The urgent need to boost American economic growth while reducing the U.S. trade deficit makes it imperative to rebuild America’s manufacturing sector. Capital and labor that were diverted during the bubble years into unproductive, inflated assets in the housing and stock markets need to be shifted into the production of tradable goods to be exported or substituted for imports. A successful policy to reinvigorate U.S. manufacturing will require intelligent public policy in a number of areas, from lowering the costs of doing business in the United States through infrastructure investment and tax reform to addressing the mercantilist practices of some U.S. trading partners.
Central to any strategy for industrial revitalization in America must be expanding the access to credit of American manufacturing firms, particularly small and medium-sized firms. In the medium term, this requires the creation of a comprehensive federal and state manufacturing credit system modeled on the successful farm credit system of the last century, which modernized American agriculture and turned high-tech U.S. agribusiness into a leading export industry. In the short term, as a down payment on the goal of modernizing American manufacturing, Congress should build on successful precedents in infrastructure investment and other areas and create a new category of “Made in America Bonds.” Modeled on the Build America Bonds program created by the American Recovery and Reinvestment Act of 2009 (ARRA), Made in America Bonds would be a new class of tax credit bonds that could be issued by states, local governments and other authorized entities to encourage the establishment or expansion of manufacturing in the United States.
