By J.F. McKenna
President Obama came to Cleveland for a pep rally. He talked about business. He talked about innovation. He talked about the future.
“As I said, it’s not always easy to project into the future,” he told his audience at Cleveland State University. “ Sometimes the unknown is scary.”
The unknown can indeed be scary. Then there are the scarier things we already know.
The President insisted that “it’s not good enough just to rely on the old industries.” Cleveland, he said, has been “working to reinvent the Rust Belt as the Tech Belt.” And he gave the impression that such reinvention is as easy as switching from suspenders to a stylish leather strip.
Here comes one of those scarier things we already know. President Obama’s economic view just taint so.
Like it or not, manufacturing remains a critical component of wealth creation. As my friend Chuck Day, former Industry Week editor, used to tell me over hamburgers and cottage cheese, “There are only three ways to produce wealth—mine it, grow it or make it.” To factor out “making stuff” is to factor out the region itself. Now and in the future. There’s no replacement for it.
President Obama seemed to toss off manufacturing’s critical role. “It’s not good enough just to rely on the old industries,” he said. Well, Mr. President, it’s foolhardy to believe Cleveland can begin its reinvention without a revitalized manufacturing base.
Maybe the President was reluctant to dwell on manufacturing. The topic has been a touchy one, politically speaking. Less than a year ago, Bison Gear & Engineering CEO Ron Bullock criticized America’s lack of commitment to manufacturing. Much of Bullock’s rebuke was aimed in the direction of Mr. Obama’s Washington.
“The United States has been the leader in manufacturing output globally for the past 110 years, with about two-thirds of all business research and development in the United States being performed by manufacturers and nearly 60 percent of exports coming from manufactured goods,” the St. Louis manufacturer said. “However, more effective foreign competition has led to increasing manufactured-goods trade deficits and the loss of 7 million U.S. manufacturing jobs since 1980. Our position as the world’s leading manufacturing economy is about to be lost to China because of a lack of effective measures in tax and trade policies.”
Bullock then pointed to the Tax Reform Act of 1986, “with the personal income tax rate being lower than the corporate rate for the first time in history. By changing to a Subchapter S corporation taxed at the personal rate, I had 7 cents more from every profit dollar to reinvest into the company, which was key to growing the business. This led to growth rates that doubled our sales every five years ongoing and the hiring of an additional 200 employees, who enjoyed 14 percent higher wages than for other private-sector jobs.”
Today, Bullock continued, “economic models indicate that under President Obama’s 2011 budget proposal, S corporations in the manufacturing sector will see their tax bills go up 14 percent, our country’s economic output through 2015 will drop $200 billion on an annual basis, with 500,000 jobs lost—especially in the manufacturing sector—and the deficit will increase another $100 billion. This appears to be a recipe for a continued downward spiral.”
Manufacturing is sine qua non to recovery, not an adjunct to high-tech plans. Given the hardscrabble state of the global economy, sporting “suspenders and a belt” would be a good look for Cleveland and the rest of America. Current fashions be damned, we’ll at least be able to keep our pants up.
Speaking of decorous bearing—in business as well as personal attire—President Obama told his CSU listeners: “When it comes to workforce development, one of the most important things that we’ve all learned is how important it is to get businesses in early with the universities and the community colleges—a hugely under-utilized resource—to develop the actual training program so that young people have confidence if they go through this training program, they’ve got a job; businesses have confidence that if they hire these young people who went through the training program, they are trained for those jobs.”
All well and good, sir. But a person must learn to walk before he or she can run. Particularly in Cleveland, workforce training starts with a strong basic education.
When Eugene Saunders bailed out as the Cleveland schools’ CEO in January, the graduation rate was 54 percent. Such a dismal statistic does not a future make. Workforce development will have to begin long before the future workers get anywhere near the doors of Cleveland State or Cuyahoga Community College.
“We’ve never taken the easy route,” President Obama told his audience. “We’ve always done what’s hard.”
You’re absolutely correct, Mr. President. Rebuilding the manufacturing base and ensuring the knowledge base of a future workforce are indispensable to the future of Cleveland. As management guru Peter Drucker used to say, “the best way to predict the future is to create it.”
Anything less would be scary beyond words.
J.F. McKenna is a veteran business journalist and communications specialist.