* Obama, Republican rivals push policies to aid factories
* Jobs may be key to winning Rust Belt states in November
* But economists say unskilled factory jobs won't return
* They say policies should focus on boosting whole economy
By Andy Sullivan
EASTLAKE, Ohio, Feb 27 U.S. factories are
hiring again, and Democratic President Barack Obama and some of
his Republican rivals are pitching tax breaks to fuel a rebound
in manufacturing and help rebuild a battered middle class.
A focus on manufacturing may be good politics, as Rust Belt
states like Michigan, Ohio and Pennsylvania are likely to be
hotly contested in the Nov. 6 election.
But is it good policy?
Economists on the left and the right say promises to bring
back factory work may yield more votes than jobs.
Industry experts say the United States is long past the days
when steel mills, auto plants and machine shops boosted millions
of unskilled Americans into the middle class.
"The days where you could get a job right out of high
school, step on a (factory) line and make 35,000 dollars a year,
40,000 dollars a year, are pretty much not out there anymore,"
said Rich Peterson, a vice president at Astro Manufacturing and
Design here in suburban Cleveland.
Astro, which makes products ranging from torpedo fins to
medical scanner beds, is a good example of the new face of U.S.
manufacturing. The company is hiring, but it needs workers with
advanced mathematics and computer-programming skills.
Decades of productivity enhancements mean that factories
have little need for unskilled workers. Though the sector added
237,000 jobs last year, the Labor Department projects employment
will shrink by 2020.
Service-sector employers, by contrast, will add 18 million
jobs by then.
Economists say the middle class would benefit more from
efforts to boost the economy as a whole, rather than a
particular sector such as manufacturing.
Still, that hasn't stopped some candidates from suggesting
that a resurgence of factory work would revive the fortunes of
blue-collar workers who have seen their prospects dwindle as
low-skilled manufacturing jobs have left for China or Mexico.
Obama, backed by labor unions that play a large role in the
manufacturing sector, has made the government bailout of the
auto industry a centerpiece of his re-election campaign. He has
called for tax breaks and other policies aimed at re-opening
shuttered factories and bringing jobs back from overseas.
Republican presidential candidate Rick Santorum, a former
senator from Pennsylvania, says manufacturers would create more
jobs if their corporate taxes were eliminated entirely.
Like the auto industry's resurgence, such proposals may
strike an emotional chord with recession-weary voters who have
suffered through two financial bubbles in the last 12 years.
But they would not be an effective way to rebuild the middle
class, tax experts say.
"Manufacturing is something that's tangible and is easily
seen by the voter," said Will McBride, an economist with the
business-friendly Tax Foundation. "That's what's going on here -
it's not based on any sort of economic reasoning."
Joseph Rosenberg of the non-partisan Tax Policy Center
"There's a political aspect" to the manufacturing proposals,
he said. "It sounds good, it has sort of a patriotic feeling to
A DEAD-END CAREER CHOICE?
Obama and Santorum would find a lot to like at Astro, which
employs about 280 people.
Machinists use three-dimensional modeling software to
program $700,000 lathes that can be set up to run overnight
unattended. The finished product is accurate to within 1/1000th
of an inch.
Workers with such skills can command up to $30 an hour, and
the company can't find enough of them as it gears up to double
its sales over a five-year period. Astro is working with a local
community college to develop new talent and reverse widespread
perceptions that manufacturing is a dead-end career choice.
"People have been steered away from it, especially young
kids," said Mike Franks, a production manager.
Cleveland, a city long synonymous with Rust Belt decline,
now has an unemployment rate of 6.9 percent, well below the
national average of 8.3 percent.
Medical research, not steel, now drives the local economy.
Astro is working with the Cleveland Clinic, a leading education
and research hospital, to developing surgical tools that are
customized for each patient.
Obama has touted the U.S. auto industry's resurgence since
his administration led bailouts of General Motors and Chrysler
in 2009 and highlighted incentives that encourage manufacturers
to buy new equipment.
In his State of the Union speech last month, Obama proposed
expanding a tax break for domestic manufacturing, rescinding tax
breaks for companies that move jobs overseas, boosting efforts
to fight unfair trade practices and increased vocational
On Wednesday, he called for lowering the corporate tax rate
for manufacturers to 25 percent, below the 28 percent rate he
proposed other companies would pay.
Santorum has called for eliminating the corporate income tax
for manufacturers entirely and expanding other tax breaks as a
way to create stable jobs for workers without a college
Santorum's Republican presidential rival, former
Massachusetts Governor Mitt Romney, has promised to aggressively
challenge China on trade practices he calls unfair and to push
that country to increase the value of its currency, a move that
would help U.S. manufacturers by effectively raising the cost of
Romney has stood by his opposition to the U.S. auto bailout,
which could complicate his prospects in states such as Ohio and
Michigan that are tied closely to the industry. Michigan holds
its Republican presidential primary on Tuesday.
Many economists say that tax breaks focused on manufacturing
would likely be exploited by other businesses as well. An
existing tax break for domestic manufacturing is now claimed by
nearly every other business sector, according to Internal
Revenue Service data.
"Every barbershop is now going to claim that they
manufacture haircuts," said Jared Bernstein, a former economic
adviser to Vice President Joe Biden who thinks the government
would do better to help commercialize academic research and aid
emerging sectors such as clean energy.
Others question whether manufacturers should get any special
treatment at all.
Christina Romer, Obama's former top economic adviser, argued
in a Feb. 4 New York Times opinion piece that the government
would do better to boost the economy as a whole through tax cuts
and aid to troubled state governments. Increased construction
spending would do more to create good jobs for low-skilled
workers, she said.
Voters are open to government help for manufacturing, partly
out of concern that low-wage service industry jobs will be all
that is left for unskilled workers if manufacturing fades
Some 69 percent of likely voters surveyed by the Alliance
for American Manufacturing in June 2011 said government should
take steps to boost manufacturing, while only 23 percent said
the government should not interfere in the economy.
Manufacturing was viewed as more important to the economy
than healthcare, high tech and other sectors.
White working-class voters aren't a crucial voting bloc for
Obama, whose 2008 victory was powered by a coalition of minority
and college-educated voters.
But he will have to limit his losses among blue-collar
voters to stay in the White House, according to Ruy Teixeira and
John Halpin of the liberal Center for American Progress.
Democrats generally fare better among the white working
class in the industrial Midwest than they do elsewhere. Obama
lost this group by 2 percentage points in this region in 2008,
compared with an 18 percentage-point deficit nationwide.
Voters in Ohio are likely to view any plans to revive
manufacturing with skepticism, said Ohio State University
political science professor Paul Beck.
"They've seen these promises before," Beck said.
"Politicians have come and talked to them, Democrats and
Republicans, about how they're going to do something to improve
the job climate. It really doesn't get better over time."
(Editing by David Lindsey and Eric Beech)