Beyond “Buy American”: Why U.S. Manufacturing Needs A National Resilience Council

The executive order would use “the full force of current domestic preferences to support America’s workers and businesses.

By Michael Mandel, Chief Economic Strategist

At PPI, we strongly support President Biden’s signing of the Executive Order beefing up Buy American provisions for federal purchases. The executive order would use “the full force of current domestic preferences to support America’s workers and businesses.

But much more needs to be done, since domestic manufacturing is much weaker than most people realize. Most important, multifactor productivity in domestic manufacturing — the broadest measure of the ability of U.S. factories to turn inputs into useful goods — actually fell from the previous business cycle peak in 2007 to 2019, before the Covid recession started. In other words, domestic manufacturing is becoming less competitive, not more competitive.

That’s why Biden needs to go beyond Buy American in order to boost domestic manufacturing. In our August 2020 report on how to “Spur Digital Manufacturing in America,” we propose a “National Resilience Council” to lead a push to stimulate local production, shorten supply chains, create high-wage factory jobs and make our manufacturing sector more resilient in crises.

The National Resilience Council would be tasked with identifying those industries and capabilities that are strategic, in the sense of improving the ability of the economy to deal with shocks like pandemics, wars, and climate changes. These areas are likely to be underinvested by private sector companies, who quite naturally don’t have an incentive to tackle these sorts of large-scale risks.

The goal would be a resilient manufacturing recovery, based on flexible, local, distributed manufacturing — relatively small efficient factories that are spread around the country, using new technology, knitted together by manufacturing platforms that digitally route orders to the nearest or best supplier. To achieve this goal, we make four concrete proposals:

• First, we should double the National Science Foundation’s roughly $8 billion budget, with more of an emphasis on manufacturing-related areas such as materials sciences.
• Second, the government can shore up the nation’s supplier base by providing $200 million in low-cost loans and grants to help small and medium manufacturers test and adopt new production technologies, including digital advances such as robotics and additive manufacturing. Even in a low-interest rate environment, capital is relatively scarce for companies that are too small to tap the bond market
• Third, the National Resilience Council should sponsor a Manufacturing Regulatory Improvement Commission, along the lines that PPI has suggested in the past. We have no desire to roll back essential environmental and occupational health regulations. But we do want to consider whether rules governing manufacturing have become so restrictive as to unnecessarily force out jobs
• Fourth, the federal government should take the lead to create a common “language” so that product designers, manufacturers, and suppliers can more easily work together online, just like DARPA helped create the basic structure of the Internet in the late 1960s. Just as a young person can write an app, put it online, and find users around the world, it should be possible to create a design for a new product and easily find potential local manufacturers.

A more extensive set of policies to enhance the resilience of US manufacturing can be found here.