The state of US manufacturing

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Chairman Casey, Vice Chairman Brady, and other members of the Committee, thank you for the opportunity to appear before you this morning and discuss the U.S. manufacturing sector--a key part of our economy. The significance of manufacturing to the U.S. economy is undeniable, and the role and dynamics of this sector are important to study. It is critical to recognize, however, that manufacturing is but one segment of the U.S. economy, and the share of the resources dedicated to this sector should be determined by market forces, not government policy.

The role of policymakers should be to establish broad, effective, and stable policies that permit the U.S. economy to evolve as market forces dictate. Given that objective, policymakers should not seek to develop targeted subsidies or narrowly tailored economic policies for a single sector, not for one as large and important as manufacturing or for other smaller sectors. Instead, policymakers should promote economic growth by improving the U.S. business environment as a whole. Pursuing structural reforms will benefit the manufacturing sector directly by reducing costs and impediments and indirectly by encouraging growth across the entire economy.

There are many ways policymakers can pursue the goal of facilitating a healthy business environment for manufacturing and other sectors. Trade liberalization, corporate tax reform, education and job training, legal reforms, a comprehensive energy policy, and other infrastructure improvements are but a few. In my testimony this morning, I will focus on just one--corporate tax reform. However, it is important for the purposes of this hearing to understand the evolution of the manufacturing industry. Therefore, I will begin with an overview of the current state of manufacturing in the U.S. and the longer-term employment and productivity trends in the sector.

Alex Brill is a research fellow at AEI.

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