Obama’s Economy of Tomorrow, Driven by Factories and Schools

To pay for a series of programs he deemed crucial to the future and reduce the long-term budget deficit, Mr. Obama also called for cuts to Social Security and Medicare, putting him at odds with many other Democrats. They instead see those programs, created by previous Democratic presidents, as sacrosanct.

Republicans, meanwhile, greeted the budget with criticism, and most parts of it are unlikely to become law.

But it gave Mr. Obama a chance to lay out his plan for tomorrow’s economy, centered on manufacturing, education, alternative energy, infrastructure and science.

“Our economy is adding jobs — but too many people still cannot find full-time employment. Corporate profits have skyrocketed to all-time highs — but for more than a decade, wages and incomes have barely budged,” Mr. Obama wrote in a message addressed to Congress. “It is our generation’s task to reignite the true engine of America’s economic growth — a rising, thriving middle class.”

The budget puts particular emphasis on education and manufacturing. In Mr. Obama’s view, both are critical to widespread economic growth.

At the center of his education agenda is a program that would guarantee public preschool for all 4-year-olds from families with low or moderate incomes. To pay for the plan, the administration has proposed an increase in federal cigarette taxes to $1.95 from $1.01 per pack. That would cover the $66 billion federal contribution to the cost of providing preschool over 10 years and the $11 billion cost of home visiting programs for poor families.

The budget also called for a total of $12.5 billion over the next two years to preserve teaching jobs and increase hiring as the economy recovers.

Grover J. Whitehurst, a senior fellow at the Brookings Institution, noted that the Obama administration was continuing its education policy of using federal money as an incentive to drive its overhaul. Many of the programs require states to comply with administration priorities to get financing.

“This is a very activist budget,” Mr. Whitehurst said. “The administration intends to use the mechanism it has used successfully to impose its policy views widely on states and, in some cases, districts.”

On manufacturing, Mr. Obama proposed some small-scale programs, including a $1 billion initiative to build manufacturing “hubs” where businesses would partner with universities and federal agencies, and a new tax credit to support communities with manufacturing bases. The White House would also increase federal research and development spending, which benefits manufacturing as well as other industries, like health care and biotechnology, to $143 billion.

Some economists question just how big a driver of job growth manufacturing can be. More companies are bringing jobs back to the United States, in no small part because of real declines in American wages. But even with the recent job growth, there are about two million fewer manufacturing jobs now than there were right before the economy tipped into recession. There are about seven million fewer manufacturing jobs than there were in the late 1970s, when employment in the sector peaked.

Manufacturing simply requires fewer workers than it once did. Factories have become vastly more productive, as processes that were once done laboriously by hand are increasingly done by machine.

As a result, much of the recent job growth has been not in low-wage, low-skill production line work, but in higher-wage, higher-skill positions. But the downside is that manufacturing probably will not be a huge driver of job growth in the coming years, with housing and health care being the more likely bets.

Article source: http://www.nytimes.com/2013/04/11/us/obamas-economy-of-tomorrow-driven-by-factories-and-schools.html?partner=rss&emc=rss