative minds generate. Being “best in the world” in scientific discoveries is important, but it is not sufficient in itself to keeping any nation viable in today’s global economy.

… At this point, the United States has lost ground or is on the verge of losing ground to global competitors in many economically important advanced-technology industries that got their start in America: among them are flat-panel displays, lithium-ion batteries, solar cells, and nanotechnology.

… Companies choose to expand or set up new manufacturing facilities based on many factors, among which are taxes and trade regulations, as well as access to capital, markets, and a skilled workforce. But two additional factors that are often overlooked matter even more: engineering know-how and the presence of supply chains. Many electronics products, the Amazon Kindle and Apple iPhone being good examples, can no longer be made in the United States, primarily because their supply chains are now rooted in Asia. A similar erosion of supply chains in defense-critical technologies or products would be strategically dangerous.

… Although the acronym identifying its “STEM Education” effort stands for “Science, Technology, Engineering and Mathematics,” NSF spends only $15 million on engineering education, barely more than 1 percent of the $1.3 billion it directs to education in science and mathematics. The important question here is not how much more the nation should be investing in engineering versus science, but how it can allocate available resources to ensure that the benefits of the science it funds come back to taxpayers as a return on investment.

… Although the federal government continues to invest in basic research, which in turn continues generating new ideas and scientific breakthroughs just as it did when Bell Labs was there to develop them, it is now other nations that are picking up the results, capitalizing on U.S. discoveries and inventions and creating value for themselves. Losing the corporate research institutions of the past has significantly impaired America’s innovation ecosystem—the ability to transition good science into U.S.-based manufacturing. If the United States proves unable to find the 21st Century equivalent of those legendary hotbeds of creative industry, it may concede forever its lead in innovation and prosperity.

… As of 2010, 38 American universities had 65 branches in 34 countries25 whose most popular programs are in the sciences, engineering, and business. But the trend of attracting additional hefty tuition dollars from foreign students has gone beyond educational missions.

A growing number of research universities in the United States have established overseas satellite research labs—some far more advanced than those at the home institutions—lured by massive investments by host countries eager to capture the “secret sauce” of American innovation. As host countries spend lavishly on scaling American inventions into commercial products, the knowledge, skills, and infrastructure needed for the next generation of innovation begin to take root, raising more questions about the benefits U.S. taxpayers are gaining from the investments they are making in academic research.

… Establishing a National Innovation Foundation (NIF) within the federal government would be an excellent step toward coordinating R&D in advanced manufacturing and would enable strategic investment to reduce the risk both of developing emerging technologies and of ensuring their manufacturing readiness. A NIF could be created without raising federal expenditures by consolidating various existing programs and crafting a vision focused on strengthening economic and national security.

… It is critically important that both policy makers and citizens understand the importance of investing in engineering to confront the challenges that face the nation. The United States’ economy must remain vibrant, diverse, and flexible in a world that continues to challenge it to be great, helpful, and strong. A new, engineering-friendly economy that values both research and development can become the basis for American prosperity.

The Blueprint forReMaking America
Scott Paul

…I believe the good news to be this: a new American manufacturing is rising from the ashes. Detroit has never made better cars. American steel mills have never been so efficient. No other nation is better at making complex systems like aircraft or heavy machinery. The manufacture of sophisticated computer equipment, offshored over the past decade to Taiwan, Malaysia and China, is returning, ever so slowly, to America: Google’s glasses; one line of Apple’s Mac computer; Lenovo’s laptops. Companies that long ago abandoned American factory workers are, without much accompanying irony and with a bit too much bravado, now complaining they can’t find enough of them: see General Electric, Whirlpool or Caterpillar.

Outsourcing is out; insourcing is in.

… One of President Barack Obama’s principal promises for his second term? Create a million new manufacturing jobs. His Administration’s tax strategy? Cut taxes for businesses that manufacture in America. He’s launched initiatives to encourage public-private partnerships on manufacturing innovation and a skilled workforce. He rescued the auto industry. His Administration has quietly embraced “Buy America” requirements for more federal investment. He’s enforced American trade laws like no other recent president. There’s a lot more he could be doing—tackling currency manipulation, working to reduce the trade deficit, making sizable investments in training. But no one can dispute that the Obama White House has given enhanced attention to American manufacturing.

… All told, Obama, Romney and their supporters spent nearly $700 million during the 2012 general election on ads focused around jobs, outsourcing and trade. They spent $45 million on “get tough on China” ads. Not a dime was spent on the opposite message. One of the most popular physical images in campaign ads? The factory. And in 2012, we saw politicians strolling through modern industrial workplaces, in addition to the usual assortment of abandoned factories, padlocks and pink slips.

… Without more manufacturing, it will be virtually impossible to rebuild the middle class, reduce the trade deficit or innovate the next amazing generation of products.

… There are some who say that manufacturing does not deserve a strategy. They’ve managed to get a lot of ink. Christina Romer, the former chairwoman of President Obama’s Council of Economic Advisers, took U.S. manufacturing to task in a 2012 New York Times op-ed head- lined “Do Manufacturers Need Special Treatment?”… She’s asking the wrong question. Manufacturers don’t need special treatment. Just a level playing field.

… From a strategic (though perhaps not an economic) point of view, the United States does not want to depend on China to supply its military with vital parts, computer chips, rocket propellant and surveillance equipment. But if America loses the capacity to manufacture any of its key national security components, it won’t have a choice.

… Unfortunately, the Obama administration’s Treasury Department has let the most egregious trade cheating — that of the Chinese government — slide despite numerous opportunities to do something about it since the start of the president’s first term.

Currency manipulation is pretty simple: A country keeps the value of its currency deliberately low versus the U.S. dollar. This makes the country’s exports artificially cheap when entering the U.S. market while simultaneously imposing a tax on U.S. exports entering its own market.

China does this. And who is China’s biggest trading partner? The United States of America.

… While Americans wait for their political leaders to stand up to a country that is clearly cheating at trade, U.S. producers suffer from the hidden tax of currency manipulation, while the nation’s unemployment rate remains frustratingly high and its trade deficit with China grows wider each day.

… Tax reform must support rather than undermine domestic production. As the facts above show, manufacturing, agriculture and other industries that produce things would see their tax burden increase significantly if tax reform simply eliminated deductions and credits, and used the resulting revenues to lower tax rates. America’s long-term economic success and future opportunity for its workers depend on a tax code that supports and promotes investment in innovation, production and job creation in the United States.

… If you build it, they will come. A famous line from Field of Dreams, yes. But it’s also the solution to the so-called workforce-skills gap.

…There is no doubt that it will take some time to strip off the rust that the last few decades of neglect have left on vocational education for manufacturing careers. But too many just want to point fingers: at kids, for not being smart enough to realize the benefits of a manufacturing career; at schools, for not focusing enough on STEM education to prepare the workforce; at popular culture, for portraying factories as desolate and factory workers as desperate; or at the nation’s leaders and counselors, for suggesting to students that a four-year college degree is the only path to success in America.

… There are three things Congress and the Administration should do to ensure that these tax dollars stay in the United States, supporting economic development and investment in the American economy:

• Support Buy America.
• Defend America with American-Made Products.
• Prepare for the Next Super Storm.

The Future of Manufacturing
Irene Petrick

This chapter is a story about the future of manufacturing based on three predictions:

• that firms of all sizes will have increasing access to high-performance computing capabilities that will enable sophisticated modeling and simulation both of new products and production processes;
• that additive manufacturing will become commercially competitive across a wide range of industries and will support the use of multiple materials; and
• that new business models relying on information technology (IT) will reduce the administrative overload both of bidding and winning contracts and of delivering products and services.

Together, these trends will favor localization of manufacturing over today’s more centralized, economies-of-scale production models based most recently on offshore outsourcing. A fourth trend—a rise in the number of hobbyists who become designers and producers of one-off and small-lot products—will change the definition of “manufacturer” and may, in fact, return manufacturing to the garage. An IT-driven transformation in the manufacturing sector is inevitable.

… This is also a story about the changing dynamics within current supply chains, where the traditional David-and-Goliath relationships are evolving. If these predictions are borne out, David may triumph over Goliath more frequently in the future, and at least will enjoy the luxury of increased self-determination.

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