Congressional Research Service Gets it Wrong, Says ITIF; U.S. Manufacturing Still Hurting Post-Recession

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A recent Congressional Research Service report mistakenly suggests that U.S. manufacturing is healthy while dismissing the need for supportive manufacturing policies.

In a new report released today, the Information Technology and Innovation Foundation (ITIF) argues that a recent Congressional Research Service (CRS) report contains flaws that paint a rosier picture of U.S. manufacturing than is actually warranted.

ITIF’s report—titled, “A Critique of CRS’s ‘U.S. Manufacturing in International Perspective’”—finds that in contrast to the CRS assessment, the U.S. manufacturing sector has in fact barely recovered from the Great Recession. ITIF concludes policymakers must take action to help it thrive again.

“America’s future economic prosperity depends on a healthy manufacturing sector,” said Robert Atkinson, founder and president of ITIF and one of the report’s co-authors. “We need to take an honest look in the mirror. Right now, the state of U.S. manufacturing is not a pretty picture. The CRS report gets it wrong. The real facts are clear: U.S. manufacturing is in trouble and needs help more than ever.”

The ITIF report critiques and counters several errors in the CRS analysis:

-How many manufacturing jobs did we lose? The CRS report uses unofficial data and a truncated period of analysis to suggest a 12 percent loss of manufacturing jobs between 2003 and 2013. The ITIF analysis, on the other hand, found that when you use official Bureau of Economic Analysis (BEA) data for 2000 to 2013, U.S. manufacturing employment actually declined by a staggering 30.7 percent.

-Is U.S. manufacturing output actually up? While the CRS report compares raw U.S. manufacturing output to other nations and concludes nothing is amiss, when ITIF compared the output as a percent of GDP, U.S. performance was stagnant at best. Considering that BEA output data are likely overstated, U.S. output has probably decreased.

-Are there signs of growth? The CRS report suggests that we should be optimistic because of high manufacturing R&D, high foreign direct investment (FDI), and a high percentage of domestically manufactured inputs. ITIF counters that when controlling for industrial composition, the results are much less favorable for R&D. The new report also suggests that by not differentiating between greenfield and brownfield investments, the CRS report does not tell the full story on FDI, which actually is less encouraging. Furthermore, given the size of the United States, ITIF points out that having a significant amount of domestic inputs is natural.

The ITIF report goes on to suggest policy solutions Congress could undertake to address the weak manufacturing industry, including legislation to reduce the effective corporate tax rate; boost investment incentives, including for R&D; better enforce trade rules globally; and support manufacturing innovation and workforce development .

“Clearly, Congress needs to act to get U.S. manufacturing back on track,” said Atkinson. “Policymakers must take seriously the gravity of this situation. It is time to reinvigorate American manufacturing before it is too late.”

Read the report here.

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