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Trump and Sanders' common cause

DANE, Wis. – Bernie Sanders and Donald Trump are barnstorming Wisconsin with at least one promise in common: by taking apart trade deals and imposing tariffs, they will bring back the highly paid blue-collar jobs of the industrial past.

But many economists say that’s little more than an appealing fantasy. And the reasons are on display at this small metal fabrication shop tucked into rural Wisconsin farm country.

Dane Manufacturing offers a mini-trip through labor market history. At one end, partially automated machines stamp out metal parts with the help of several workers. At the other end, a giant, laser-guided robot silently cranks out products with virtually no human intervention. Before long, more of Dane’s machines will be fully automated.

So executives at Dane think Trump and Sanders have it all wrong on manufacturing. Many, if not all, of the low-skilled, assembly-line jobs the two leading populist candidates talk about bringing back are gone for good, they say, a view shared by many trade economists.

But the picture is not as grim as Sanders and Trump make it seem. There are still many manufacturing openings — 13,000 across Wisconsin — for workers with slightly higher levels of technical skill or who are willing to learn how to operate newly automated factories and move short distances for new openings.

“It’s probably right that all these blue-collar, labor intensive jobs just aren’t coming back. The labor costs are too high and there’s too much automation now,” said Mike Lisle, Dane’s chief operating officer. “But we have openings for people [starting at $13 or $14 per hour] if they are willing to take some training and have the right kind of attitude and work ethic.”

This scenario is playing itself out all over the nation, which, contrary to popular political myth, has had something of a manufacturing renaissance over the last seven years, adding around a million new factory jobs since employment in the sector bottomed out at about 11.5 million in 2010. Employment in the sector peaked at 19.7 million in 1979 and now sits at 12.3 million, according to the Bureau of Labor Statistics.

And the trend is to bring factories back, not ship more production to China. According to Harry Moser, president of the Reshoring Initiative, the balance of jobs leaving and entering the U.S. has essentially evened out over the last two years, with most of the incoming jobs coming back from China, where employment costs are rising. “The outsourcing problem isn’t getting dramatically worse,” Moser said.

That’s not the picture being painted on both sides of the campaign trail, where Trump and Sanders have jointly obliterated the consensus that overseas trade deals are mostly good for American workers and the U.S. economy.

Trump has thundered away about bad trade deals and weak leadership ripping good jobs out of the U.S. and into Mexico, China and elsewhere. He’s promised to bring them back by being tougher in negotiations and slapping punitive tariffs on imported products. At a Democratic debate in Michigan last month, Sanders said if he became president U.S. companies would “have to” move jobs home.

This approach is exactly the wrong one, according to Kurt Bauer of Wisconsin Manufacturers and Commerce. Companies he represents want to do more free trading with Europe and Asia, not less, and the last thing they need is a tariff-induced spike in the cost of unfinished supplies from abroad used in their domestic supply chains.

“If you are not engaged globally and not exporting you are going to find yourself contracting, if not perhaps putting your entire business at risk,” Bauer said.

It irks Bauer and other business leaders and economists when they hear politicians like Trump — who has manufactured many of his own products overseas — talking about forcing Apple to start making the iPhone in the U.S. or Sanders demanding that companies leaving the U.S. over its high corporate tax rate move back immediately and bring all the jobs with them. Both the Trump and Sanders campaigns did not respond to requests for comment for this story.

But there’s another enormous obstacle to restoring the blue-collar jobs of the past: automation. The cold economic fact that is even if Trump or Sanders could somehow get Apple or Nike or any other big company to start making more stuff in the U.S., it would be done mostly by machines, not people.

“One of the features of this campaign with respect to manufacturing is that we have heard a lot about the effect of trade but none about the effect of automation and automation is a very big deal when you think of the evolution of the labor market over the last 35 years,” said Michael Strain, deputy director of economic policy studies at the conservative American Enterprise Institute. “The rhetoric from Trump and Sanders is so wildly over-the-top with respect to what can actually be done to effect the composition of the workforce through trade. They just won’t be able to do what they say they will be able to do.”

One big problem is that the more complex and less emotionally satisfying message — that highly paid, low-skilled factory jobs are gone but there are other things government can do to help workers — simply hasn’t broken through in the populist fervor of 2016.

Trump soared with his message of blaming China, Mexican immigrants and stupid trade negotiators for persistent problems with the U.S. economy. He’s evenly flatly made up problems with the economy that do not exist.

In Wisconsin he’s talked about a jobless rate of 20 percent (it’s actually 4.6 percent). In an interview with the Washington Post over the weekend Trump predicted a “very massive recession” though no economic data suggest such a cataclysmic event is coming.

Officials in rival campaigns have expressed exasperation throughout 2016 that a crowded field and the emotional nature of Trump’s appeals made it impossible to break through with fact-based arguments on trade and manufacturing. That may be changing now with the field now dramatically reduced.

“Early on, Trump was able to mask his totally misinformed policies with so many candidates in the field,” said Danny Diaz, who served as campaign manager for former Florida governor Jeb Bush. “His rhetoric is now being scrutinized to a greater degree.”

That could be playing out here in Wisconsin, where most polls show Trump now trailing Ted Cruz, perhaps a reflection that the GOP frontrunner’s rhetoric about the state’s economy does not match the facts on the ground.

On the Democratic side, Sanders staged a surprise win in Michigan largely by ripping front-runner Hillary Clinton for past support of trade deals and for only recently saying she would oppose a Trans-Pacific Partnership she once heralded as the “gold standard.” Sanders has effectively pushed Clinton out of her traditional support for free trade deals like those negotiated under her husband’s presidency.

But for business executives and many economists, Sanders, just like Trump, is spinning a fantasy about punishing big employers into bringing back high-paid, low skill manufacturing jobs. Tariffs won’t do it and junking trade deals won’t either, many experts say.

“We’re not going to ‘restore’ most of those labor-intensive jobs in textiles, leathers, toys, rubber products, and commodity furniture that were lost in the ’90s and 2000s,” said David Autor, an economics professor at MIT. “We’re not going to turn back the clock — and certainly slapping on huge tariffs would accomplish nothing constructive.”

Neither will the kind of universal free college education Sanders is talking about. Many of the new jobs in manufacturing and in the much larger services industry require specialized training, not a four-year degree.

“And when it comes to corporations wanting to leave,” said Moser. “Get rid of all the special stuff and deductions and get the [corporate tax] rate down to 20 percent or 22 percent rather than 35 percent and you make that decision to stay a lot easier.”

The bottom line on the low-sill factory work fantasy from Sanders and Trump, according to Dane Manufacturing CEO Troy Berg, is that it’s never gonna happen.

“Those jobs are gone and the aren’t coming back,” said Berg, who supported Rubio and now hopes for a brokered convention. “The jobs that are replacing them are the Dane Manufacturing jobs, knowledge workers with some skills and some on the job training. So my hope is we can stop Trump right here in Wisconsin.”

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