Should There Be Block Grants for Manufacturing?

Aug. 16, 2012
Manufacturing is a classic case of a "yes but" success story. The sector has been a bright spot in a modest recovery, with some 500,000 jobs added in manufacturing since January 2010. Until it cooled in June, the Institute of Supply Management's manufacturing index had show 36 consecutive months of expansion.

The manufacturing recovery is a classic case of a "yes but" success story. The sector has been a bright spot since the Great Recession, with some 500,000 jobs added in manufacturing since January 2010. Until it cooled in June, the Institute of Supply Management's manufacturing index had shown 36 consecutive months of expansion. But these successes don't erase the fact that over the previous decade the U.S. lost 4.9 million manufacturing jobs.

So it's worth considering any ideas designed to breathe added life into the manufacturing community. One such idea, the Make It in America Block Grant Program (H.R. 1912), was proposed by Rep. David Cicilline (D-R.I.) back in May 2011. The bill directs the Commerce Department to provide grants to support small and medium-sized manufacturers. It specifically calls for additional funds to be allocated for the program rather than take money from existing programs that support manufacturing. These grants can be used for:

  • Retooling or retrofitting
  • Business plan diversification
  • Improving energy efficiency
  • Employee training and retraining
  • Provision of capital and technical expertise
  • Expanding export opportunities

In a recent paper, John Hudak of the Brookings Institution praised the bill, saying that by helping manufacturers increase production efficiency, it would allow them to "hire workers, become more profitable and have additional funds for capital and technological improvements." He argued that the bill would provide manufacturers with "an immediate influx of needed, targeted, purposeful capital, and also expand future access to the same."

Hudak called out two particular aspects of the bill. First, he notes, the use of block grants directs decision-making to state and local leaders. They are in the best position to determine how to help local manufacturers who face a wide array of challenges. Second, the bill would establish local Make It In America Partnership Boards. These boards, he explains, "function as a public-private partnership, bringing together government officials and local business leaders to help maximize the benefits of the program."

Hudak recommends that the legislative language be modified to help ensure that the local boards act as "clearinghouses for capital development and expansion."

"The program not only has a real chance of making business leaders aware of corporate models that need change or companies that need assistance," Hudak writes. "It can facilitate private investment in manufacturing in ways that have been lacking in recent history and ultimately have broad-based benefits."

Hudak understands that Washington politics being what they are, Cicilline's bill stands little chance of passage in the House. And so he suggests that the Commerce Department pilot the Cicilline approach through the Manufacturing Extension Partnership, which he says has been "an incredibly effective program, operating on a relatively meager appropriations ($100-$130 million annually)." Hudak says MEP could try out the block grants in three to five states and compare the results to states where no grant funding is available.

"The manufacturing sector needs help, and innovative policy solutions may be the only option in a contentious and partisan political environment," Hudak concludes.

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