Bad Trade Deals and the Flint Water Crisis

You might think that the drinking water crisis in Flint, MI, is unrelated to the decrepit state of roads and bridges in your state.  Well, think again.  Both problems are the result of a lack of available resources to update infrastructure that is decades old.  Why the dearth of resources?  The massive offshoring of manufacturing jobs over the last 25 years has eroded our tax base.  In a nutshell, we’ve traded good-paying manufacturing jobs for access to cheap imports.  It’s a bad trade-off, and it has left us with a tax base that does not provide enough money to rebuild or maintain infrastructure.

How did we get here?  One of the major culprits is bad trade deals.

For decades, politicians have operated under the false assumption that if we import cheaper goods it will raise our standard of living.  So they pursued trade deals that opened up our markets to imports, and created a wildly tilted playing field that placed US manufacturers at a grave disadvantage.  The ultimate result was the offshoring of over five million good-paying manufacturing jobs since 2000, with over two million of those lost to China alone.

Keep in mind that the US granted China Permanent Normalized Trade Relations status in 2000 and facilitated their entry into the World Trade Organization the following year, unleashing a flood of cheap imports to our shores.  How has that worked out for us?  Since 2001, real median household income in our country has gone down, according to data provided by the Federal Reserve Bank of St. Louis.  Household income peaked at $57,843 in 1999 and was only $53,657 in 2014.  Thus, importing cheaper goods at the expense of good manufacturing jobs has actually lowered our standard of living.

But isn’t the latest news on employment gains positive?  After all, job data released by the Bureau of Labor Statistics shows an increase of 150,000 jobs in January 2016 and a drop in the unemployment rate to 4.9%.

Let’s take a closer look at those employment numbers.  What has replaced good-paying manufacturing jobs?  Jobs in service industries.  Of the jobs created in January, over 70% were in retail stores and restaurants.  This is not to denigrate the hard working people who need those jobs, but it’s no great secret that service industries pay less than manufacturers.  The Benefits of Manufacturing Jobs, a May 2012 report released by the Department of Commerce, concluded that total compensation for service jobs is 17% less than in manufacturing.  Lower wage levels means less total taxes paid, and less money to spend on our rapidly deteriorating infrastructure.

Yet, we learn little from our past mistakes.  The Obama administration is pursuing a new trade deal, the Trans-Pacific Partnership, that once again throws manufacturing under the bus.  Shortly after the text of TPP was released, the Wall Street Journal cited an analysis from the Peterson Institute for Economic Analysis estimating that TPP will lead to an additional $10 billion deficit in US heavy manufacturing, and an additional $20 billion deficit in light manufacturing.  Perhaps this explains the Department of Labor’s December 2015 projection that we will lose another 800,000 manufacturing jobs by 2024.

If our manufacturing base continues to erode, we will pay an increasingly higher percentage of household and business income on taxes and fees to rebuild roads and bridges.  And we can expect more tragedies like the drinking water crisis in Flint, MI.

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