Teaching an Old Dog Even Older Tricks… That Still Don’t Work

 

Teaching an Old Dog Even Older Tricks… That Still Don’t Work

The above pie-chart represents the pre-AI explosion of job categories in the United States. It shows approximately 11% dedicated to manufacturing, reflecting massive reduction from 26% in 1970. Year by year, the number of manufacturing jobs has contracted, and the number of financial, STEM and other service jobs has soared. Estimates for 2025 suggest that the manufacturing slice has fallen to 8% of the total job market. Over the years, manufacturing has contracted because of rising labor costs in this country, and as you can see in the above pictures, large-scale manufacturing has almost entirely shifted to automation, mostly in the form of robots. Except for highly skilled, custom manufacturing, much of the remaining domestic labor in manufacturing has shifted to low-wage, undocumented workers.

In an effort to justify tariffs, we are told that countries that manufacture durables at lower cost and sell us those products below what we can make those products for domestically are ripping us off. Really? So, when big retailers have sales, reducing prices significantly, they are also ripping us off? We need to pay more to maintain industries where the United States can no longer manufacture consumer products efficiently? We are great at inventing, and with a few rare exceptions, we are not so good at making. Reality. I’d say that’s sad except those new sectors generate so much more value and, obviously, more money. And when we fight like hell and pay through the nose to support higher tariffs, are we reshoring to protect old world jobs or moving that work to the fully automated factories where that manufacturing will obviously take place?

The Department of Commerce has emphasized the value of applying higher tariffs to manufacturing basics like steel and aluminum. Indeed, the extraction/processing of these metals from raw ore into usable industrial basics (like extracting iron from ore and then converting that into steel) is almost uniformly much less expensive in Asia than here. So, let’s say we save 1000 steelworker jobs and keep those workers here in the United States… resulting in steel at a much higher cost per ton. Since those metals are necessary components in other manufacturing jobs (like cars and trucks), the resulting products cost more and generate lower sales numbers. Higher prices… less demand. And instead of incenting more sales of new US vehicles, people keep cars longer, and the used car market is soaring. Government statistics show that protecting those 1000 metal workers will result in 70,000 American workers in other US manufacturing segments losing their jobs.

For a political party that has championed economic laissez faire for decades, the GOP, and for a party that likes to incent and direct business sectors, Dems, both parties have pretty much made a mess of our targeted growth industries. Even once anti-socialist MAGA Republicans are having the government take significant stakes in big, targeted companies, granting these same entities fat government contracts and tariff their foreign competitors out the door. Even Italian pasta is facing tariffs over 100%! Who pays for this? YOU DO!!! LA Times (November 22nd) Contributing writer, Veronique de Rugy, explains how this meddling backfires:

“American industry has been getting a lot of hands-on direction from Democrats and Republicans for quite some time now. Every few years, someone looks at the underwhelming results of this economic maneuvering and insists that real ‘industrial policy’ has never been tried. Truth is that the left’s call for a ‘mission-oriented’ state and the right’s yearning for a nationalist industrial revival may sound different, but they share the same conceit: that their own intentions can finally succeed where decades of intervention have failed…

“Back in the days of President Biden’s industrial policy, when subsidies, tax credits and loans were flowing, an emerging Republican faction had a similar refrain, claiming that to revive American manufacturing, restore communities and put men back to work, industrial policy simply had to be done right. We now know that this meant increasingly erratic tariffs, price controls and government taking shares in companies.

“Hope for both sides rests on quite a premise: that Washington can guide trillions of dollars to the right industries, produce a manufacturing boom and maybe even heal America’s social fabric… The problem isn’t that industrial policy has been done badly. It’s just bad economics.

“Dreams of reviving manufacturing jobs face the reality that modern manufacturing is capital-intensive and largely automated. Even if subsidies or government loan guarantees spur a factory boom — and history suggests otherwise — it won’t bring back 1950s-style armies of industrial workers unless we somehow outlaw productivity. Today’s factories run on robots and engineers.

“Nor will tariffs bring a manufacturing revival. Taxing inputs and components only raises costs, weakens U.S. competitiveness and ultimately punishes the firms’ protectionists claim to support. True American industrial strength rests on productivity, innovation, competition and access to global supply chains, not on coddling producers behind walls of higher prices.” And you really do not have to wonder why so many CEOs no longer criticize Donald Trump and “donate” to his campaign, his ballroom and donated to his inauguration… or invest in his crypto world. Since Trump and his administration have the discretionary right to waive or exempt specific tariffs, it seems that favored CEOs and their companies are not remotely hampered by tariffs as most Americans believe. Remember, the fundamental ethos of the Trump administration is to reward “winners” (generally the rich as long as they side with him) and punish the rest as “losers.”

Let’s look at more objectively government regulation; it does have a place. For example, a corporation won’t adopt environmental controls if none of its competitors is required to adopt such measures… that always cost more. Full disclosure and honesty can hurt sales, and adhesion contracts and hidden costs can be huge profit centers… unless government makes rules that attack “marginal” fraud and pernicious dumping or emitting of toxins and waste. And sure, when an old industry is creating massive harm, incentives might be needed to shift into less toxic forces. But if you look at the period of growth that made us the richest and most powerful country in the world, most of that was based on free trade market competition. Are we really getting new policies that make us richer, better and more productive?

I’m Peter Dekom, and the United States has become a nation of powerful special interests who find “buying politicians” far less expensive than doing what’s right.