Congress Forgets Manufacturing

April 13, 2009
Ever since this recession began last year, Congress has been consumed with strategies that have been proposed to stimulate the economy and get people back to work. The stimulus bill is but the latest attempt. Nevertheless, this most ...

Ever since this recession began last year, Congress has been consumed with strategies that have been proposed to stimulate the economy and get people back to work. The stimulus bill is but the latest attempt. Nevertheless, this most recent effort was disappointing from the perspective of manufacturing. Other than providing research and development funds specifically targeted for green projects and promoting fuel-saving automobile technology, there is virtually nothing in the economic recovery package directly aimed at helping America’s producers of next generation manu-facturing technology.

That is an odd omission, because it is well known that manufacturing technology is the key to staying competitive and to generating new jobs in an increasingly competitive global trade environment. Given the troubles in the automobile industry and in manufacturing generally, manufacturing technology, which is at the foundation of America’s industrial base, faces desperate times. It is an industry that has managed to retool and survive since the beginning of America’s industrial age, but it is by no means certain that it will make it through the current turmoil without assistance. Congress needs to consider long-term consequences as well as the short-term impact.

The entire country is in the grip of a credit crisis, but it has hit manufacturing particularly hard. In a recent survey conducted by my trade association, AMT, fully threequarters of the respondents reported that credit has tightened over the last six months, and more than one half have altered the way they do business as a result. Most report that banks have changed their terms, and nearly 60 percent are considering, or have considered, self-financing.

Manufacturers are being squeezed from every direction. Suppliers are pressing for accelerated payments, while customers are delaying – or are unable to make – their payments. Meanwhile, manufacturers, like their suppliers and customers, are finding it increasingly difficult to get bank credit. Some are on the verge of mass layoffs, or closing their doors completely.

The Obama Administration and the Congress have promised that they will do whatever it takes to get credit flowing again. But so far, all that manufacturers have seen is a credit market that seems to get tighter every day.

Authority already exists that could alleviate at least some of the tightening of credit. I would point out that Title 3 of the Defense Production Act (DPA), provides for the government to guarantee loans to companies that play an important part in our nation’s defense industrial base, companies that would be important to mobilization efforts to change over from a peacetime to a wartime economy, should the need arise. Obviously, the machine-tool industry fills that description. That is precisely why President Reagan authorized the negotiation of a machine-tool voluntary restraint arrangement with Japan and Taiwan in 1986. Reagan believed that our nation could not afford to lose a significant part of the machine tool industry and still be able to mobilize quickly if the need arose.

The same argument could be made today in order to justify Congress’s funding of the DPA’s loan guarantee authority. Such authority could also be extended to cover other industries that would be needed in a possible mobilization (which would extend beyond the machine tool industry, of course.) While Congress would most likely fund no more than a few billion dollars for this program initially, that funding could go a long way because the Congress’s budgetary rules count loan guarantees in a one-to-four ratio. One billion dollars worth of guarantee authority would underwrite $4 billion worth of loans to companies benefiting from the DPA.

While authorizing and funding the DPA’s loan guarantee authority would be a modest step toward helping the manufacturing sector deal with the credit crunch, it is a necessary one. Every possible means of getting dollars flowing into manufacturing again ought to be explored, and the Defense Production Act offers a genuine opportunity to provide much needed relief.

You can help revitalize U.S. manufacturing! Send this page to your Congressman, local and state government leaders, or your local newspaper editor. Add your own comments on the importance of manufacturing innovation to the health of our economy. Your comments are also welcome at [email protected]

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