Calling a Code Red in the Rust Belt; governors in the nation's rust belt increasingly worried

Reuters ^ | 09-12-03

[Brian S]

Fri September 12, 2003 11:14 AM ET By Karen Pierog and Susan Kelly

CHICAGO (Reuters) - The prospect of a jobless economic recovery has governors in the nation's rust belt increasingly worried that the thousands of manufacturing jobs lost during the recession and the tax revenues they generated are not coming back.

"I'm sending up the alarm," said Michigan Gov. Jennifer Granholm in a recent interview. "We are at code red in terms of loss of manufacturing jobs and the shifting of these businesses offshore."

In Michigan, where manufacturing accounts for one out of every five jobs, more than 170,000 factory jobs have been shed over the last two and a half years, according to Granholm.

The state's unemployment rate hit 7.4 percent in July, the highest among Midwest states, as a tight budget has seen income tax revenues slip due to the climb in joblessness.

Nationally, manufacturing job losses totaled 2.7 million over three years, with another 44,000 disappearing in August -- the 37th straight month of declining U.S. factory employment.

At this rate, "in five and a half years we will have zero manufacturing jobs in America," said Richard Dauch, incoming chairman of the National Association of Manufacturers.

Dauch, chief executive of Detroit-based auto parts maker American Axle & Manufacturing Holdings Inc., said companies are saddled with higher costs for health care, labor, energy, regulations, taxes and litigation, while fierce global competition prevents them from raising prices.

"We have such incredibly high fixed costs that need to be absorbed, and we have dynamics that are driving costs much higher, when we don't have pricing power anymore," he said.

U.S. policymakers must address trade barriers that create huge imbalances with our partners and must provide more investment tax credits for research and development. They also must find ways to streamline regulations and stop excessive lawsuits, and emphasize science and technology in our education system, Dauch added.

Granholm, Michigan's freshman Democratic governor, has taken aim at those problems.

She wants to rally other rust belt governors around a plan to help manufacturers stay and expand in their states by pressuring the federal government for regulatory reforms and a more-level playing field for international trade. She particularly pointed to lopsided trade with China, which has benefited from its currency's non-floating relationship with the U.S. dollar.

But David Littman, chief economist at Comerica Bank in Detroit, said political rhetoric will not change the realities of the rust belt and the willingness of businesses to shut down and move to more accommodating locations.

"The incentives aren't here," he said. "Odds are they are elsewhere, where someone wants what we once had."

MANUFACTURING MATTERS

Other states besides Michigan are climbing aboard the "manufacturing matters" bandwagon. Fearing the loss of good-paying manufacturing jobs threatens the long-term economic stability of Minnesota, Gov. Tim Pawlenty this month announced a series of regional round-tables to bolster that sector.

Wisconsin Gov. Jim Doyle, whose state lost 14,400 manufacturing jobs over the last year, has targeted the manufacturing of high-end products using well-paid, highly skilled workers. Milwaukee-based Harley-Davidson Inc. motorcycles is one example.

"We think that's where our future in manufacturing lies," he told Reuters in an interview.

Companies want states to address environmental protection laws and other regulations that raise the cost of doing business, said Gary Corrigan, spokesman for Toledo, Ohio-based auto parts maker Dana Corp., which has closed more than 30 plants in two years.

[dennisw]

Tariffs.

[dts32041]

Cut back spending, you know thinks like legislature sallaries and pensions, close government buildings like governor's mansions and legaslative buildings.

Cut taxes.

[Ronaldus Magnus]

The loss of our domestic manufacturing capability is a direct threat to our nation's security.

[Ronzo]

Nope, those jobs aint' comin back. Never. Not ever. And that's not a good thing.

It's too late to throw up a barrage of tarriffs. We undercut ourselves, and now we are paying for it.

I wish I could find some sort of "postive note" in all this, but everyone I know in manufacturing is either worried sick or looking for another line of work...like Wal-Mart greeter or landscape artist, which is about the only jobs left for blue-collar workers. (Well, there's the trades...they seem to be doing OK for the moment...)

But manufacturing isn't the only area that's shrinking irreversibly, same thing is happening on the tech & service sides now that big corporations have found out that India can do tech stuff as well as Americans, if not better, and it costs a whole lot less.

Yeah, this is one awesome recovery we're having....

[Uncle Miltie]

Does Willie Green really have two logons?

[viaveritasvita]

Being a Michigander, this makes me sick. All these crazy taxes and regulations and BS from Washington (NAFTA, H1B, outsourcing, China most favored trade nation!!!) is just suicide. Damn them!

[Tribune7]

Right to work would do wonders for some of these places.

[Brian S]

Does Willie Green really have two logons?

I know Wille Green on FR, I think of Wille Green as a friend of mine, I am no Willie Green...except in my dreams. :)

[Brian S]

Sorry Wille about the missing "I" in your name...damn foreign import keyboard. Really have to "smack" the ".... I" key... ;)

[mongrel]

I have a theory and I'll get blasted for this. But I think we're seeing just the beginning of a union and democrat organized media hype about losing jobs. And it looks like it's working.

I couldn't figure out why Democrats kept harping about the economy, when history tells us we will be in recovery by the time the election rolls around. But what I think they were/are banking on is that unemployment always lags behind a recovery. So now that the recovery starts, begin the incessant drumbeat of jobs, jobs, jobs and somehow make it look like it's Bush's fault. By picking up this theme and tying it to the overall economy, they make this claim stronger.

The reality is that NAFTA came courtesy of Clinton, and the current recession was as severe as it was because it was delayed by voodoo. The end of the Clinton boom years were propped up by accounting lies and dot-com hype.

The media is hyping a situation that has been slowly building for years as an opportune way to get a Republican out of office. Kind of like there was rampant homelessness during the Reagan-Bush I years, but it disappeared during the Clinton years. (Even though the numbers never changed.)

[MissAmericanPie]

Bout time someone became alarmed. Now the governors should think about making their states more business friendly.

[afraidfortherepublic]

But manufacturing isn't the only area that's shrinking irreversibly, same thing is happening on the tech & service sides now that big corporations have found out that India can do tech stuff as well as Americans, if not better, and it costs a whole lot less.

You are highly perceptive. Manufacturing is hurting, and the American standard of living will eventually be fatally wounded as a result. The large corporations are part of the problem because they are leading the charge to outsource overseas for cheap labor. I don't know what the answer is but I do know that I cannot continue to pay all kinds of insurance, environmental fees, benefits, etc. and still compete with government subsidized overseas manufacturing. Many of my customers are able to import a fully assembled product from overseas (and not just from Asia -- we're talking the Czech Republic and other parts of Europe) and have it delivered to their loading dock for less than the parts alone cost me. Technology that American companies spent years developing is copied and stolen and nothing done about it.

I heard from a local manufacturer last week that a Harley sub-assembly was outsourced to China without Harley knowing about it. They could not tell the difference on the final product, but Harley kicked up a fuss when they found out because they sell the concept of "American built" as part of their mystique. Most larger corporations would not quibble.

[dennisw]

Right to work would do wonders for some of these places...................


Get real! Right to work would do jack when a nation is being invaded by lowest cost foreign goods. Futile against the Chinese.

[ETERNAL WARMING]

The prospect of a jobless economic recovery has governors in the nation's rust belt increasingly worried that the thousands of manufacturing jobs lost during the recession and the tax revenues they generated are not coming back.


Last I heard they were parroting the "right to work state" mantra. How "successful" they all were. Dang fools. Everybody knows "Right to Work" is suicide for American workers.

[NewRomeTacitus]

There it is: the Clinton legacy. Give China everything it asks for and hope everything will turn out all right.
No, Man from Hope, you screwed the pooch. Allowing technology transfers under the aegis of the Department of Commerce was the equivilant of supplying Hitler with nuclear research during World War II. Now America degrades while other countries benefit from your Wilsonian actions.

Bill Clinton should not be immune to charges of high treason. Bush Sr., though, signed the GATT and NAFTA appeasements.

[RLK]

I couldn't figure out why Democrats kept harping about the economy, when history tells us we will be in recovery by the time the election rolls around.

-------------------------

It's good to see somebody is doing it. This nation is disintegrating and dissolving. There will be no substantial recovery.

[RLK]

Bill Clinton should not be immune to charges of high treason. Bush Sr., though, signed the GATT and NAFTA appeasements.

----------------------

The Bushs are overseeing the destruction of this nation.

[jimkress]

You want businesses to stay in the US? Stop taxing them. Taxes on business are a pass-through cost that does nothing but drive up prices. Eliminate business taxes, with a concomittant reduction in prices, and all will prosper.

[Ciexyz]

My city and state -- Pittsburgh and the State of PA -- can't wait to add more taxes to tax their way to prosperity. These people are clueless.

[ChiMark]

So would you be wiling to pay double the price for a shirt?
If people had no income there would be no need for exporting jobs. Apparently the number of housing starts and property values that continue to rise must be a myth. If what you say is true we would be in a severe deflationary cycle. Go to France and Germany. Enjoy 11% unemployment. They have lots of tariffs.

[sixmil]

This is not cyclical unemployment. It is more structural, the kind of jobs that don't come back. So, they better get busy creating jobs or Bush will be another one termer.

[sixmil]

So would you be wiling to pay double the price for a shirt?

If it were twice as good. Nike should have the cheapest shoes in the world according to your economics.

If people had no income there would be no need for exporting jobs.

Can you elaborate on this?

Apparently the number of housing starts and property values that continue to rise must be a myth.

That's just low interest rates and high immigration.

If what you say is true we would be in a severe deflationary cycle. Go to France and Germany. Enjoy 11% unemployment. They have lots of tariffs.

Tariffs cause unemployment? From what I see, low tariffs cause unemployment. High tariffs are also inefficient, but don't you think that this article shows what a poor source of revenues income tax is? Basically, we have replaced tariffs with income taxes. I guess you would rather share your finances with the government and watch them run up deficits, than have some reasonable tariffs. What's really stupid is that Bush cut income taxes to indirectly help out the job situation. Seems to me like it would have been smarter to cut business taxes. The unemployed aren't going to get an income tax cut, but businesses might be more willing to hire them if they had more cash left after taxes.

[Susannah]

The government can only attempt to reduce taxes, regulations and litigations on businesses. Job creation, with the exception of government jobs, is done through the private sector.

Americans need to face some realities: Our education system is failing to prepare graduates to compete globally. Unions add additional layers of bureaucracy to both employees and employers. Opposition to local power plants and reasonable energy prices forces many manufacturers to have their own costly backup systems to maintain operations.

Let the liberal California's protections of environment and ever-increasing benefits for workers LAWS serve as a reminder to other failing states: - - - goodpaying jobs with great benefits are wonderful until the jobs leave your state or the country.

Even my neighbors, who work in local construction, say their employers are moving their headquarters to other states to avoid California's outrageous protective laws.

[Susannah]

"What's really stupid is that Bush cut income taxes to indirectly help out the job situation. Seems to me like it would have been smarter to cut business taxes. The unemployed aren't going to get an income tax cut, but businesses might be more willing to hire them if they had more cash left after taxes."

Small businesses are the trend in new job creation. 79% of the Bush tax cut is directed at small businesses (who actually file differently than major corporations - - various chapters of the personal income tax return). The various small businesses are getting triple the amount of write-offs for new equipment, for example.

According to a report on tv news a couple months ago, 20% of businesses reported they will hire the third quarter of 2003. The highest percentage of new hiring by businesses was reported by Wisconsin businesses at 28%.

[mongrel]

Oh, I get it. Since a.)the Democrats talk about jobs, and b.)since it's obvious they're doing it for political purposes, and c.)since history has proven their solutions will only destroy us further then it conclusively follows that we need to vote Bush out of office. Howard Dean or Wesley Clark or Hillary Clinton (who are the only realistic alternatives) will talk about the right things but insure policies that will only destroy us in the long term.

What I would like to know is what your proposals are that Bush isn't doing and the Democrats will. Tariffs? Subsidies for businesses that manufacture in the US? Pulling out of NAFTA? I'm interested in moving this to a substantial discussion of the merits of each proposal rather than Bush or Clinton bashing.

[q_an_a]

A software vendor told one of my clients, that the reason they set up offices in Mich was because they knew the employment story and that paying a good wage would have loyal employees, who know GM and Ford will not be adding jobs soon. They said,"Our turnover and employee troubles are at 0."

[Tribune7]

Get real! Right to work would do jack when a nation is being invaded by lowest cost foreign goods.

What is your solution?

[Tribune7]

My city and state -- Pittsburgh and the State of PA -- can't wait to add more taxes to tax their way to prosperity. These people are clueless.

ditto that

[Tribune7]

79% of the Bush tax cut is directed at small businesses (who actually file differently than major corporations - - various chapters of the personal income tax return).

I didn't realize that. W knows what he is doing.

[Tribune7]

Everybody knows "Right to Work" is suicide for American workers.

That's why all those "right to work" states like Texas and Florida and the Carolinas lag behind Pennsylvania and Michigan and Ohio in job creation.

[ridesthemiles]

That along with the increased inability to mine and extract our own natural resources due to the hard core enviro's. Someone needs to get into the spotlight and tell this country that the only reasons we won WW2 with fighting on 2 major fronts was that we had our own ore, our own steels mills, and our own manufacturing ability. Look up how many airplanes this country was producing DAILY during 1942-1945. It will astonish you.
We have allowed others to dictate to us and have given away our capacity of production. They are working on our food production right now. If you think I am wrong, look up Range Magazine on the web. They can explain it even better.

[Gritty]

companies are saddled with higher costs for health care, labor, energy, regulations, taxes and litigation

Causes:

...health care - trial lawyers, government regulations
...labor - unions, government regulations
...energy - trial lawyers, government regulations, "environmental advocates"
...regulations - trial lawyers, government regulations
...taxes - government growth, government social spending growth
...litigation - trial lawyers, government regulations, "consumer advocates"

Solutions:

...Republicans - retraining to non-existant jobs, demand increased globalization, more of the same, import illegals
...Democrats - demogoguery, more of the same, import illegals

Anybody see any patterns here?

[lewislynn]

Even my neighbors, who work in local construction, say their employers are moving their headquarters to other states to avoid California's outrageous protective laws.

California is an example of what's been happening nation wide with businesses leaving...They're "moving their headquarters" but continue to do business where the money is.

[Tribune7]

You forgot

Causes
Education --- NEA, Dept of Ed, Trial Lawyers.

[dennisw]

My solution is tariffs.

Right to work and other really cool capitalist "solutions" only show your foolishness. Did you just happen to pick up an Ayn Rand book that hates unions and right to work laws? Union or no union China will flood this nation because it pays it's workers 50 cents per hour. Many of the US workers it makes unemployed never even had a freaking union in the first place.

You could even get rid of a lot of the OSHA and EPA laws and these US factories would be hard put to compete against Chinese making 50 cents per hour.

[Tribune7]

My solution is tariffs.

That's a gym-dandy idea. We can get suburban kiddies -- perhaps like yourself -- to work in our textile mills and electronic assembly plants. AND WE CAN MAKE THE MILL OWNER PAY THEM A 'LIVABLE WAGE'. Yeah, that'll work. You know your econ.

Did you just happen to pick up an Ayn Rand book that hates unions and right to work laws?

No, I live in a non-right-to-work, union-dominated state which is losing jobs to right-to-work states.

[Tribune7]

Check post 33. Gritty gets it.

[Joe Hadenuf]

Get out of California fast. Uh, wait a minute.....

[Conservative til I die]

I come from and still live in a formerly industrial town in Westchester County, of all places. The waterfront is littered with abandoned plants and factories, and my area of town has mostly junkyards where the factories used to be. Yet my city is growing by leaps and bounds. How??? A pro-business administration running the city like a corporation, buying back condemned and abandoned land for literally $1 apiece, developing it, and inviting business in. A lot of it is retail, but there is some manufacturing coming in. Why? We're business-friendly. Taxes are fair, restrictions loose, the administration showing that it's willing to work with the corporations.

[1rudeboy]

Note that your governor says nothing about repealing trade agreements, only saying that there needs to be a "level playing field." That's because she understands how much of Michigan's economy is export-related.

[Tokhtamish]

Incessant drumbeat about jobs ? You thing 2.7 million jobs can just go away without anyone noticing ? Without those who still have jobs not being scared ? Without lots of high tech people staring at their ceilings at 2AM wondering what in God's name is going to happen to their lives ?

The IT profession has dropped by a tenth. A tenth. Wages have dropped by 15%. You think mentioning this is some kind of "liberal media" plot ?

[Ronaldus Magnus]

Thanks, I had missed how the eco-freaks are also compromising our national security.

[Susannah]

The following link explains the growth of Small Business Owners. It shows 2/3 of personal income filers in the upper bracket as business owners, but the latest percentage I heard this year was 79%.

http://www.taxfoundation.org/ff/bizreturns.html