Tax Cuts and the Future of Manufacturing in the United States

Posted on 12/02/2016. Filed under: Uncategorized |


Manufacturing Cars in the 21st Century

Ah the magic of tax cuts. The cure for all economic concerns. Borrow money from the Chinese to cover the cost of government. Eliminate all taxes and we will have reached nirvana.
Trump has said tax cuts and eliminating bad trade agreements will bring manufacturing back to the US.
I disagree. In the future automation will be a more important factor in where manufacturing will be done than taxes. Automation will minimize the importance of cheap labor to do repetitive and manual task in the manufacturing process. The future for people in automated factories will be developing, applying and maintaining the automation doing the work of producing products. Automated factories will not bring the manufacturing jobs of the type that supported the middle classes in the 40’s,50’s, 60’s. There will be jobs in these factories, good high paying jobs for the technically trained people needed to design install, monitor and maintain the automated equipment. There will be other people needed to manage, administer, move raw material in and product out, and service people like janitors but very few people doing unskilled manual labor or repetitive tasks associated with manufacturing.

Automation is happening and will continue to happen as manufacturing becomes more and more automated. The same thing has happened and is happening in US agriculture. I spent my youth in a Midwest farming community. I was born in the twenties and 25 percent of the population farmed. Now less than 2 percent of the population earns its livelihood by farming and produce more than ever before. US farmers compete successfully with the rest of the world because of its use of technology. One adverse aspect of this is that the farming communities have been and are being hollowed out. Where one family farmed 160 acres in the 20’s, now one farmer can farm a thousand or more acres. Instead of a farmer milking a dozen cows, he can now milk a thousand. They have automated milking for God’s sake. 

In the automated world the importance of cheap labor to do manual and repetitive jobs in manufacturing will be minimized and factors more important than manual labor will determine where factories will be built. Government’s role will be a factor and taxes are part of it but not an overriding concern. One thing the government shouldn’t do is be a barrier to trade if it wants the country to expand its manufacturing capacity. Trade by its name is a two way thing. Trade occurs when two countries each have something the other one wants. High tariffs, such as Trump suggests to keep companies from moving out of the United States would stifle trade and hurt US manufactures, agriculture other trading functions,. Not something a country that striving to be a manufacturing power house would like to see.

Things the US government should do to encourage manufacturing includes insuring that there is a skilled and educated work force available to build and run an automated factory and adequate public infrastructure to supports the factory’s needs. There are other things the government can do, such as funding research for automation, provide financial incentives to help small manufactures to automate, to encourage and increase manufacturing in the United States. There will be countries competing to be centers for automated manufacturing and the United States better get on board if it wants to be part of it. However the government shouldn’t be telling manufacturers how to run their companies. If a company decides it will build a factory outside of the United States that is a decision that the company should be able to make without government interference. The government can and should to strive to set up conditions that will entice, but not force, companies to build factories in the United States. Reducing corporate taxes will not in itself do it.

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