The issue is that labor productivity (level of tech) in American mfg hasn't broadly increased at the rate we'd need to manufacture many things at reasonable prices for the American consumer. This makes Baumol's cost disease a huge issue: https://en.wikipedia.org/wiki/Baumol_effect You can see this manifest in healthcare as one of the most egregious examples; the top cause of margin pressure for hospitals is labor: https://www.hfma.org/press-releases/health-systems-near-thei....
While we can still manufacture things that require comparatively high levels of skill, technology, and capex, it's never again (absent a depression greatly outstripping the 1930s) going to be profitable to pay American workers to make t-shirts rather than Bangladeshis.
There's a good argument to be made that a combination of outsourcing and illegal labor caused problems by suppressing investment in tech and automation for thirty years plus, and there are certain things we probably should make here. But ultimately the stuff we actually need to manufacture are things core to sustaining life and the military. Medical supplies, weapons, food, oil, metals, chemicals, etc.
We can, with time and good industrial policy, bring back some manufacturing. That would be a case of short-term pain for long-term benefit. But even then, that's true only insofar as we give people a shot to actually buy American. Moonshot investments in roboticization and industrial automation for a few years would really make this easier, along with using the huge amount of post-HS education dollars we spend to focus on training skilled engineers to implement this sort of thing, along with things like skilled machinists. But these tariffs don't really give American companies a shot.
We cannot, with any reasonably-good outcome, bring back manufacturing jobs. That midwest factory worker is never going to be paid $30/hour plus pension/retirement contributions, good medical, etc. to make regular, el cheapo consumer goods.
> factory worker is never going to be paid $30/hour plus pension/retirement contributions, good medical, etc. to make regular, el cheapo consumer goods
Well, this is possible, but it will take very few workers to produce the huge amount of goods to make it profitable. Case in point: e.g. a Novo Nordisk factory that produces like half of the EU supply of insulin employs like 15 workers per shift, who mostly oversee automation at work, handle incoming / outgoing trucks, and ensure physical security of the plant.
It's the same thing that happened to the US agriculture: in 1800, it used to employ like 80% of the population, in 2000, 2% to 3%. Machines replaced human labor almost fully.
Sorry, to clarify: by "factory worker" I'm referring to the pre-offshoring state of your typical American factory job. A skilled employee who's closer to a plant operator and troubleshooter than an assembly-line drone is, of course, another case and can make very good wages.
Your parallel to ag is a good one: it's something we need to be here, and we wisely embraced automation to ensure 1. we could do it even in wartime, when our male population is needed elsewhere, and 2. that we could produce in a way that cost little for the average consumer and the export market. We need the same thing to happen here.
I mentioned the "factory jobs aren't coming back" point more because Trump is playing hard to a rust-belt base that wants those jobs back, doing this in some ways as a hand-out.
Absolutely. A factory worker doing something that a Bangladeshi factory worker is doing (expertly but manually sewing garments or shoes) can only make comparably much to the Bangladeshi worker, and would need to survive in comparable conditions, unable to afford more.
Places like Bangladesh are experiencing the industrial revolution; to remember what it looked like in England, read some Dickens (or even K. Marx, haha); for the US, read some Mark Twain or Theodore Dreiser. It was bleak.
The paradise of 1950s, when a Ford factory worker could be the only breadwinner in a middle-class family, was only possible because most of the rest of the world was devastated by WWII, from which the US emerged relatively unscathed.
Historically, yes. The arson performed on our research funding puts that at risk for anything which isn’t already clearly close to commercially viable.
The data don't bear this out. Insurance companies do represent some level of inefficiency and are easy scapegoats, but saying this only prevents people from better identifying and fixing actual cost centers. Here's a good breakdown of contributions to total national health expenditures by type in 2023: https://www.healthsystemtracker.org/chart-collection/u-s-spe...
You'll notice that hospitals are the largest component. Physicans and clinics are also substantial. Insurance costs fall under "Other health", which includes "spending on durable and non-durable products; residential and personal care; administration; net health insurance; and other state, private, and federal expenditures."
Drug costs, the other frequent alleged cause, are even smaller, representing less than a tenth of expenditures.
If you go to the source of the data linked there -- cms.gov -- you'll see that this is only one side of the equation: health spending by product.
This explicitly does not include insurance costs.
Private health insurance costs are covered by "healthcare spending by major sources of funds" and reached 1.5 trillion, the same dollar amount as hospitals cost as a product group.
That is the dollars spent for insurance plans. Those dollars then reappear in the product spending figures, less some amount of overhead and margin for insurance. Those additional data you provided don't say anything more about exactly what that is, nor do they imply the total overhead and margin of health insurance is $1.5T.
Any casual glance at the finances of a health insurance company will quickly throw cold water on the "health insurance companies are greedy scamming dirt bags"
Then go look at the finances of those who take in insurance money.
Trust me, it's _very_ (read: very) clear who holds all the bargaining power in the healthcare market. People target their anger at insurance companies because that is who they pay. "My healthcare provider is good and my health insurance is evil" is exactly backwards. You are not the one paying $400 for your "I have a head cold" virtual visit.
To emphasize, there's a massive difference between high-end manufacturing which is important for national security, and manufacturing of toys and t-shirts, especially in an economy with a low 4% unemployment. Those low-end manufacturing jobs can't come back to the US, and nor should any attempt be made to make that happen. Any industrial or trade policy that doesn't factor this in is not pareto optimal.
Another thing to point out is that there's no national security justification for bringing back even high-end manufacturing from close allies like Canada.
A good trade and industrial policy is one that tries to protect key industries among allies instead of insisting on every single important industry being done locally.
Well, there are some that absolutely should be done locally. Supply chain risk goes up hugely during time of war. We are very good at protecting shipping lanes but not perfect. Canada is a fine place to leave things as she shares a land border with us; Europe, for some things, is not. Industries needn't be wholly relocated, but at least some level of manufacturing for many of those key areas must remain either in America or very close to us.
I agree with almost everything you said except there's one founding assumption that enables offshore manufacturing that you describe.
And that is a secure seas. Well, I don't think piracy or u boat torpedoing and many other forms of threats to overseas trade is going to appear in the near future, I do think that overseas shipping is going to get less secure.
China is exerting its "rights" in its near area seas and attempting to expand further. Ukraine has shown that capital naval vessels can be threatened with cheap drones. The red sea trade is being assaulted by Somali raiders and yemeni rebels armed with Iranian missiles.
The other thing I think is missing from your analysis is that the cost of labor to business is laden with healthcare costs. And the US has the most expensive healthcare by far in the world. So perhaps a comprehensive universal healthcare system and reform of all the profit and rent seeking systems that are in the medical establishment in the United States would need to be reformed. Can't wait for that unicorn to fly.
So again, while I agree with a lot of your analysis and it matches mainstream economic analysis, this mirrors a lot of my criticisms of economic analysis. It basically is a defense of capital interests and the rich, and strenuously avoids analyzing anything that doesn't serve those interests from a fundamental assumption standpoint.
This is a good point. Rep. Rogers' amendment to DOD for FY25, which just came out, includes:
- $1.53B for expansion of small unmanned surface vessel production.
- $1.8B for expansion of medium unmanned surface vessel production.
- $1.3B for expansion of unmanned underwater production.
- $188mm for development and testing of maritime robotic autonomous systems and enabling technologies.
- $174mm for the development of a Test Resource Management Center robotic autonomous systems proving ground.
- $250mm for development, production, and integration of wave-powered unmanned underwater vehicles.
Perhaps less-safe seas will mean it's better to on-shore, but we do seem to be focused on keeping them secure. If nothing else, while America is more capable of autarky than most, we still pull a lot of critical minerals and other feedstocks from other places.
The healthcare debate is really complicated. We do spend a ton, but we also demand an extraordinarily high standard of care. We don't tend to deny people anything and waitlists are very rare. Now while a universal healthcare policy is doable, a lot of Americans would demand some level of additional private care, which means net healthcare spending might rise between the two systems.
I tend to hear arguments for universal healthcare like "negotiating drug prices". While that could save some money, we spend less than one-tenth of total dollars on prescription drugs. Hospitals are still the largest chunk at ~30%, and I'm unsure how universal care would realistically save us money there. Doctors/clinics are about 20%, and I don't see obvious savings there, either. "Other health" is opaque but there's potential for savings here; it includes "durable and non-durable products, residential and personal care, net health insurance, and other state, private, and federal expenditures."
This is a very hard problem to solve, and is compounded by the fact that we have an incredibly unhealthy population. I also hesitate to attribute this to "lack of care": obesity is massively comorbid with heart disease (the leading cause of death in most states), diabetes (a large ongoing drain on the health system), and end-stage renal disease (dialysis accounts for ~2% of the entire federal budget.). And yet, obesity is strongly prevalent in every income group, across men and women both.
There are people who say we have a moral obligation to give free healthcare to everyone. I don't agree, but I understand that's moral position. But I am less sure that data bear out the idea that publicizing healthcare would magically save so many dollars.
I'm not "avoiding" criticizing the rich or capitalism. I'm just not motivated by my personal morality to do so. I understand you and others are, and can respect that too, but these are two separate conversations: on one hand, what is practically right and wrong with the current policies? On the other, how ought we to act? The latter underlies the former and, if you want to criticize the former on grounds of the latter, you've got a long row to hoe. It's probably easier to segment practical discussions to one place and moral dialogue to another.
>>But ultimately the stuff we actually need to manufacture are things core to sustaining life and the military. Medical supplies, weapons, food, oil, metals, chemicals, etc.
Well and having chip fabs as well.
More generally, though, there is another variable in-between wages and cost of products, and that is profits.
Perhaps the likes of Apple, Amazon etc could maybe make do with a few less billion in profits.
I read an article (in, I think the NYT) about how, prior to Jack Welch at GE, companies used to boast in their annual reports about how well paid their employees were. The only company I know of that does this now is CostCo.
Perhaps, but I do see this as a mostly-disconnected issue. Companies in China are extremely profit-seeking. We're talking about countries that run literal sweatshops, so let's stipulate worker's rights and living wages aren't high in their considerations.
I agree that paying workers well is a good thing; I like that the advanced mfg model still allows people to give good salaries. But, I don't see how it's strongly tied to the issue of tariff policy in terms of economic outcomes.
Never is a long time. The more capital, skill, and energy intensive manufacturing becomes the more likely it will end up in the US. As an example, you don't want your 100 million dollar t-shirt making machine in Bangladesh. You want it in the US where you have 24/7 power, no risk of revolution, cheap capital, access to skilled labor and so on. You can take the $25 an hour hit to pay a US worker because it's practically nothing compared to the machine.
Absolutely. Right now, though, people haven't built nine-figure ultra-robotic t-shirt factories because they can "cheat" around the issue of tech advancement and requisite R&D investment because they can just offshore to avoid spending that money. And, when that happens, it will employ a dozen people rather than hundreds or thousands.
The issue is that labor productivity (level of tech) in American mfg hasn't broadly increased at the rate we'd need to manufacture many things at reasonable prices for the American consumer. This makes Baumol's cost disease a huge issue: https://en.wikipedia.org/wiki/Baumol_effect You can see this manifest in healthcare as one of the most egregious examples; the top cause of margin pressure for hospitals is labor: https://www.hfma.org/press-releases/health-systems-near-thei....
While we can still manufacture things that require comparatively high levels of skill, technology, and capex, it's never again (absent a depression greatly outstripping the 1930s) going to be profitable to pay American workers to make t-shirts rather than Bangladeshis.
There's a good argument to be made that a combination of outsourcing and illegal labor caused problems by suppressing investment in tech and automation for thirty years plus, and there are certain things we probably should make here. But ultimately the stuff we actually need to manufacture are things core to sustaining life and the military. Medical supplies, weapons, food, oil, metals, chemicals, etc.
We can, with time and good industrial policy, bring back some manufacturing. That would be a case of short-term pain for long-term benefit. But even then, that's true only insofar as we give people a shot to actually buy American. Moonshot investments in roboticization and industrial automation for a few years would really make this easier, along with using the huge amount of post-HS education dollars we spend to focus on training skilled engineers to implement this sort of thing, along with things like skilled machinists. But these tariffs don't really give American companies a shot.
We cannot, with any reasonably-good outcome, bring back manufacturing jobs. That midwest factory worker is never going to be paid $30/hour plus pension/retirement contributions, good medical, etc. to make regular, el cheapo consumer goods.