Here’s a pop quiz: How many people are running for president? Answer: As of November 12, 2019, 937 are listed as candidates on the Federal Election Commission website. OK, so maybe not all of them are serious candidates. But even if one looks at the candidates raising the most money and appearing in the national polls, the number is not small. The Democratic debate from Ohio on October 15 featured an even dozen, with others just missing the cut to qualify. On the Republican side, Donald Trump is being challenged by Bill Weld, Mark Sanford, and Joe Walsh.
Where do these candidates stand on issues important to domestic manufacturers? A just-published report from Indiana University looked at the positions of 12 of the top candidates (10 Democrats, two Republicans) across eight issues: competitiveness, taxes, tariffs, trade agreements, China, regulation, energy/climate, and workforce. The results show some similarities—and many more differences—in policies that will likely shape manufacturing for decades to come.
Each of the major candidates voice support for U.S. manufacturing. Given that many of the swing states have a high concentration of manufacturing, this is not too surprising. And Donald Trump’s successful 2016 campaign—with its emphasis on bringing back manufacturing jobs—has not gone unnoticed by his 2020 competitors.
For example, all of the major candidates regard the skills gap as a serious problem. Greater federal support for skills-based training is a common refrain. Whereas some want to double the number of apprenticeships across the nation (e.g., Buttigieg and Klobuchar), others promise to expand vocational training at the high school level (e.g., Booker, and Castro) and/or create opportunities for lifetime learning (Biden).
Another similarity is agreement that globalization and/or technology have led to, or will lead to, job destruction on a massive scale. At the fourth Democratic debate in Ohio, Andrew Yang stated that automation has taken and will take away manufacturing jobs and that is why he favors giving every American a freedom dividend of $1,000 per month—a concept also endorsed by Tulsi Gabbard. Elizabeth Warren claimed that bad trade policies have destroyed more U.S. jobs than automation since the turn of the century. Bernie Sanders also blames bad trade policy for massive job losses. And the Trump campaign highlights Donald Trump’s efforts to renegotiate trade agreements to stop the exodus of manufacturing jobs. Fact check: Despite these sentiments, U.S. manufacturing establishments have been adding jobs, on a net basis, for the past decade.
Nearly all the major candidates would not support future trade agreements unless they contain non-tariff trade barriers to protect American workers and/or ensure high environmental and safety standards. None of the Democratic candidates support the Trump-negotiated United States, Mexico, and Canada Agreement (USMCA) without greater protections for workers. The only major candidates with a history of favoring trade liberalization (that is, a lowering of tariffs and non-tariff trade barriers) are Biden, O’Rourke (who recently announced he is ending his campaign), and Weld, and only Weld is publicly and proudly acknowledging his support for free trade in this campaign.
Despite the similarities, the candidates espouse a range of opinions on tax reform, energy/climate, regulation, and competitiveness.
The 2017 tax reform law—which lowered the corporate tax rate for domestic firms and improved the relative position of the US compared to other OECD countries (according to the Tax Foundation)—has generated a wide range of responses from the candidates. Only Republican candidates offer support for the law (Weld would prefer that it was paid for) while the Democrats either oppose it (Booker, Castro, Harris, Sanders, and Warren) or seek targeted changes (Biden, Buttigieg, Klobuchar, and O’Rourke). The Buttigieg campaign says “Mayor Pete” won’t raise taxes on small manufacturers—just “top-earning individuals.” (Complication: many U.S. manufacturing firms are pass-through entities, where the federal income tax falls on the business owner.) Trump takes credit for the 2017 law, which he says is a significant win for U.S. manufacturing.
All 10 of the top-polling Democrats support the Green New Deal (GND)—a resolution that couples aggressive action on climate and income inequality. Some—including Warren and Biden—plan to offer manufacturers tens of billions of dollars in subsidies to make greener products that can be marketed to the world. A handful have endorsed putting a price on carbon, either through a carbon tax (Buttigieg, Yang, Harris, Booker) or cap and trade (O’Rourke). Some of the Democrats (e.g., Klobuchar) support a slower transition to renewable energy than the 10-year timeframe included in the GND resolution, which passed the Democrat-controlled House but was defeated in the Republican-majority US Senate. Weld’s biggest issue with the GND is its exclusion of nuclear power, which he favors. Trump is against the GND.
Most of the candidates are pro-regulation or critical of recent efforts at regulatory reform and deregulation. Only Yang and Trump have voiced support for deregulation. The Trump Administration uses a regulatory budget—forcing regulators to eliminate two regulations for every new one. Few new major regulations have been finalized in the Trump Administration. Yang has voiced support for a regulatory sunset clause—each regulation would have a limited duration after which it would sunset unless Congress acts to reaffirm it.
Only a few candidates have plans to actively promote the competitiveness of domestic manufacturing. Warren proposes a Green Manufacturing Plan, under which the government would invest $2 trillion over ten years, including procurement of American-made, clean energy products. Biden wants to develop a low-carbon manufacturing sector in every state through tax credits and subsidies for added capacity or new factories. These plans are aligned with the candidate’s pledge to address climate change. Trump, on the other hand, claims that his policies (lower taxes, deregulation, re-negotiating trade agreements) are responsible for the highest level of optimism among manufacturers in decades.
Missing in Action
Not all issues important to domestic manufacturing have been debated on the campaign trail. For example, every major manufacturing nation is creating incentives to promote Industry 4.0, yet the U.S. presidential candidates are generally silent. And one—Yang—foresees the next industrial revolution as synonymous with job destruction. None sees the U.S. in a race for a first-mover advantage, yet that is exactly how other nations see it.
Neither is the industrial defense base getting attention. For example, China possesses a near-monopoly on the processing of rare earth elements into metals that are required inputs into virtually all high-tech products and advanced weapon systems. The reliance of the Department of Defense on strategic competitor nations (like China or Russia) for critical supply chain materials is a major national security issue, as outlined in a 2018 report from the Department of Defense.
Although all of the Democratic candidates oppose Donald Trump’s approach to China’s policies and practices on intellectual property, they acknowledge that China poses a significant threat and that the US should lead in efforts at reform. Most of these candidates lack specifics, other than to enlist greater support from our allies. Few seem eager to remove the tariffs imposed by the Trump Administration.
Referendum on Trump?
Many believe the 2020 election will ultimately boil down to a referendum on the Trump presidency. If so, the Democratic nominee may have a steep hill to climb: Donald Trump has a record of lowering taxes, curtailing regulation, and renegotiating trade agreements to more favorable terms—popular policies among manufacturers. He has also taken a much more aggressive stance than previous presidents on China’s unfair trade practices and theft of intellectual property.
But Trump is also getting blamed for initiating a trade war with China. His argument: tariffs are necessary to bring China to the negotiating table. This is risky for candidate Trump: he gets credit for taking on China but could get blamed for being weak if any negotiated deal is viewed as unsatisfactory. With this in mind, the recent White House announcement that China talks will proceed in phases may be good politics. If Phase I or Phase II is criticized, Candidate Trump can always insist that the next phase will bring greater benefits to Americans. And if the election occurs before talks with China end, Trump gets credit for taking on China and continuing the fight.
Trump’s penchant for tariffs, such as that on certain steel and aluminum products, is being labeled protectionist—nurturing a small subset of “upstream” manufacturers at the expense of “downstream” manufacturers and consumers. In fact, some of the Trump tariffs—and retaliatory tariffs from other nations on US goods—are hurting him politically in farm states and communities dependent on affordable consumer goods. Critics will also point out that some of the Trump tariffs were wrongly imposed on our allies and largest trading partners.
As the campaign continues and candidates start to drop out or modify their positions on the issues, manufacturers should pay close attention. Elections have serious consequences for business, and this next one is shaping up to be no different.
To access Indiana University’s comparison of the major presidential candidates, go to the webpage of the Manufacturing Policy Initiative, or just click here. The information will be periodically updated as the campaign evolves.
Keith Belton is Director of the Manufacturing Policy initiative at Indiana University in Bloomington, Indiana.