Skip to comments.Rush Limbaugh: The US Manufacturing Myth
Posted on 02/09/2011 11:32:17 PM PST by iowamark
RUSH: Here's Robert in Los Angeles. Robert, welcome, sir, to the EIB Network, great to have you with us. Hello.
CALLER: Thank you, Rush. It's a pleasure to talk to you. I just want to take a minute of your time and I want to ask your opinion on something. I constantly keep hearing the president and government officials saying that we need jobs, jobs, and jobs. I have the solution, and I'd like your opinion on this. Domestic manufacturing. We've lost it to China. We have a trade imbalance of about 200 to $300 billion a year. Why don't we either tax them at a higher rate or, my suggestion would be, reduce the taxes on anyone who makes something in the United States and the product that's made here has to be made with maybe 70%, 80% American made. I'd like your opinion.
RUSH: I have to find the story. I do not have it at my fingertips. It was a story within the past month on an anniversary of something, I forget which. It might have been in the Wall Street Journal, and the point of the story was that we are manufacturing more stuff today than ever before in this country. (interruption) Was it after the State of the Union? That was just a couple weeks ago. I thought this was a little bit longer ago than that, certainly this year. We are the number one manufacturer in the world. There's been this myth that we've shipped all of our jobs overseas. Yeah, certain kinds of jobs have been shipped overseas. And one of the misnomers with manufacturing jobs lost, take a look, for example, at the Apple iPhone. Now, the Apple iPhone is assembled in China, but all the guts are not made in China. There are parts made in America, parts made in Switzerland, parts made in parts of Europe. They're just all shipped over to Shenzhen at the manufacturing plant and they're assembled there, but the whole phone is not ChiCom. It's just assembled there. But because it comes from there, it is considered a Chinese-made product, when in fact the guts may not be. And that's how you can report accurately that we still are the number one manufacturing country in the world.
So we are nevertheless allowing the Chinese to manipulate us in a lot of ways. I'm not saying the premise of your call is wrong. We start tariffs on Chinese imports, that just never works. It just never works. The market is speaking. The market here is speaking. If we, given current labor rates and everything else, an iPhone totally put together and made in this country would cost about $1800. Well, people aren't gonna pay $1800 for an iPhone, and Apple knows it. But with all the parts made elsewhere, shipped to China and assembled over there, you can get an iPhone for 200 bucks now with Verizon thrown in as a carrier, in addition to AT&T. So I'm against Smoot-Hawley-type tariffs. I think the way you deal with the ChiComs is diplomatically, and it's tough to deal with them diplomatically when they own so much of our debt. I'm gonna tell you something, Robert. The Chinese ran rings around us in that last state visit of Hu Jintao. We sit here, we talk about human rights, we demand human rights, and we exempt them. We talk about carbon emissions and making sure that we penalize ourselves for our technological process, but not them.
Donald Trump has some I think intriguing, intelligent stuff to say about China, but he does business with them at the same time. Trump does a lot of business with the ChiComs. But in his view, Trump does not lose money doing it nor does he get humiliated or embarrassed in the process. But there are a lot of myths about manufacturing in this country and the trade deficit and all this. We're not nearly as absent manufacturing jobs as people think. Now, we might have lost sectors. I'm having a mental block. Textiles, we mighta lost a lot of the textile industry and we probably don't make many sewing machines anymore. But there are other things that have replaced them on the manufacturing scale, and we're not a totally manufacturing-free economy. It's just one of the many myths that are out there. I'm gonna have to find that story. Somebody on my crack research staff -- well, I'll look for it myself. It will take them 'til June to find it, but I'll come up with it here and -- (laughing) -- I'll probably have it in the break when we get back. BREAK TRANSCRIPT
RUSH: And, as I knew would be the case, we have a couple of stories here on the US and manufacturing. "According to the Federal Reserve data, the U.S. produced almost $3 trillion of industrial output in 2008, measured in 2000 dollars (or about $3.7 trillion in 2008 dollars The US manufacturing sector, the manufacturing sector alone is the third largest economy in the world. Just manufacturing. Compared to the GDP of the top five countries -- Japan, China, Germany, France, UK -- USA manufacturing alone is the third highest GDP, just the manufacturing sector. "If the U.S. manufacturing sector were a separate country, it would be tied with Germany as the world's third largest economy.
"It would also be larger than the entire economies of India and Russia combined. As much as we hear about the 'demise of U.S. manufacturing,' and how we are a country that 'doesn't produce anything anymore,' and how we have 'outsourced our production to China,' the U.S. manufacturing sector is alive and well, and the U.S. is still the largest manufacturer in the world." That's Federal Reserve numbers. This is Jeff Jacoby and his column in the Boston Globe on February 6th, three days ago: "There's just one problem with all the gloom and doom about American manufacturing. It's wrong. Americans make more 'stuff' than any other nation on earth, and by a wide margin," damn it! Yeah.
"According to the United Nations' comprehensive database of international economic data, America's manufacturing output in 2009 (expressed in constant 2005 dollars) was $2.15 trillion. That surpassed China's output of $1.48 trillion by nearly 46 percent. China's industries may be booming, but the United States still accounted for 20 percent of the world's manufacturing output in 2009 -- only a hair below its 1990 share of 21 percent. 'The decline, demise, and death of America's manufacturing sector has been greatly exaggerated,' says economist Mark Perry, a visiting scholar at the American Enterprise Institute in Washington." That's not a liberal think tank.
"'America still makes a ton of stuff, and we make more of it now than ever before in history.' In fact, Americans manufactured more goods in 2009 than the Japanese, Germans, British, and Italians -- combined," and as I've always said it's the European Union that's going to hell when it comes to manufacturing. It's the European Union that is in deep, deep trouble, aside from Germany. France, Great Britain, Italy, they're in trouble as a competitive enterprise. "American manufacturing output hits a new high almost every year. US industries are powerhouses of production:
"Measured in constant dollars, America's manufacturing output today is more than double what it was in the early 1970s. So why do so many Americans fear that the Chinese are eating our lunch? Part of the reason is that fewer Americans work in factories. Millions of industrial jobs have vanished in recent decades, and there is no denying" that. "But factory employment has declined because factory productivity has so dramatically skyrocketed," and not everything anymore that's manufactured in America is made in a factory or a plant.
I posted Jacoby’s article earlier.
I missed Rush’s program today, I’ll have to listen to it on Rush 24/7. Thanks for the heads up.
He’s talking about total dollar value and not actual number of jobs created. So many people get confused or are misled intentinally...
instead of a 25% tarrif, we should simply drop the corporate tax
Pure BS. Rush wouldn’t know a manufacturing plant if it was across the street from his house.
the 25% tarrif is a tax on US consumers. The consumers will see no difference between a 25% GST or VAT tax. Trump is essentially advocating higher taxes without off setting it without tax cut elsewhere
“an iPhone totally put together and made in this country would cost about $1800”
A bunch of bull. iPhone from China comes at around $6.50 cost so maybe it would cost about $50 to make here. Apple is making plenty money on it, so they can easily afford to employ a few Americans here. Someone has to open factories and businesses here too, not just try to sell us crap.
German companies somehow manage to compete and pay very good wages. Their exports are over a trillion a year and unemployment is extremely low.
Okay, I’ll bite Pisser, as an old Ret. manufacturing fella, what is the small gripe, (rant I think the kids call it now), about Rush’s speak here. Things must be different now I guess.
I don’t know about your towns, but mine was centered around manufacturing socks.. What was 400 small to large plants is down to about 7 and they just announced their movement overseas. Our town is basically a ghost town with empty buildings all over. Sorry Rush, but the real world says your wrong on this.
your = you’re
What happens if a competitor build it at $6.50 and sell the similar product at a lower price and Apple which build it in the US build it at $50 sell it at a higher price. Apple will lose very quickly. All that money invested in building a factory in the USA will go to waste. Businesses can’t invest like that. They have to find the cheapest place with the lowest cost and plan long term, to give themselves some room to adapt to any changes in the market
Its called “race to the bottom” and is no way to run a business. Apple could and can build here and still make a profit. They just don’t.
rush is full of it
manufacturing jobs are disappearing
i personally worked at 4 companies that are now making all over in China
Pratt & Whitney engines
all the mom and pop machine shops that made parts are gone
service jobs are what are being creeated
I sent 115 drawings of a compamny’s products and within one year that entire line was being made in China and they laid off 150 people
Rush has NEVER had a manufacturing job, all he is doing is quoting some airhead
Come to new england. we used to make everything
every major industry up here is GONE
Aerospace is now outsourced to China or has left the state
auto parts now made in Mexico, samping done in China, Jet engines made in China and Poland, machined parts for fuel controls made in Mexico
textiles now made in Vietnam instead of Rockville, Ct
the list goes on
RUSH, Come back to Bristol, look at the abandoned factories, ask where they went
then drive around the rest of Connecticut. Count the abandoned factories. Ask where the work went.
Drive around Worcestor, ask where the work went
drive around Springfield, ask where the work went, where are the factories that existed for years and put tens of thousands of people to work?
Total BS. On average, labor costs make up 10% of the total cost of a manufactured good. So a $200.00 cell phone made in China would cast $220.00 if built is the USA.
Rush is not denying that manufacturing jobs are disappearing. What he is saying is that the amount of total manufacturing has stayed the same, because manufacturing with high labor costs (like textiles) is being replaced by low labor cost manufacturing.
Rush ignores the obvious experience of the everyday American walking through a department store and trying to find something made in the USA - or for that matter, trying to buy an appliance or car.
“What he is saying is that the amount of total manufacturing has stayed the same, because manufacturing with high labor costs (like textiles) is being replaced by low labor cost manufacturing.”
A whole lot of boarded up textile mills in the south that have been replaced with nothing.....
“German companies somehow manage to compete and pay very good wages.”
One of the reasons might be that they still enjoy the perception by consumers that ;German made’ = high quality. The US used to enjoy that perception, but this has been eroded over the past couple of decades. Deserved or not, it is a problem. Consumers will pay more for a product that they believe is truly better, but not if they think there are less expensive alternatives that are just as good, or better.
It’s not just the economics of building here, it’s that no one knows what Congress will next. It only takes one bill or ruling to make a billion dollar factory idle.
Oh, and I forgot about the legal climate. Every employee is a potential lawsuit.
Look at that inflation = 23% from 2000-2008.
He never said jobs are not going overseas, he just said that we are still a producer. Our manuafturing sector is not employing as many as many as it once did but is still producing products.
We’re not nearly as absent manufacturing jobs as people think. Now, we might have lost sectors. I’m having a mental block. Textiles, we mighta lost a lot of the textile industry and we probably don’t make many sewing machines anymore. But there are other things that have replaced them on the manufacturing scale, and we’re not a totally manufacturing-free economy. It’s just one of the many myths that are out there.
Of course, the workers have obsolete skills.
The total dollar value v. jobs is a serious concern, but it actually reflects incredible productivity gains.
Those gains are in large part driven by liberal efforts to make labor more expensive. That effort simply compounds the bureaucratic (Federal, state and local) effects of taxation and regulation.
Liberals have increased the cost of labor beyond its marginal value.
Hence, high productivity, high value products and high profits to a smaller group (owners/capitalists) at the expense of labor.
Exactly what all Leftist programs do...the opposite of their stated intent.
Unskilled labor is cheap and that is why jobs went overseas. You can’t build a product here and pay employees $30 per hour when the same task can be accomplished for a dollar an hour in Asia. I know that much of our remaining manufacturing is done on high tech equipment but the older, more dangerous equipment we used 25+ years ago is likely being used today in Asia.
Instead of a tariff we could impose a regulation tax. Tax imports to compensate for ridiculous Liberal Anti-Market regulations.
Maybe so BUT he sure can regurgitate 'research' information just fine!
BS. Rush deliberately "couldn't find the WSJ" article that supported his claim. It's about dollars. The whole article was based on the value of manufactured goods in the U.S. vs the rest of the world.
When China makes coffee pots for $5 and the U.S. makes them for $20 that means, in his eyes, we make more.
‘When China makes coffee pots for $5 and the U.S. makes them for $20 that means, in his eyes, we make more.’
Actually if China made coffee pots for $5 and it would cost $10 here, we would make none at all, since nobody would pay $10 for a $5 coffee pot.
BUT, those Asian manufacturers are now taking their profits (off that old 'dangerous' equipment) and investing in competing manufacturing technologies and, MORE IMPORTANTLY, improving their labor force with skills to run and maintain those new manufacturing technologies.
These moves are something that goes crosswise with the our country's union mentality.
then I guess the job would have STAYED IN AMERICA, wouldn’t it?
AMERICANS would be making it, and AMERICANS can MOVE to where the JOBS ARE, couldn’t they??
Did AMERICAN COMMUNIST GOVERNMENTS build up AMERICAN manufacturing bases?
NO! Capitalists did, using their OWN money!
Name ONE foreign company that uses it’s OWN money, until you can name where all our products come from, and which are made on PRIVATE money that invested their OWN money in R&D and development and production, All Rush’s words are just NUMBERS GAMES!
The truth is found in the Bell Curve. It is a statistical fact that one-half of the population is below average in intelligence. Since the industrial revolution, workers in the west have been conditioned to believe that they should work 40 hours per week — no more, no less — for their wages.
The average factory worker is capable of working with physical objects in a repetitive task. This person does not think abstractly or learn new things easily. I’m not knocking them, just stating facts.
You say that the market will not support paying Americans $ 30 per hour for the same job that can be done by an asian coolie at 25 cents per hour, and that is true. But the people on the “wrong end” of the Bell Curve don’t just disappear.
OK, I’ve come across as elitist, now I’m going to go whole hog and say someting that sounds Marxist: somebody is making big bucks off the labor arbitrage, so those somebodys need to pay up to fund the welfare needed to support our jobless citizens.
The Market would say, “Let them starve”, but that’s too Dickensian for me. Also, I don’t want to have to have to build a security wall around my house like they do in South America.
“Of course, the workers have obsolete skills.”
Obsolete skills that are now being employed by many thousands of workers across the globe for pennies. Using machines that used to be manufactured in this country for good wages but have now gone to countries overseas. I don’t know why so many try so hard to defend companies that have screwed over the American manufacturing base.
I do drafting on the side for a company that makes beer taps, they design it here, theyhave parts made in China for pennies on the dollar, shipped here for partial assembly, then ship the parts back to China for final assy, which are then shipped back here and sold...all cheaper than can be done here in total.
Some stuff we made goes in refridgerators, too. designed here, made there, assembled here, shipped back, final assembly there, shipped back, sold here
for half the price after all that.
race to the bottom? You mean race for greater and great efficiency. Thats exactly how we want business to be run, to allocate global resources efficiently in the most profitable manner. This signals to the rest of the market, that this business is doing the right thing and that consumers are rewarding this business with more profit, thus encouraging more investment and competition.
Well, yes Apple could build it in the US, but then go bankrupt if one of their product don’t turn out well. Way too risky. Plus not every company is like Apple that can sell their product at such huge mark up based on their brand name. Majority of business out there have very low mark up
As well as an unfunded persion liability. Look at GM and Chrysler with liabilities in the billions and the US Govt with pension liabilities in the tens of TRILLIONS. No wonder firms look elsewhere for labor savings.
Exactly so. There is so much in the way of myth and “myth-understanding” in play here, it’s mind-boggling.
As for out textile industry ... well, Asia may be the textile giant TODAY, but as for all those deserted and shuttered textile mills that dot the New England landscape - all those firms re-located to the American South in the 1970’s and 1980’s. Why? Reduced tax burden and lower labor costs.
Take for example GM or Crysler. These companies are literally one product line from bankruptcy. They invest all their capital into a product and if that product line don’t become profitable, they’re screwed. Its good that Apple is making a lot of profit, so that they could experiment with various investments and not become one product line from bankruptcy
“There are three types of companies, 1) lowest cost-highest volume(low margin). 2) highest cost-lowest volume(High Margin) 3) everyone else in the middle.
When times get tough the two at the end survive and everyone in the middle loses.”
It works in most all markets and now it probably can be looked at by country. If governments get in the way it delays the inevitable, very inefficiently
For that absurd assertion, you need to come up with a falsifiable hypothesis, no matter how weak. I would be wiiling to entertain the notion that they don't want to strengthen American labor unions by building here for fear of rising costs down the line. Any ideas?
The story can be told through many industries (New England used to make a great many shoes, as well).
A good economist should be able to clearly lay out the reasons why an industry rises and falls in one area, only to rise up again in a different area. Perhaps the blind could be made to see.
I don't remember who wrote the editorial on high productivity and low employment, but it gave the example of gas station attendants. I (barely) remember when, if you pulled into a gas station, a small army would come out and get busy checking the tires, cleaning the windshield, checking the oil and filling the tank. Now? Who could afford to run a business like that? All self serve.
If to hire someone, I have to take on all of their medical costs and their retirement for the rest of their life, in addition to workman's comp, SS, etc. etc., plus deal with the paperwork, how much productivity do I need to get out of that person to make hiring them worth it?
And how did all of that become my responsibility when all I'm doing is paying them to help me build widgets? Has public education made us so stupid we can't take care of ourselves any more?
And, if I was wrong about them and this person absolutely sucks and is hurting my business, how much does it then cost me to make them go away, assuming I still can fire them? How much of a case do I need to build to avoid or win the lawsuit?
I'm exaggerating, but not by much and not for much longer since we seem to be embracing the progressive European model. It's no way to run a country unless you are trying to run off business and run the country into the ground.
The end result is a great mass of very unemployable people. No education, no skills, no work history, no work habits, no discipline. They have nothing to offer.
I see this as one of the biggest issues facing the country, but I don't see a lot of people talking about it.
Which is to say, record-high tariffs. Maybe Rush doesn't know this, but there were already tariffs in place before Smoot-Hawley. The problem with Smoot-Hawley was that it raised tariffs to record levels. It wasn't an either/or situation. Wouldn't surprise me at all if that were news to Rush.
It is not correct to say that whatever is not in the manufacturing costs is ‘profit’. Doesn’t Apple have thousands of employees in the US whose wages are paid by these products? Don’t they have rent, utilities, and taxes to pay?
What you say is true, but the bottom half was formerly much better educated than they are today, and was able to contribute more productively to society. The teachers they had back then, they whipped knowledge into even the thickest noggins.