As factories closed and more companies moved their operations offshore, employment in manufacturing has declined over the years. But now the Biden Administration is spending big on industrial policies, such as the CHIPS and Science Act and the Inflation Reduction Act, to bring manufacturing, especially semiconductors and electric vehicles, back to the U.S. But some economists warn against the dangers of government playing favorites in a free market. So how exactly is the U.S. government convincing manufacturers to return? And will its bet pay off?

Chapters:
00:00 — Introduction
01:58 — Industrial policies 
04:47 — Pros and Cons 
08:20 — Way forward 

Produced & Edited by: Juhohn Lee
Animation: Christina Locopo
Supervising Producer: Lindsey Jacobson
Additional Sources: EPA, White House, Department of Commerce, Center for Strategic & International Studies, Census Bureau

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Why Factories Are Coming Back To The U.S.

More than 19 million Americans held a job in manufacturing during the peak in 1979.

Since then, that number has tumbled by nearly 36 percent to just 12.5 million in November 2021.

In comparison, non-farm employees grew more than 65% during the same period.

1 is that manufacturing steadily is becoming a more complex industry, where you need more people with advanced degrees and professional certificates.

Over the last 50 years, certain industries that just aren't really well suited for the U.S.

Economy, particularly labor intensive, low wage manufacturing and things like textiles or furniture, have moved offshore.

Is spending big on industrial policies to bring manufacturers back to America.

Industrial policy is the use of some sort of government power, either legal power or taxing power or tax abating power or some other thing to have the economy start producing some things that the government thinks it needs to be producing and maybe isn't producing.

If you look at the 3 pieces of legislation, the Chips and Science Act, the bipartisan infrastructure bill and the Inflation Reduction Act.

You're looking at more than a trillion dollars in new government spending on industrial policy.

Not all economists believe the government should be playing favorites.

Politicians and bureaucrats are ill suited to pick winners in the market.

If the federal government so puts its thumb on the scale on 1 side, then there is inevitably going to be some sort of loser.

Government convincing manufacturers to return?

Government has directly interfered with the free market.

Was weak in terms of making things and we knew we had to be strong, had to make cannons and muskets and whatever.

And so they put on heavy tariff walls that made it not economic to import things and therefore companies here started to make things.

And we're a great country significantly because of that.

However, experts say the recent initiatives from the Biden administration are unprecedented.

The United States government has in the past used subsidies, it has used tariffs and Buy American protection.

But the scale of what we're playing with now is far, far bigger than anything we've done in the recent past.

Government incentives ranked second on reasons why manufacturers are returning to the U.S., according to the National Institute of Standards and Technology.

We asked manufacturers and distributors, to the extent that you get product or components from offshore, why do you do that?

If the government can lower that cost of production through subsidies, it makes production more attractive in the location that the government wants it.

The new incentives from the Biden administration focus on 2 specific sectors, electric vehicles and semiconductors.

For instance, the Inflation Reduction Act of 2022 employs tax credits to encourage the manufacturing of clean energy in the U.S.

Since its enactment, at least $45 billion in private sector investment has been announced across the supply chain, according to the Treasury Department.

thousand dollars per new car and then a $4 thousand dollar credit when you sell the used car to somebody else.

Manufacturing costs isn't that much higher than than doing it in China, for example.

And therefore, it would clearly be more profitable to do it here than it would be to ship it, make it there and ship it here.

Meanwhile, the Chips and Science Act of 2022 set aside $50 billion to boost America's competitiveness in semiconductors.

The Semiconductor Industry Association estimates that the act has attracted over $210 billion in private investments across 22 states.

We make a fair amount of them, but we are highly reliant on a relatively small set of sources, especially Taiwanese.

1 of the lessons that not only the government have drawn from COVID is that semiconductor sector is at the core of a lot of advanced manufacturing and even a lot of mid-level consumer goods manufacturing and that we can't really afford an interruption of semiconductor supply.

Defense systems today rely on semiconductors in order to function.

The Biden administration has referred to the reshoring of semiconductors as a matter of national security.

There is a theoretical case for industrial policy, particularly in national security related technologies.

Free markets just simply can't account for that national security issue.

And the Defense Department is not a big enough buyer to in itself, in its own demand, to ensure that we have sufficient onshore supply.

If successful, industrial policies can also potentially lead to big payoffs.

The development of space industry, we now have a large commercial space launch industry.

That investment of public money in space science is now having a big commercial payoff.

Another example would be the development of mRNA vaccines for COVID.

They put out a goal for businesses to do and they financed it and the businesses delivered on it.

And that cost a lot of money, but I think most people would say it was well worth it.

But there are also strong cases against them.

The real economy is insanely complex, involving millions of people and millions of transactions every single day.

What is potentially strategic today might change dramatically tomorrow.

We are head first into electric vehicles today.

We're running the risk of pushing a technology that isn't quite ready for prime time and in the process sidelining a technology that maybe turned out to be a better approach.

Industrial policies are also susceptible to the biases of the politicians involved.

The reality is that any industrial policy must make it through a political process that is inevitably influenced by political actors, whether that is interest groups or lobbyists.

So all of those political influences really are a corrupting force.

The Micron plan in upstate New York, well that just happens to be where Senate majority leader Chuck Schumer's home state, right?

Well, Ohio is, of course, a very politically important state for the presidential election.

So you might be running the risk of having projects located in places that are more politically important than they are strategically sound commercial investment.

If the federal government so puts its thumb on the scale on 1 side, there is inevitably going to be some sort of loser.

and EV batteries, that is an area where we know we have to invest.

We can do that with incentives, but at the same time, we can't penalize through the regulatory system other forms of energy production or development.

Ultimately, critics point out that it isn't the government's job to pick the winners and losers in a free market.

My view is that I have no idea what's the right industry or the wrong industry.

And I think that as long as we've implemented the right market-based policies to make investing and producing here affordable and attractive, The market is going to figure that out.

Total construction spending in the manufacturing sector has seen an increase of over 106 percent since November 2021, when the Infrastructure Investment and Jobs Act was passed.

Has spent more money building factories than schools, health care centers, and even office buildings.

It's still an open question, but I do think you see electronics and semiconductors sector, companies that had been here again seeing the U.S.

As a place they want to make things and others considering it.

And the administration's right to claim a bit of credit for that.

Experts suggest a broader policy could have brought more significant and efficient improvements.

I think instead of spending so much on on the incentives that they did have, they should have spread around more and taken other actions that would have leveled the playing field.

The most obvious 1, especially given the technologies that we're looking at, is in immigration.

The fact is that a lot of the smartest people in the world can't get to the United States to work here and support the types of technologies that the government says are critical to national security and the future of the U.S.

And you're hearing from really across the industries in this tech space the need for more high-skill immigration.

The labor shortage is perhaps the biggest challenge that manufacturers have to face.

82 percent of manufacturing companies today are seeing a shortage of workers.

The National Association of Manufacturers estimate that 2.1 million manufacturing jobs could go unfilled by 2030.

The rest of the world has the same problem.

This is not a unique problem for the United States.

Part of that rests on our public schools.

Primary and secondary education needs to focus on the amazing opportunities that are available in manufacturing, about half of which do not even require anything beyond a high school degree.

So you don't have to amass hundreds of thousands of dollars of college debt.

So you're kind of setting yourself up for a challenging and exciting career that will pay well and provide an incredible quality of life for your family.

Nevertheless, the rising trend in reshoring has brought back what the manufacturing sector has needed the most Excitement.

People used to believe manufacturing was cool until the factory in their small town got shut down and their work moved to somewhere else and everybody lost their job.

As it comes back And it proves itself to be excellent careers again for millions of extra people.

We'll have better trained people, more productive, more enthusiastic, and a rebirth of US manufacturing.


Speaker 0: More than 19 million Americans held a job in manufacturing during the peak in 1979. Since then, that number has tumbled by nearly 36 percent to just 12.5 million in November 2021. In comparison, non-farm employees grew more than 65% during the same period.

Speaker 1: There are several reasons for this. 1 is that manufacturing steadily is becoming a more complex industry, where you need more people with advanced degrees and professional certificates.

Speaker 2: Over the last 50 years, certain industries that just aren't really well suited for the U.S. Economy, particularly labor intensive, low wage manufacturing and things like textiles or furniture, have moved offshore.

Speaker 0: But now the U.S. Is spending big on industrial policies to bring manufacturers back to America.

Speaker 1: Industrial policy is the use of some sort of government power, either legal power or taxing power or tax abating power or some other thing to have the economy start producing some things that the government thinks it needs to be producing and maybe isn't producing.

Speaker 2: If you look at the 3 pieces of legislation, the Chips and Science Act, the bipartisan infrastructure bill and the Inflation Reduction Act. You're looking at more than a trillion dollars in new government spending on industrial policy.

Speaker 0: Not all economists believe the government should be playing favorites.

Speaker 2: Politicians and bureaucrats are ill suited to pick winners in the market. If the federal government so puts its thumb on the scale on 1 side, then there is inevitably going to be some sort of loser.

Speaker 0: So how exactly is the U.S. Government convincing manufacturers to return? And will its bet pay off? This isn't the first time the U.S. Government has directly interfered with the free market.

Speaker 3: Industrial policy in the U.S. Was started by Alexander Hamilton. The U.S. Was weak in terms of making things and we knew we had to be strong, had to make cannons and muskets and whatever. And so they put on heavy tariff walls that made it not economic to import things and therefore companies here started to make things.

And we're a great country significantly because of that.

Speaker 0: However, experts say the recent initiatives from the Biden administration are unprecedented.

Speaker 2: The United States government has in the past used subsidies, it has used tariffs and Buy American protection. But the scale of what we're playing with now is far, far bigger than anything we've done in the recent past.

Speaker 0: Government incentives ranked second on reasons why manufacturers are returning to the U.S., according to the National Institute of Standards and Technology.

Speaker 3: We asked manufacturers and distributors, to the extent that you get product or components from offshore, why do you do that? Why don't you get them here? And they said price.

Speaker 2: If the government can lower that cost of production through subsidies, it makes production more attractive in the location that the government wants it.

Speaker 0: The new incentives from the Biden administration focus on 2 specific sectors, electric vehicles and semiconductors. For instance, the Inflation Reduction Act of 2022 employs tax credits to encourage the manufacturing of clean energy in the U.S. Since its enactment, at least $45 billion in private sector investment has been announced across the supply chain, according to the Treasury Department.

Speaker 3: The EV battery tax credit is

Speaker 0: $7.5

Speaker 3: thousand dollars per new car and then a $4 thousand dollar credit when you sell the used car to somebody else. U.S. Manufacturing costs isn't that much higher than than doing it in China, for example. And therefore, it would clearly be more profitable to do it here than it would be to ship it, make it there and ship it here. So The incentives have been huge.

Speaker 0: Meanwhile, the Chips and Science Act of 2022 set aside $50 billion to boost America's competitiveness in semiconductors. The Semiconductor Industry Association estimates that the act has attracted over $210 billion in private investments across 22 states.

Speaker 1: We make a fair amount of them, but we are highly reliant on a relatively small set of sources, especially Taiwanese. 1 of the lessons that not only the government have drawn from COVID is that semiconductor sector is at the core of a lot of advanced manufacturing and even a lot of mid-level consumer goods manufacturing and that we can't really afford an interruption of semiconductor supply.

Speaker 0: All major U.S. Defense systems today rely on semiconductors in order to function. The Biden administration has referred to the reshoring of semiconductors as a matter of national security.

Speaker 2: There is a theoretical case for industrial policy, particularly in national security related technologies. Free markets just simply can't account for that national security issue. And the Defense Department is not a big enough buyer to in itself, in its own demand, to ensure that we have sufficient onshore supply.

Speaker 0: If successful, industrial policies can also potentially lead to big payoffs.

Speaker 1: The development of space industry, we now have a large commercial space launch industry. That investment of public money in space science is now having a big commercial payoff. Another example would be the development of mRNA vaccines for COVID. They put out a goal for businesses to do and they financed it and the businesses delivered on it. And that cost a lot of money, but I think most people would say it was well worth it.

Speaker 0: But there are also strong cases against them.

Speaker 2: Politicians and bureaucrats are ill suited to pick winners in the market. The real economy is insanely complex, involving millions of people and millions of transactions every single day. What is potentially strategic today might change dramatically tomorrow. We are head first into electric vehicles today. We're running the risk of pushing a technology that isn't quite ready for prime time and in the process sidelining a technology that maybe turned out to be a better approach.

Speaker 0: Industrial policies are also susceptible to the biases of the politicians involved.

Speaker 2: The reality is that any industrial policy must make it through a political process that is inevitably influenced by political actors, whether that is interest groups or lobbyists. So all of those political influences really are a corrupting force. The Micron plan in upstate New York, well that just happens to be where Senate majority leader Chuck Schumer's home state, right? We see the Intel plant in Ohio. Well, Ohio is, of course, a very politically important state for the presidential election.

So you might be running the risk of having projects located in places that are more politically important than they are strategically sound commercial investment.

Speaker 0: There's also the issue of hidden costs.

Speaker 2: If the federal government so puts its thumb on the scale on 1 side, there is inevitably going to be some sort of loser. Electrification

Speaker 4: and EV batteries, that is an area where we know we have to invest. We can do that with incentives, but at the same time, we can't penalize through the regulatory system other forms of energy production or development.

Speaker 0: Ultimately, critics point out that it isn't the government's job to pick the winners and losers in a free market.

Speaker 2: My view is that I have no idea what's the right industry or the wrong industry. And I think that as long as we've implemented the right market-based policies to make investing and producing here affordable and attractive, The market is going to figure that out.

Speaker 0: Total construction spending in the manufacturing sector has seen an increase of over 106 percent since November 2021, when the Infrastructure Investment and Jobs Act was passed. That means the U.S. Has spent more money building factories than schools, health care centers, and even office buildings.

Speaker 1: It's still an open question, but I do think you see electronics and semiconductors sector, companies that had been here again seeing the U.S. As a place they want to make things and others considering it. So I think that's it's a positive story. And the administration's right to claim a bit of credit for that.

Speaker 0: Experts suggest a broader policy could have brought more significant and efficient improvements.

Speaker 3: I think instead of spending so much on on the incentives that they did have, they should have spread around more and taken other actions that would have leveled the playing field.

Speaker 2: The most obvious 1, especially given the technologies that we're looking at, is in immigration. The fact is that a lot of the smartest people in the world can't get to the United States to work here and support the types of technologies that the government says are critical to national security and the future of the U.S. Economy. And you're hearing from really across the industries in this tech space the need for more high-skill immigration.

Speaker 0: The labor shortage is perhaps the biggest challenge that manufacturers have to face. 82 percent of manufacturing companies today are seeing a shortage of workers. The National Association of Manufacturers estimate that 2.1 million manufacturing jobs could go unfilled by 2030.

Speaker 4: The rest of the world has the same problem. This is not a unique problem for the United States. We just need more workers. Part of that rests on our public schools. Primary and secondary education needs to focus on the amazing opportunities that are available in manufacturing, about half of which do not even require anything beyond a high school degree.

So you don't have to amass hundreds of thousands of dollars of college debt. So you're kind of setting yourself up for a challenging and exciting career that will pay well and provide an incredible quality of life for your family.

Speaker 0: Nevertheless, the rising trend in reshoring has brought back what the manufacturing sector has needed the most Excitement.

Speaker 3: People used to believe manufacturing was cool until the factory in their small town got shut down and their work moved to somewhere else and everybody lost their job. As it comes back And it proves itself to be excellent careers again for millions of extra people. That will create excitement. We'll have better trained people, more productive, more enthusiastic, and a rebirth of US manufacturing.

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Why Factories Are Coming Back To The U.S.