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Leslie Patton/MEDILL

The manufacturing industry, devasted by the credit crisis, would benefit from a public infrastructure stimulus.

A bandage for the gravely wounded manufacturing industry

by Leslie Patton
Jan 20, 2009

On the day of Barack Obama’s historic inauguration, manufacturers voiced apprehension that his economic recovery program may not be enough to spur job creation in the faltering manufacturing sector.

"We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together," said President Obama in his inaugural address Tuesday.

"The general direction of Obama’s plan is a good start," said Scott Paul, executive director of the Alliance for American Manufacturing. "We are optimistic that the program will have benefits for manufacturing."

Paul went on:  "In general, infrastructure spending creates far more jobs than money invested in the tax cuts."  The Obama program, he observed, would create jobs in construction and increase demand for manufactured goods, but would it be enough?

The Alliance's members hope that the overall funding level will move up beyond $900 billion, said Paul.  Top economists, he said, think at least 3 percent of gross domestic product, or about $830 billion over two years, will be needed "to make a real difference."

Eileen Appelbaum, Rutgers University professor and director of the Center for Women and Work, agreed that infrastructure investment will generate jobs in various industries. "Construction companies, for example, may purchase construction equipment from the manufacturing sector or financial services from the financial services sector.”

According to Appelbaum, who was research director at the Economic Policy Institute in Washington, D.C., the Obama plan should create about 408,000 manufacturing jobs by fourth quarter 2010.

But Dan Bianchi, Chicago Manufacturing Renaissance Council assistant director, is skeptical of the impact of the program. "A stimulus package that’s focused on infrastructure…unless you are making a product directly linked to that, you won’t be that excited."

The Obama plan includes several important policies for public infrastructure investment that would have implications for the manufacturing industry, such as doubling funds for the Manufacturing Extension Partnership and creating a National Infrastructure Reinvestment Bank.

Under the plan, the bank would be infused with $60 billion of federal funds over a 10-year period to finance the rebuilding of highways, roads, bridges, airports and train systems.

"Based on the somewhat anecdotal information with manufacturers…people are not excited about the infrastructure part of the stimulus," Bianchi went on.  There may be a few exceptions, such as Caterpillar Inc., Peoria-based manufacturer of construction equipment, he noted.

Manitex International Inc., in Bridgeview, Ill., a maker of cranes and fork lifts, has no immediate plans for hiring additional workers.

"We are certainly not to that point yet," said President and Chief Operating Officer Andrew Rooke.  Manitex will not take action until "legislation gets passed, when funding becomes available," he said.

The manufacturing industry’s unemployment rate climbed to 8.3 percent in December, exceeding the national figure of 7.2 percent. And the state of Illinois, one of the most concentrated areas of manufacturing, is suffering as well. November’s preliminary unemployment numbers for the state were 7.3 percent, compared with the 6.8 percent national figure.

In a 65-page report released Friday, the Alliance for American Manufacturing called for a baseline, one-year investment in public infrastructure of $87 billion. According to the study, a high-end estimate of $148 billion would be needed. Funding for water systems, school buildings and transportation would create the most U.S. jobs per investment dollar, the Alliance stated.

The Institute for America’s Future drafted a 22-page Main Street Recovery Program in December 2008. The plan calls for a $900 billion floor in total government stimulus over two years, including $75 billion in infrastructure spending in the first year and $150 billion in the second.

The Main Street recovery proposal is endorsed by Leo W. Gerard, president of the United Steelworkers; Mike Wessell, senior advisor of the Alliance for American Manufacturing; Ron Gettelfinger, president of the United Auto Workers; as well as 127 economists.