Ohio, a state reliant on manufacturing and trade, has a lot riding on President Obama’s nomination of Jack Lew to be the nation’s next treasury secretary.
In that job, Lew would be the president’s top economic adviser. The position has been compared to that of a CEO, with the exception that Lew would formulate trade, taxation and national debt policies that should help grow the national economy.
Lew would also oversee the monitoring of compliance by other nations with trade norms such as how they value their own currencies, which has implications for international trade and chronic annual U.S. trade deficits.
The deficit is a key gauge for Ohio manufacturers that sell goods and services in international markets - and whether they can hire more workers because of growing market share or must lay them off when the U.S. is outmaneuvered economically.
The fragility of the nation’s economic recovery’s was underscored Wednesday when the Commerce Department said the nation’s gross domestic product shrank for the first time in three-and-a-half years during the fourth quarter, declining at an annual rate of 0.1 percent between October and December.
Lew, 57, has a professional background of administrative roles in the Clinton and Obama administrations and served a stint with Citigroup. But he remains mostly an unknown on these fronts, domestic industry advocates say.
Ohio’s senators, Rob Portman, a Republican, and Sherrod Brown, a Democrat, are united on the importance of Lew as an advocate for Ohio’s bread-and-butter businesses. Both spoke to him in advance of a Senate confirmation hearing.
“The Secretary of the Treasury has the potential to play a key role in the kinds of entitlement and tax reform needed to address the nation’s record debt and relatively weak economic growth and high unemployment,” Portman said. “I spoke to him about the need to create an environment that will provide the opportunities hard-working Ohioans need to get back to work.”
Brown said Lew emphasized the commitment President Obama made in his inaugural address to stand up for the middle class.
“I did raise my concern with Washington’s long held bias towards Wall Street, particularly the largest mega banks that have only grown bigger since the financial crisis,” Brown said. “I also pressed Mr. Lew on the need for Treasury to take decisive action when countries like China cheat by manipulating currency. While the Treasury Department has taken modest steps, American manufacturers and workers deserve a level playing field when competing with other industries and other countries.”
For economists like Alan Tonelson of the U.S. Business and Industry Council, a business lobby representing 2,000 family owned and privately held companies, most of them manufacturers, claims of an American industrial comeback are blurred by a rising share of advanced manufactured goods imported into U.S. markets, which still has the wealthiest consumers in the world. The share reached another all-time high in 2011, Tonelson said, and threatens to grow again in 2012 once final figures are counted.
“The analysis strongly indicates that, contrary to widespread optimism about an American industrial renaissance, domestic manufacturing’s highest value sectors keep falling behind foreign-based rivals,” Tonelson said.
Imports in 2011 captured 37.57 percent of the collective $2.01 trillion American market for a group of more than 100 advanced manufactured products – a new record level.
Ohio Gov. John Kasich called on Lew Thursday to advocate for effectively tackling federal debt as well as entitlement reform to help remove what he called an “overhang” on businesses.
“We saw the economy kind of shrinking again,” he said. “If there is anything, you need a safeguard against the fact that this economy is in deep trouble and we could face — who knows what they are going to do down there in (budget) sequester.” ”
Trade reform advocate Michael Stumo, CEO of the Coalition for a Prosperous America which has held seminars in Dayton and around the nation, said that Lew’s first priority should be eliminating the U.S. trade deficit, which he called a “$600 billion outflow of money from our economy.” That, he said, would be the equivalent of a $6 trillion stimulus over 10 years with no government spending.
He said the U.S. should declare China and several other countries currency manipulators, and take all necessary steps to neutralize that trade advantage. The issue was a hot one during the presidential race in Ohio. Stumo also called for comprehensive tax reform to shift the tax burden from domestic production onto imports.
“This could be accomplished by adding a consumption tax and reducing reliance on income taxes in a manner that is revenue neutral and progressively neutral,” Stumo said. “It would reduce the cost of hiring and relieve the tax burden on exports, while broadening the tax base to include imports.”
Robert Scott, director of trade and manufacturing policy research at the Economic Policy Institute, a labor and business-supported think tank, said reducing trade deficits will benefit Ohio more than the average U.S. state, because the state is a large manufacturer.
“Rebuilding manufacturing is one of the best ways to support sustainable growth,” Scott said. “We also need to encourage infrastructure rebuilding, which can create millions of jobs.”
Scott cited a 2009 American Society of Civil Engineers finding that the U.S. needs $2.2 trillion worth of infrastructure investment just to replace work and degraded facilities.
Investments in infrastructure also help build demand for domestic manufactured goods such as iron and steel, cement, and construction machinery, Scott said.
Congressman Mike Turner, R-Centerville, said he’d like the confirmation hearings to focus on the failures of departing Secretary, Tim Geithner, “to operate the Department in a fair and transparent manner” particularly with how the auto industry bailout was brokered for Delphi’s salaried retirees.
“Mr. Lew should be questioned on the plight of Delphi salaried retirees and what specific steps he intends to take to right these wrongs,” Turner said.
Staff Writer Andrew Tobias contributed to this report.
Ohio manufacturing provides 17 percent of state’s gross domestic product and includes:
- More than 600,000 jobs for Ohio workers
- An annual payroll of more than $33 billion, the highest total annual wages of any non-government economic sector
- More than $46 billion in products to more than 216 countries and territories
- Manufacturing is the largest of the 20 sectors of Ohio’s economy with 16.7% of total output in 2010; durable goods were 9.8 percent and non-durable goods were 6.9 percent of output.
- Ohio’s manufacturing sector produced $80.0 billion worth of goods in 2010, ranking fifth in the nation after California, Texas, Illinois and North Carolina.
- The average annual earnings of Ohio workers on its payrolls in 2010 were $53,281.
Source: Ohio Manufacturers’ Association