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Germany surpassed the United States to become the world’s leading exporter in 1992, around the time that Germany joined the European Union as a founding member.  The United States remained the second highest exporter until China surpassed it in 2008.  Germany remained number one until 2009 when China surpassed it to become the world’s top exporter.  Germany exported $1.17 trillion compared to the $1.057 trillion of the United States.  However, China’s exports were $1.2 trillion for 2009.  Germany’s exports fell by 18.4 % from 2008, the largest decline in 60 years, while China’s exports fell only 16 %.

“’This is just one more step by China in attaining economic size commensurate with its population,’ said Arthur Kroeber, managing director of Dragonomics, an economic research firm in Beijing.  Germany has a population of about 80 million, while China’s population is about 1.3 billion.”

If population were a key factor, then at over 300 million in population, the United States would have maintained the number one status until being surpassed by China.  The key question is how did Germany remain number one over the United States for so long and how did they lose this ranking to China?

Germany is the largest national economy in Europe, the fourth largest by nominal GDP in the world, and fifth by GDP in 2008.  The service sector contributes around 70 % of the total GDP, industry 29.1 %, and agriculture 0.9 %.  Germany is relatively poor in raw materials.  Most of the country’s products are in engineering, especially in automobiles, machinery, metals, and chemical goods.  Germany is the leading producer of wind turbines and solar power technology in the world.   Exports account for more than one-third of national output.  Germany is such an export-driven economy that German companies own 35% of the container ships in operation worldwide.

By the Fortune Global 500 ranking of the world’s 500 largest stock market listed companies, 37 are headquartered in Germany.  Well-known global brands are:  Mercedes Benz, BMW, Volkswagen, Audi, Porsche (automobile), Adidas and Puma (clothing and footwear), Bayer and Merck (pharmaceuticals), DHL (logistics), T-Mobile (telecom), Lufthansa (airline), SAP (computer software), Siemens (computer services), and Nivea (personal care).  You may have been as surprised as I was to learn that DHL, T-Mobile, and Nivea are German companies.

With the manufacture of 5.2 million vehicles in 2009 (compared to the U. S. total of 7.9 million), Germany was the world’s fourth largest producer and largest exporter of automobiles.  German automotive companies enjoy an extremely strong position in the so-called premium segment, with a combined world market share of about 90 %.  Germany places five luxury automotive brands among the world’s top global brands for all sectors, more than any other country.  Germany’s reputation for quality precision engineering gives them a competitive advantage in selling high dollar vehicles in foreign countries.  Thus, German automotive products spearhead the high value and growth of Germany’s exports.

Germany is also the world’s leader in mechanical engineering systems analysis and design, holding about 20% of this global market.  This precision engineering expertise gives Germany a competitive advantage in producing machine tools (the tools that make tools and equipment).  For example, Germany has a 58 % market share for producing reciprocating pumps used for drilling and water purification and produces 34 % of packaging and bottling equipment used around the world.

It isn’t just large firms that are market leaders.  Small-to-medium sized manufacturing firms that specialize in technologically advanced niche products are vitally important.  It is estimated that about 1,500 German companies occupy a top three position in their respective market segment worldwide.  In about two thirds of all industry sectors, German companies belong to the top three competitors.

Germany’s tax structure contributes to their success as an exporter and puts a barrier on imports. Germany’s corporate tax rate is 15 %, but they also have a solidarity surcharge (5.5 % of corporate tax) and a trade tax charged by local authorities.  As of 2008, the rate averaged 14 % of profits subject to trade tax.   In addition, all services and products generated in Germany by a business entity are subject to value-added tax (VAT) of 19%. Certain goods and services are exempted from value-added tax by law.  Value-added taxes are added in paid for all along the supply chain, and then are rebated for exports.  A VAT is added at the border to imports as a balancing trade strategy to discourage imports.

I had heard a rumor that one of the factors in Germany’s success is that they don’t tax revenue on exports, but was unable to confirm this by diligent research.  I did learn that Germany practices a “national jurisdiction” on taxes wherein they tax national consumption in contrast to the “unitary jurisdiction” of the United States wherein companies are taxed on revenues from worldwide sales (with a deduction for taxes paid to foreign countries).  This taxing practice may be the source of the rumor or the source may be confusing it with the value-added taxes that are rebated for exports.

In a June 28, 2010, economist Ian Fletcher, commented, “Germany, like the U. S., is nominally a free-trading country.  The difference is that while the U. S. genuinely believes n free trade, Germany quietly follows a contrary tradition that goes back to the 19^th-century Germany economist Friedrich List… So despite Germany’s nominal policy of free trade, in reality a huge key to its trading success is a vast and half-hidden thicket of de facto non-tariff trade barriers.”

Fletcher, in turn quotes from a report by the Heritage Foundation:  “Non-tariff barriers reflected in EU and German policy include agricultural and manufacturing subsidies, quotas, import restrictions and bans for some good and services, market access restrictions in some services sectors, non-transparent and restrictive regulations and standards, and inconsistent regulatory and customs administration among EU members.”

Another opinion of Germany’s export success as reported in The New York Times, is “the roots of Germany’s export-driven success reach back to the painful restructuring under the previous government of Chancellor Gerhard Schröder.  By paring unemployment benefits, easing rules for hiring and firing, and management and labor’s working together to keep a lid on wages, ensured that it could again export its way to growth with competitive, nimble companies producing the cars and machine tools the world’s economies – emerging and developed alike – demanded.”

The same article reported that Germany’s Chancellor Angela Merkel resisted the use of government stimulus spending that the United States and some European partners used to handle the recession.  Instead of extending unemployment benefits like the United States has done several times since the recession began, Germany “extended the “Kurzarbeit” or “short work” program to encourage companies to furlough workers or give them fewer hours instead of firing them, making up lost wages out of a fund filled in good times through payroll deductions and company contributions.  At its peak in May 2009, roughly 1.5 million workers were enrolled in the program,” and the Organization for Economic Cooperation and Development estimated that   “more than 200,000 jobs may have been saved as a result.”

As a result, Germany’s unemployment rate at the height of the global recession was 9.0% in contrast to the 10.2% of the United States.  The German jobless rate in October 2010 was down to 7.0% in contrast to the 9.6% of the United States.  Germany is one of the few economies experiencing a solid recovery and one of the even fewer economies without a substantial deficit crisis on its hands.  Germany’s exports surged month by month in 2010, but year-end data hasn’t been released yet.

Numerous manufacturers in Germany see China as a key driver in their recovery from the global financial and economic crisis.  In July 2010 , Chancellor Merkel took the heads of major German corporations with her on a four-day visit to China.  As a result Siemens signed a contract worth $3.5 billion (2.7u billion euro) with Shanghai Electric Power General Equipment to develop steam and gas turbines.  Daimler signed a contract worth 6.35 billion yuan (720 million euro) with Beiqi Foton Motor to build trucks.

Even small-to-medium manufacturers are benefiting from increased exports to China.  Nobilia, a mid-size manufacturer of prefab kitchens “made in Germany,” is selling its kitchens to construction companies building huge housing projects in China.  Company spokeswoman Sonja Diemann said, “These are big projects with 1,000-plus apartment units.  There is a growing group of consumers who have money, seek quality products and know that Germany has a good reputation in manufacturing.”

German trade with China has grown from $41 billion in 2001 to $91 billion dollars in 2009, and now represents 5% of German trade.  Germany’s exports to China in 2009 accounted for $36 billion, a 7% increase over 2008.  However, Chinese exports to Germany accounted for $55 billion, and Germany has been running a trade deficit with China since 2005.  It shows that even with the addition of a VAT on imports and other non-tariff trade barriers, Germans are increasingly buying the cheaper consumer goods that China is flooding onto the world market.

If even Germany has a trade deficit with China and can’t fend off the Chinese juggernaut on trade of consumer products, who can?  This is a question that the economists of Germany and the United States must carefully consider.  One answer is ending the so-called “free trade” coalition as advocated by Ian Fletcher in his book, Free Trade Doesn’t Work, What Should Replace it and Why.  One thing I do know, the negotiation of more “free trade” agreements that provide an unfair playing field for developed countries is not the answer.

On March 11, 2010, President Obama established the Export Promotion Cabinet by Executive Order 13534 and tasked them with a plan to achieve the goal of doubling U. S. exports in five years that he had stated in his 2010 State of the Union address.

Sixteen representatives from the Secretary of State down to the Director of the United States Trade and Development Agency were appointed to this Cabinet, but the final report, released on September 15, 2010, was the product of an intensive six-month collaboration between this Cabinet and the 20 federal agencies that make up the Trade Promotion Coordinating Committee (TPCC).  In addition, the TPCC Secretariat reviewed over 175 responses to a Federal Register notice requesting input to the National Export Initiative (NEI) from small, medium, and large businesses; trade associations; academia; labor unions; and state and local governments.

In 2008, U. S. exports represented records levels of GDP (12.7 percent) and supported over 10 million jobs (6.9 percent of fully employed workers).  This was the highest percentage level of GDP since the beginning of World War I in 1914 and marked the high point of a 70-year trend that began in the early 1930s.  However, exports fell from $1.8 trillion in 2008 to $1.57 trillion in 2009 during the recession.

The report states:  “The National Export Initiative (NEI) is a key component of the President’s plan to help the United States transition form the legacy of the most severe financial and economic crisis in generations to a sustained recovery …The NEI’s goal of doubling exports over five years is ambitious.  Exports need to grow from $1.57 trillion in 2009 to $3.14 trillion by 2015.”

The NEI has five components:  improve advocacy and trade promotion, increase access to export financing, remove barriers to trade, enforce current trade rules, and promote strong, sustainable, and balanced growth.

The NEI Executive Order identified eight priorities for the plan, and the Export Promotion Cabinet developed recommendations to address each of these priorities, which cover all five components, cut across many Federal Government agencies, and focus on areas where concerted Federal Government efforts can help lift exports.  The following are recommendations for each priority:

Priority 1:  Exports by Small and Medium-Sized Enterprises (SMEs) – advocacy, promotion and export financing component

1. Help identify SMEs that can begin or expand exporting through a national campaign to increase SME awareness of export opportunities and U. S. Government resources.
2. Prepare SMEs to export successfully by increasing training opportunities for both SMEs and SME counselors.
3. Connect SMEs to export opportunities by expanding access to programs and events that can unite U. S. sellers and foreign buyers.
4. Once SMEs have export opportunities, support them with a number of initiatives, including improving awareness of export finance programs.

Priority 2:  Federal Export Assistance – trade promotion component

1. Create more opportunities for U. S. sellers to meet directly wit foreign buyers by bringing more foreign buyer delegations to U. S. trade shows and encourage more U. S. companies to participate in major international trade shows.
2. Improve cooperation between TPCC agencies to encourage U. S. green technology companies to export by matching foreign buyers with U. S. producers.

Priority 3:  Trade Missions – trade promotion component

1. Increase the number of trade and reverse trade missions, including missions led by senior U. S. government officials.
2. Improve coordination with state government trade offices and national trade associations.

Priority 4:  Commercial Advocacy – trade promotion component

Leverage multiple agencies assistance in the advocacy process and extend outreach efforts to make more U. S. companies aware of the Federal Government’s advocacy program.

Priority 5:  Increasing Export Credit – export financing

1. Make more credit available through existing credit platforms and new products.
2. Increase outreach to exporters, foreign buyers bankers, and other entities in order to build awareness of Government assistance.
3. Make it easier for exporters and other customers to use Government credit programs by streamlining applications and internal processes.

Priority 6:  Macroeconomic Rebalancing – strong, sustainable, and more balanced global growth

In the short term, the U. S. and its G-20 partners must work to ensure that the global economy shifts smoothly to more diversified sources of economic growth.  Over the long term, shifts in the composition of economic growth in our trading partners will also be crucial to U. S. export growth.  Actions to reduce surpluses and stimulate domestic demand for imports will be required by a broad range of countries.

Priority 7:  Reducing Barriers to Trade – removing trade barriers and enforcing trade obligations components

1. Conclude an ambitious, balanced, and successful WTO Doha Round that achieves meaningful new market access in agriculture, goods, and services.
2. Conclude the Trans-Pacific Partnership (TPP) Agreement to expand access to key markets in the Asia-Pacific region,
3. Resolve remaining issues with pending FTAs, such as the United States – Korea FTA.
4. Address foreign trade barriers – especially significant non-tariff barriers – through use of a wide range of U. S. trade policy tools.
5. Use robust monitoring and enforcement of WTO trade rules and other U. S. trade agreements.

Priority 8:  Export Promotion of Services – advocacy and trade promotion components

1. Build on the activities and initiatives outlined in Priorities 1 – 7 with enhanced focus on the services sector since it accounts for nearly70 percent of U. S. GDP.
2. Ensure better data and measurement of the services economy to inform commercial decision-making and policy planning.
3. Continue to assess and focus on key growth sectors and emerging markets such as China, India, and Brazil; increasing the number of foreign visitors to the U. S.
4. Better coordinate services export promotion efforts.

There are four general themes that apply to all of the priorities and recommendations in order to achieve the goal of doubling the U. S. exports in five years:

1. Strengthen interagency information sharing and coordination.
2. Leverage and enhance technology to reach potential exporters and provide U. S. businesses with the tools necessary to export successfully.
3. Leverage combined efforts of State and local governments and public-private partnerships.
4. Have united goals for TPCC member agencies to support the NEI’s implementation

The plan admits that the Federal Government alone cannot succeed in this initiative; its ultimate success will be determined by the success of U. S. companies selling their goods and services internationally.  A continued dialogue with the business community will be required to help ensure that the NEI is addressing their export challenges.

On December 7, 2010, U. S. Energy Secretary Steven Chu announced the establishment of the Renewable Energy and Energy Efficiency Export Initiative as part of its National Export Initiative and Trade Promotion Coordinating Committee.  “Expanding U. S. clean technology exports is a crucial step to ensuring America’s economic competitiveness in the years ahead,” said Secretary Chu.  “The initiatives we are announcing today will provide us with a better understanding of the global clean energy marketplace and help boost U. S. exports.”

The Initiative is divided into two parts:  (a) an assessment of the current competitiveness of U. S. renewable energy and energy efficient goods and services and (b) an action plan of new commitments that facilitate private sector efforts to significantly increase U. S. renewable energy and energy efficient exports within five years.  As part of the Initiative, the Administration created www.export.gov/reee, a web portal that consolidates information on government-sponsored export promotion programs.

The next article will examine whether or not the plan will work to achieve the stated goal.

In June 2010, the National Association of Manufacturers (NAM) released a report titled, “Manufacturing Strategy for Jobs and a Competitive America.”  In considering the recommendations made by NAM, it is important to understand where they are coming from as an organization and what kind of companies comprise their membership.

NAM is the largest, most well known trade association in the United States, headed up by former Governor of Michigan, John Engler.   Many Fortune 500 companies that are manufacturers are members of NAM, and the member companies that comprise NAM’s policy committees and subcommittees are mainly large, multinational companies because small-to-medium-sized companies don’t have full-time representatives in Washington where policy matters are discussed and voted on.  Also, many of these multinational companies have manufacturing operations in China and other foreign countries, and this influences their position on trade issues.

NAM’s Executive Summary begins with what I consider absolute truths:  “America’s prosperity and strength are build on a foundation of manufacturing.  Manufacturers create, innovate and employ millions of Americans in some of the best jobs our country has to offer.”

We agree on the fact that the United States needs a comprehensive manufacturing strategy to be able to compete against foreign governments that provide all the tools of government to support their manufacturing industries.

NAM’s proposed strategy “highlights the need for:

• Tax policies to bring American more closely into alignment with major manufacturing competitors
• Government investments in infrastructure and innovation
• Trade initiatives to reduce barriers and open markets to U. S. exports”

The need to create a national tax climate that allows U. S. manufacturers to be competitive in the global marketplace is unquestionably the highest priority.  We must reduce the corporate tax rate and promote fair rules for taxation of active foreign income, both of which I wrote about in my recent article, “Congress – It’s Jobs, Stupid,” as well as in previous articles and my book.  We must institute permanent lower tax rates for individuals and small businesses because most small businesses are not incorporated and create the majority of new jobs in the United States.

There is no question that the continuing expansion of federal mandates and labor regulations undermines employer flexibility and increases costs that discourages hiring new employees.  New regulations and federal mandates must be rejected and opposed.

Implementing a common sense, fair approach to legal reform is vital to bringing legal costs under control and eliminating the disadvantage American companies face in competing globally.

We definitely need to create a regulatory environment that promotes economic growth.  U. S. manufacturers are forced to comply with scores of regulations that manufacturers don’t have to face in other countries.    As NAM’s plan points out, “the Small Business Administrations office of Advocacy has estimated that regulatory compliance costs amount to $1.1 trillion annually.”

I share NAM’s goal for the United States to be the best country in the world to innovate and perform the bulk of a company’s goal R&D, but this goes against the trend of its own membership of large, multinational companies.  More and more R&D is being conducted offshore in China and India each year.  The danger is that innovation and production are intertwined.  Stephen Cohen, co-director of the Berkeley Roundtable on the International Economy at the University of California Berkeley, said, “Most innovation does not come from disembodied laboratory.  In order to innovate in what you make, you have to be pretty good at making it – and we are losing that ability.”

A 2008 report by Duke University’s Fuqua School of Business Offshoring Research Network and Booz Allen Hamilton, predicted that offshoring of R&D would increase 65 percent and offshoring of engineering services would increase 80 percent in the next 18 to 36 months.

I agree with NAM’s recommendations regarding enacting tax provisions that stimulate investment and recovery, encouraging the federal government’s critical role in basic R&D, and enhancing efforts by the federal government to protect American Intellectual Property (IP) and impede the continuing trade in counterfeit products that results in hundreds of thousands of jobs annually.

However, I question NAM’s recommendation to support substantial increases in the number of employer-sponsored visas as the solution to attract the best talent within the United States and from the entire world.  With the U. S. unemployment ranging between a low of 9.6 to a high of 10.0 in the past year, the last thing we need is more immigrant workers, legal or otherwise taking jobs away from qualified Americans.  There are plenty of highly skilled American workers to fill the needs of American manufacturers.  We are still attracting a large number of foreign undergraduate and graduate students, but a high number of Indians and Chinese are returning to their native countries to work in the industries their governments support instead of remaining in the United States.

I share NAM’s goal to have the U. S. be a great place to manufacture to meet the needs of the American market and export our products to the world.  The United States outdated export control system needs to be modernized to encourage exports and strengthen national security.  Small-to-medium-sized manufacturers need more assistance in export promotion and export credit.   The biggest problem is that the United States is no longer the source for products consumers buy around the world (electronics, small appliances, clothing, etc).  These products are now being made in China and other Asian countries and imported into the United States and other developed countries.  The end result is the export of more and more high tech products by United States manufacturers, some of which involve technology useful for military weapon systems.

It is imperative that the United States develop a comprehensive energy strategy that embraces an “all of the above” approach to energy independence.  A large portion of our worldwide trade deficit is for the importation of oil.  We must end our dependence on imported oil and utilized all of our domestic resources for energy generation.

The United States already leads the world in innovation and investment related to protecting the environment to the point that American manufacturers are at a competitive disadvantage compared to China and other Asian countries.  Until these countries start enacting similar laws and regulations or enforcing existing ones, the United States must avoid signing treaties that make it even harder for American companies to compete in the global marketplace.

At a time when the federal government’s budget deficit exceeds $1.5 trillion for 2010 and many cities and states are near bankruptcy, it is unlikely that it will be possible to invest in the infrastructure that will help American manufacturers move products and people more efficiently.

I strongly disagree with NAM’s recommendation to “enact pending trade agreements and negotiate additional agreements in the Pacific area and elsewhere.”  In my June blog article, “Do Free Trade Agreements Create Jobs?” I pointed out that NAFTA, effective in 1994, and the subsequent free trade agreements haven’t created American jobs, they have cost American jobs.  Between 1994 and 1999, we lost about a half million manufacturing jobs, but we’ve lost another 5.5 million jobs since the year 2000 when China was granted Most Favored National status and gained access to the World Trade Organization thereafter.  Our trade deficit with China rose from $84 billion in 2001 to $226.9 billion in 2009, down from $268 billion in 2008 due to the worldwide recession.  As Ian Fletcher stated in his book, Free Trade Doesn’t Work, What Should Replace It and Why, Chinese imports now constitute 83 percent of our non-oil deficit.  Elsewhere in his book, Fletcher noted, “It has been estimated that every billion dollars of trade deficit costs American about 9,000 jobs.  In his book, Mr. Fletcher makes a compelling argument that a “natural strategic tariff” should replace free trade agreements.  I strongly suggest that NAM and other national economists consider Mr. Fletcher’s proposed solution.

In conclusion, NAM’s proposed manufacturing strategy has many admirable recommendations; however, it is really a codification of positions and recommendations promoted by NAM for the past 20 years during which we have lost over six million manufacturing jobs.  NAM’s strong emphasis on a progressive international trade policy based on “free trade” will not save American manufacturing in the future.  The continuation and expansion of “free trade” policies will lead to the destruction of more American industries and the loss of more American jobs. We must change course if we want the United States to remain a great nation.  There is still time, but the clock is ticking!

The manufacturing industry is like the seat of a three-legged stool.  One leg is manufacturers and what they can do to “save themselves.”  The second leg is people and what they can do as entrepreneurs, business owners, employees, consumers, and voters.  The third leg is what government at all levels can do by means of tax policies, regulation, incentives, and national trade policies.  This stool has been toppled over because only manufacturers have been trying to “save themselves.”  It will take the cooperative effort on the part of all three “legs” to save American manufacturing.

People are starting to wake up to the importance of manufacturing to the American economy.  They have already woken up to the fact that we’ve lost too many manufacturing jobs and that is causing our unemployment rate to stay so high.  They are waking up to the need to revitalize, rebuild, re-invent American manufacturing to “save” it.

On September 28, 2010, a Conference for the Renaissance of American Manufacturing was held in Washington D. C. attended by more than 200 manufacturing executives, legislators, union leaders, trade policy experts, and state and federal officials.   At this conference, Sen. Don Riegle Jr. of Michigan warned that the U. S. economy is on a “downhill trajectory” and “going at a velocity that is very dangerous… The people are screaming to the elected officials that they think we are on the wrong path – because we are on the wrong path.”

Gilbert Kaplan, president of the Committee to Support U. S. Trade Laws, said, “The decline of American manufacturing happened not because of some inevitable shift to a post-manufacturing economy as some argue, but because the United States has picked the wrong policies and not paid attention to preserving and growing manufacturing.  American urgently needs unequivocal and bi-partisan policies in support of reviving manufacturing, with clear performance goals and timelines for action.”

After the Conference, the Committee to Support U. S. Trade Laws, the Economic Strategy Institute, the New American’s Foundation’s U. S. Economy/Smart Globalization Initiative, and other groups released a Statement of Principles, recommendations for major reforms to the U. S. trade system, and recommendations for five specific legislative initiatives to revive American manufacturing.

The Statement of Principles included:

• Changing tax policies so that manufacturing in the United States is encouraged, not discouraged, and making sure that imports pay their fair share of taxes
• Creating tax policies that foster manufacturing investment by strengthening R&D and capital investment, and allowing for accelerated depreciation
• Providing grand and low-interest loans to companies that manufacture in the U. S. (as long as other countries’ governments are providing assistance to their industries)
• Encouraging a change in corporate culture so that manufacturing in the U. S. becomes a primary objective, and moving plants off-shore is discouraged.

Some of the recommendations for reforms to the U. S. trade system are:

• A “plus jobs and plus factories” requirement for all existing trade agreements and future agreements, in which it can be shown that the agreement on a net basis has created or will create jobs and factory builds in the U. S.
• A commitment to balance trade in the U. S. by a date certain in the future
• Stronger, sustained trade action against foreign subsidization of manufacturing
• Creation of an unfair trade strike force within the U. S. government
• Addressing the fact that many imported products are not bearing environmental and health care costs

The five specific legislative initiatives recommended are:

• Legislation to countervail currency undervaluations and enhance enforcement of trade case orders
• Rewriting U. S. trade laws in the next session to bring them up to date, deal with the realities of the 21^st century, and make sure they are effective in preserving and reviving U. S. manufacturing
• Rewriting tax laws to encourage manufacturing in the U. S. to ensure that imports pay their fair share of taxes and encourage R&D and capital formation for manufacturing
• Altering the governmental policy apparatus to provide a voice for manufacturing at senior levels
• Passage of a Manufacturing Education Act that will develop target vocational and technical training programs at both the secondary and post-secondary level in order to strengthen manufacturing education, and funding programs and institutions to improve the skills of career-changing adults interested in manufacturing jobs.

The first thing needed to solve a problem is to recognize that you have a problem.  Now that key leaders in industry and government recognize that we have a serious problem, we need to work together to solve it.  As Andy Grove, senior advisor to Intel and CEO/Chairman from 1987 until 2005), said, “…the imperative for change is real and the choice is simple.  If we want to remain a leading economy, we change on our own, or change will continue to be forced upon us.”

Intel has made their choice and announced it will build a new R&D wafer fab in Hillsboro, Oregon and upgrade other existing U. S. facilities for a total investment of between $6 billion and $8 billion.  What will your choice be – reviving American manufacturing or enhancing China’s dominance?

It’s said it’s always darkest before the dawn.  With continued high unemployment, escalating national debt, and soaring trade deficits with China, the economic news seems pretty dark.  Two events occurred last week that are like a bright dawn coming after a dark night.

The first was the Design-2-Part Show held October 20-21 in Long Beach, California.  This show features design and contract manufacturers located in the United States.  While some of these companies may also have a plant offshore, no offshore-only companies are allowed to exhibit in the show.  The mission of The Job Shop Company that owns and puts on the dozen different Design2Part shows around the country is to support and feature American companies.

This year’s show was exciting!  It was the most well attended show since the fall of 2007, before the recession started.  Show management said it was one of the best southern California shows in the history of the company, with attendance up 21 percent over last year’s show in Pasadena and up10 percent over the 2008 show in Pomona.  In fact, it was so well attended that many exhibitors had trouble talking to all of the attendees that were visiting their booths.   The attendees weren’t just browsing, as many exhibitors had far more leads from this show than the two previous shows.

The demise of shows such as the Design-2-Part show was expected because of the Internet.  But there’s no substitute for the face-to-face interaction provided by trade shows.  At the Design2Part shows, engineers get to see and touch actual parts built by the exhibitors.  This gives them ideas to use for new products they are designing and shows them how other people have solved problems they may be encountering in their design phase.

What made it even more exciting this year was the number of attendees that came to the show looking for domestic sources for parts for new products or looking for a domestic source to replace an offshore vendor for parts for existing products, with some even bringing prints to quote.  We heard several stories about quality problems with offshore vendors that are making it no longer advantageous to source the parts offshore.  One company mentioned that because parts coming from China didn’t meet dimensional specifications, they had to rework the parts and modify assembly steps at their own cost.  When they contacted the Chinese vendor to return the parts, the Chinese vendors said, “We’ll be happy to accept a new order for the parts,” but wouldn’t give credit for the defective parts from the previous order.

Other factors mentioned in the decision to rethink sourcing offshore in China were the increases in wages as a result of the suicides and strikes during the summer, as well as increases in shipping costs.

The other event was the 17^th Annual TechAmerica (formerly AeA) High Tech Awards that were presented at a luncheon attended by over 600 people in San Diego on October 22^nd.  This event highlighted the creativeness and ingenuity of American companies, which is one of our greatest strengths in competing globally.   There were ten categories of awards this year with the addition of contract services for the first time.  Out of many dozens of applications, three to five finalists were selected for each category. The award winners in each category were:

Software:  Anakam Inc. provides integrated no-touch risk-based identity verification and multi-factor authentication solutions for government, healthcare, and commercial organizations.  Anakam was just acquired by Equifax Inc. earlier this month.

Internet/Web Commerce:  Anonymizer provides a proprietary set of solutions for the corporate online privacy sector.

Contract Services:  D&K Engineering provides full turnkey development and manufacturing services, as well as focused projects to address a specific client need anywhere along the product life cycle.

Computers & Related Products:  Z Microsystems provides field-ready computing technologies, focused on government and DoD, including a full range of deployable data storage systems.

Defense/IT Solutions: DefenseWeb Technologies helps government organizations address complex automation and information technology challenges through innovative software development.  DefenseWeb became a wholly owned subsidiary of Humana Inc.

Semiconductors, Industrial & Analytical Instrumentation:  Quantum Design provides automated temperature and magnetic field testing platforms for materials characterization.

Communications Products & Services:  Entropic Communications is a leading fabless semiconductor company that designs, develops, and markets system solutions to enable connected home entertainment.

Medical Device Technology/Instrumentation:  GenMark Diagnostics, Inc. provides the eSensor® XT-8 to perform multiplexed molecular diagnostics utilizing a micro fluidic system to accelerate target binding and improve time to result.

Clean Technology:  Reaction Design empowers transportation manufacturers and energy companies to achieve their clean technology goals with a comprehensive and east-to-use set of software simulation tools, chemical models, and expert consulting services.

Outstanding Emerging Growth (under $5 million revenue):  Seacoast Science, Inc. provides the next generation of chemical sensor and chemical detection devices for a variety of markets including leak detection, military, homeland security, air quality monitoring, and emission gas detection.

While the technology represented by these companies is amazingly cutting-edge, it is even more amazing that many were founded and have grown to be successful during the recession of the early 2000s and the most recent Great Recession in a state that has the 49^th worst business climate in the United States.  One new technology company starts every day of the year in San Diego, and high-tech companies represent six percent of all companies in San Diego and eleven percent of the workforce.

These companies are an example of the entrepreneurial spirit and ingenuity of Americans and provide the best hope for a resurgence of American technology-based manufacturing and services in the face of challenging global competition.

The Manufacturing Institute and Deloitte Development LLC recently released their annual public view on manufacturing in a report titled, “Made in America?  What the Pubic thinks about manufacturing today.”

The report revealed that Americans continue to believe manufacturing is vitally important to our nation’s economy, with 78 percent saying it’s very important to our economic prosperity, 76 percent indicating that it is very important to our standard of living, and 65 percent believe it is important to our national security.  If the general public were aware of how much all branches of the military depend on the manufacturing industry for the development and production of products and systems for the defense of our country, the latter figure would be equally high, if not higher.

Americans think we have the skills and resources to compete globally.  In fact, they are “bullish on the skills and abilities of our workforce in the face of global competition.”  The three sources providing the U. S. manufacturing industry with the greatest competitive advantages are:  technology use and availability, a skilled workforce, and strong R&D capabilities.  Energy availability, natural resources and our infrastructure were the next three important attributes of U. S. competitiveness.

They “think the strength of the workforce is one of the most important factors to our success.”  The top three most important items to maintaining U. S. manufacturing competitiveness are: work ethic, a skilled workforce, and worker productivity

Americans want to strengthen the manufacturing industry, with 75 percent agreeing that the U.S. needs a more strategic approach to the development of its manufacturing base.  Seventy-three percent believe the U. S. should invest more in the manufacturing industry, and 68 percent believe that developing a strong manufacturing base should be a national priority.

At the same time, Americans are concerned about the future of the manufacturing industry, and over half (55 percent) believe that the long-term outlook for manufacturing in the U. S. will weaken.  This may explain the dichotomy of why 55 percent believe manufacturing provides careers that are both interesting and rewarding, and 44 percent believe that jobs offer a safe, clean environment, but only 30 percent would encourage their children to pursue a manufacturing career.

Americans are concerned that U. S. government policies are putting the manufacturing industry at a disadvantage in the global economy.  The top three areas of concern are:

• State and federal government leadership
• Tax rates on individuals
• Government business policies

The survey didn’t delve deeper into these three areas of concern by respondents.  An independent research company conducted the survey in June 2010 with a nationally representative sample of 1,055 Americans across the fifty states.

However, we can see that these three areas of concern have become key issues in the upcoming election in November.  The September 30^th issue of Manufacturing & Technology News contains an interview with Tom Mullikin, who helped organize the Nucor town hall meetings in the 2006 election and described voter anger in his 2007 book, Truck Stop Politics.  He said that his book “attempted to capture the rage of a class of voters who feel they are sliding backward through no fault of their own.  They are forced to downsize their expectations for achieving the American dream… They have a fairly accurate idea about why this is happening.”   He said that if you went to a truck stop and tried to explain why we haven’t effectively dealt with Chinese cheating, like currency manipulation, “you will be met by disbelief and outrage.  Capitol Hill has refused to deal with these issues for over a decade.  Issues such as the unstoppable flow of jobs to other countries, the constant currency manipulation that makes American goods too expensive to sell to our trading partners, and the subsidies some foreign manufacturers receive from their government.  The change the people of Truck Stop Politics were looking for is a change on these fundamental issues.”

He said, “this grassroots revolution has been years in the making… What every-day working Americans want to see is a government that ensures fair trade so they can have jobs, a clean environment and an ability to provide for their families.”  He predicts “a storm surge of electoral activity in November,” and that “you will continue to see volatility in the electorate until we elect Members of Congress with conviction enough to address the real and underlying issues.”

His comments about fair trade are borne out by a poll conducted between September 22nd and September 26th for NBC and the Wall Street Journal.  When asked if they believe that free trade agreements signed by the United States have led to the creation of U. S. jobs or the destruction of U. S. jobs, 69 percent said they cost the country jobs compared to 18 percent saying they created jobs.

When asked if they believe that free trade agreements helped the United States, hurt the United States or did not make much difference, 53 percent said they hurt, and only 17 percent said they helped.  When asked the same question in 1999, 30 percent said they hurt, and 39 percent said they helped.

Perhaps the loss of 5.5 million jobs in the last decade has had an influence on this change of opinion.  Let’s hope that American voters remember these issues when they go to the polls in November.

Amidst the crowded ballot of initiatives for the November election is one that its proponents call the “California Jobs Initiative.”  The ballot title is much longer: “ Suspends Implementation of Air Pollution Control Law AB 32) Requiring Major Sources of Emissions to Report and Reduce Greenhouse Gas Emissions that Cause Global Warming Until Unemployment Drops to 5.5 Percent or Less for Full Year.”

While the majority of the $6.5 million funding in support of Proposition 23 initially came from oil companies outside of California:  Valero, Tesoro Companies, Flint Hills Resources, Marathon Petroleum Company, and Occidental Petroleum, the Howard Jarvis Taxpayers Association, Adam Smith Foundation, California Trucking Association, and California State Pipes Trade Association have donated substantially since the ballot initiative qualified.

The majority of the funding for the opposition campaign has come from a group called “Californians for Clean Energy and Jobs,” made up of wealthy individuals who are believers in global warming as a reality:  Thomas Steyer, Robert Fisher, Wendy Schmidt, Claire Perry, L. John Doerr, William Patterson, as well as such organizations as the Natural Resources Defense Council, the Green Tech Action Fund, and the California Teachers Association.

Thomas Steyer, founder of San Francisco-based hedge fund Farrallon Capital Management LLC, gave $2.5 million and promised another $2.5 million to come.  Steyer and his wife donated about $40 million to fund renewable energy research at Stanford University last year.

Governor Arnold Schwarzenegger is just as strongly opposed to Proposition 23, as he was supportive of AB 32.  He isn’t buying the report from California’s Legislative Analyst’s Office that shows near term job loss from implementing AB 32.

Opponents say that Proposition 23 would delay sensible measures to create a clean energy economy. William Sundstrom, Professor of Economics at Santa Clara University, said “The net impact on California’s employment picture is likely to be so small as to barely noticeable in the unemployment statistics…. Offsetting these transitional impacts will be new ‘green jobs’ in the renewable energy and energy efficiency sectors.  Clean technology is a growth industry, and California has been a significant beneficiary of that growth…”

James Birkelund, an attorney at Cleantech Law Partners, said, “California has invested billions of dollars in clean energy technology such as wind and solar, and is well positioned to lead the nation in the rapidly expanding renewable energy sector… California already had 500,000 workers employed in green jobs, and more than 12,000 clean tech companies call the state home.  It is estimated that Prop. 23 will reduce the state’s economic output by $80 billion and cut over half a million jobs by 2020.

On the other side, a new study released on October 6, 2010 by the non-profit Pacific Research Institute showed that passage of Proposition 23 would create about 1.3 million California jobs by 2020, with 500,000 of those jobs created by 2012, and 150,000 in 2011.  The study assumes that four consecutive quarters of 5.5 percent unemployment or less would not be observed, so that implementation of AB 32 would not resume.   If AB 32 is implemented, they project an employment loss equal to about 5 percent of the working age population, or more than a million jobs.

The California Trucking Association is strongly in favor of Prop. 23 because the California Air Resources Board (CARB) has imposed billions of dollars in high costs on trucking companies to comply with on-road and off-road diesel regulation, and fuel costs could increase another 32%, depending on how AB 32 is implemented.  A study authored by a former Executive Officer of CARB found that the Low Carbon Fuel Standard (AB 32 Scoping Plan Measure T-2) would increase gasoline and diesel costs by $3.7 billion a year with no detectable impact on global warming and a five ton per day increase in smog-forming emissions. The increase in fuel costs would apply to everyone purchasing gasoline and diesel fuel, not just businesses.

Valerie Liese, Chairwoman, California Trucking Association said, “Implementing AB 32 at this time would break the back of the trucking business in California.  That’s why the California Jobs Initiative is so important …Right now, that represents the difference between surviving this recession or going under for a lot of our members.

Law enforcement and firefighters have voiced their support.  Kevin Nida, President California State Firefighters Association said, “The economic crisis of the last few years has put a real strain on resources available to fund firefighters, emergency medical technicians and other public safety personnel throughout the state…The last thing we need is a law that will leave local governments with even less money to fund public safety.”

Small businesses have joined the campaign to support Prop. 23.  Reid Ennis, Ennis Inc., Lakeside, CA said, “We already are burdened with so many taxes and regulations, we barely exist.  We are down from 190 people to 46 and are losing money every month.  With California’s construction unemployment above 30% any more fuel cost increases, fees, or taxes, will destroy many more businesses.”

Michelle Grangetto, 5^th Axis, San Diego, CA, said, “…We machine parts for aerospace, military, and medical fields…another increase in electricity will force us to relocate to another state.”

San Bernardino County Supervisor, Brad Mitzelfelt said, “Our top priority has to be job creation…With more than 2.2 million people out of work in the state and the jobless rate at close to 15 percent in some counties including San Bernardino, Prop. 23 represents a common-sense approach to protecting jobs and holding the line on costs for California’s struggling families.”

When the California Global Warming Solutions Act of 2006 (AB 32) was passed in 2006, California’s economy was booming, with unemployment at only 4.8 percent.  Now California’s unemployment is at 12.4 percent statewide, and we’ve lost over 50,000 manufacturing jobs since the recession began at the end of 2007.   Over the last several years, hundreds of manufacturers have relocated to Nevada and Oregon where there is no state income tax, workers’ compensation costs are much lower, and the cost of regulatory compliance is also much lower.

Now is not the time to make it harder for California companies to stay in business and stay in California.  County Supervisor Mitzelfelt said it best — a “yes” vote on Prop. 23 makes sense.  Passage of Prop. 23 will save more California businesses than it will hurt in the clean energy technology industry.

Since saving American manufacturing has become my main mission in life and the focus of this blog, I have reviewed the Republican’s “A Pledge to America” with that viewpoint in mind.

The Republican pledge includes five major plans that they will work to achieve if they take over control of Congress and the U. S. Senate as a result of the upcoming elections in November.

These plans are:

• A plan to create jobs, end economic uncertainty, and make America more competitive – includes a pledge to permanently stop all tax increases, give small businesses a 20% tax deduction, repeal the mandate to report purchases that run more than $600 to the IRS included in the health care reform, and require congressional approval of any new federal regulation that has an annual cost to our economy of $100 million or more.

• A plan to stop out-of-control spending and reduce the size of government – includes canceling unspent “stimulus” funds, blocking attempts to extend the timeline for spending “stimulus” funds, rolling back government spending to pre-stimulus levels, setting strict budget caps to limit federal spending annually, cutting Congress’ budget, holding weekly votes on spending cuts (YouCut initiative), ending TARP (Troubled Asset Relief Program, ending government control of Fannie Mae and Freddie Mac, and imposing a net federal hiring freeze on non-security employees.
• A plan to repeal and replace the government takeover of health care – includes repeal of the Health Care Act of 2010 and replacing it with medical liability reform, allowing consumers to purchase health insurance across state lines, expand Health Savings Accounts (HSAs), and make it illegal for insurers to deny coverage to someone with prior coverage on the basis of a pre-existing condition, eliminate annual and lifetime spending caps, and prevent insurers from dropping coverage when a person gets sick.
• A plan to reform Congress and restore trust – includes pledge to publish the text of a bill online for at least three days before it comes to a vote in the House, require each bill moving through Congress to include a clause citing the specific constitutional authority upon which the bill is justified, allow any lawmaker, Democrat or Republican, to offer amendments to reduce spending, and end the practice of packaging unpopular bills with “must-pass” legislation by advancing major legislation one issue at a time.
• A plan to keep our nation secure at home and abroad – includes passing “clean troop funding bills (not attached to other policy issues or pork-barrel projects), prevent the government from importing terrorists onto American soil, ensure that foreign terrorists are tried in military, not civilian court, fully fund missile defense, require tough enforcement of sanctions against Iran, establish operational control of the border, work with state and local officials to enforce immigration laws, and strengthen Visa security.

The merits of the specific plans in the Republicans “Pledge” will be hotly debated in the future, but the urgent need to prevent tax hikes from going in effect on January 1, 2011 will be decided by the “lame duck” Congress after the election.  Who’s to say they will do what’s right?  These tax hikes will not only hurt businesses, especially small businesses, but millions of average Americans.  An analysis by Deloitte Tax LLP shows that a family of four with a household income of $50,000 a year will pay $2,900 more in taxes in 2011, and the same family making $100,000 a year will see its taxes rise by $4,500.  Even more crucial is to eliminate the restoration of the exorbitant 55% Death Tax, which would be the death knell to family-owned small businesses when the principal owner dies and the survivors have to sell the business to pay the taxes.

There is no need to “reinvent the wheel” to determine what is needed to create jobs.  Manufacturing jobs are the foundation of our economy, and we need to restore our manufacturing base to create jobs.  Not all of the recommendations of the Manufacturing Initiative reported in the 2004 “Manufacturing in America:  A Comprehensive Strategy to Address the Challenges to U S. Manufacturers” have been implemented.  The Interagency Working group set up by this Initiative released a report on topics for the federal government’s manufacturing research programs in March 2008, “Manufacturing the Future – Federal Priorities for Manufacturing R & D.”  Many more recommendations of how to restore America’s manufacturing base are summarized in chapter 10 of my book, Can American Manufacturing be Saved?  Why we should and how we can.

The U. S. tax system needs to be improved to make U. S. businesses more competitive in the global economy.  On July 26, 2007, the Treasury Department hosted a conference on Global Competitiveness and Business Tax Reform that brought together distinguished leaders to discuss the topic.  As follow-up to this conference, on December 20, 2007, the U. S. Department of the Treasury released a 124-page report titled “Approaches t Improve the Competitiveness of the U. S. Business Tax System for the 21^st century.  None of the recommendations have been passed by Congress since the report was released so this report should be dusted off and used as a starting point for revamping our tax system.

In addition, the first plan speaks about “…repealing job-killing policies…”  Does this include repealing ruinous one-sided free trade agreements where American workers are expected to compete with foreign workers making a tiny fraction of what an American worker makes in order to survive in America?  As long as China, India, and other cheap labor countries are permitted to wage unrestricted economic warfare against the America worker in the form of predatory mercantilism, we will continue to witness ever-increasing unemployment in our country.  There is nothing in the “Pledge” that addresses this problem.

While Democrats drive jobs overseas from excessive regulation and taxation, Republicans have enticed jobs overseas by promoting free trade agreements.  It is a policy that benefits consumers in the short run, until they lose their jobs.  But, it greatly benefits international business interests in the long run, which profit handsomely at the expense of American workers.  Will Republicans remain in lock step with the pied pipers of free trade by insisting on negotiating more free trade agreements?  Will Republicans continue to ignore the damage to the competitiveness of American companies from Chinese currency manipulation?  Will Republicans continue to allow China to impose tariffs and other restrictions on U. S. imports to their country without imposing tariffs on Chinese goods?

Just last week, on September 26^th, Chinese government officials said that it would slap a hefty tariff on U. S. chicken imports to combat what it says are unfairly low prices.  New import duties ranging from 50.3% to as much as 105.4% took effect the next day and will last for five years. The tariffs apply to chicken parts and whole birds, but not to live chickens or cooked products such as chicken sausage.  China was the largest importer of U. S. chicken in 2009 at $752.5 million.

The Republican “Pledge” is a good start to getting our country back on track, but it’s not enough to save American manufacturing.  It would undo much of the damage done by the Obama administration and Democratic controlled Congress and Senate in the last 20 months, especially if they succeed in repealing the Health Care Act of 2010.

We need to stop the downhill slide of our economy that has been occurring since the year 2000 when China became part of the World Trade Organization after being granted Most Favored Nation status by the United States.  While we’ve lost 5.5 million manufacturing jobs in the U. S. since the year 2000, 3.5 million occurred before the Obama administration came into power.  The end result has been an unsustainable escalation of the U. S. trade deficit with China and an equally unsustainable national debt to China from our staggering budget deficits.

Republicans need to go beyond the proposed actions in the “Pledge” to make real changes in our national policies with regard to trade so that American manufacturers have a more level playing field in which to compete in the global economy.  We can’t continue to export our wealth and be able to remain a first-world country.  We must restore our manufacturing base and help small businesses succeed and grow to create the jobs we need to remain a sovereign nation.  How you vote this fall will determine the course of our nation.   I urge you to make the right choice.

There are three propositions that will be on the California ballot November 2^nd that appear to be unrelated.  However, when you consider the background and purpose of these bills, the success or failure of these propositions could have a significant impact on California’s manufacturing industry, already struggling to survive through the tough economic times and unfriendly business climate in California.

Proposition 25, titled “On-Time Budget Act of 2010,” would change the legislative vote necessary to pass the budget from two-thirds to a majority vote (50 percent plus one).  It states that it would not change Proposition 13’s property tax limitations in any way and would not change the two-thirds vote requirement for the Legislature to raise taxes.  Legislators would forfeit their pay if the Legislature fails to pass the budget on time.   Proponents argue that for more than 20 years, the California Legislature has been unable to meet its constitutional duty to pass a budget by June 15 because of the requirement of a supermajority of two-thirds that is required to pass a budget.

A coalition of taxpayers and employers called Stop Hidden Taxes, sponsored by the California Chamber of Commerce and California Taxpayers Association are opponents of Proposition 25. They say it includes “hidden” ways to allow legislators to raise taxes as part of a budget bill with a simple majority vote.   Teresa Cassazza, president of the California Taxpayers’ Association said, “It should come as no surprise that the special interests behind this measure would try to sneak a measure by voters that makes it easier for the state Legislature to raise taxes on Californians.”

In contrast, Proposition 26, titled “Stop Hidden Taxes,” would increase the Legislative vote requirement to two-thirds for State levies and charges, with limited exceptions, and for certain taxes currently subject to majority vote.   It would require voters to approve, either by two-thirds or majority, local levies and charges with limited exceptions.  Proponents say that too often “taxes” are relabeled as “fees” by either the state Legislature or local agencies, allowing them to bypass requirements that previous ballot measures have instituted for public oversight of tax increases (either a two-thirds legislative majority vote or voter approval).  Proposition 26 would end this loophole by plainly defining what is a tax and what is a fee to ensure that any tax hikes are treated as such under the law.

Proposition 27 would eliminate the 14-member state redistricting commission that voters approved through Proposition 11 in the election of 2008.  It would consolidate authority for redistricting back with elected state representatives responsible for drawing congressional districts as was done in the past.  California voters haven’t benefited yet from the passage of Proposition 11 because redistricting is only done every ten years, the year after the Federal Census is conducted.  This means that the independent Commission will redraw the district lines in 2011using data from this year’s Census, and the newly drawn districts will go in effect for the 2012 election.

Now, how are these three propositions interconnected?  The proponents of Proposition 25 and 27 are one in the same.  They are the individuals, groups, and organizations that derive their wages or funding from government, whether it is a salary as a teacher, law enforcement officer, or firefighter or an organization such as California Head Start Association, Planning and Conversation League, or the Sierra Club.

The proponents of Proposition 26 are the opponents of Propositions 25 and 27.  They are a coalition of employers, small business owners, farmers, and industry organizations, such as the California Chamber of Commerce, California Restaurant Association, and the Howard Jarvis Taxpayers Association.  They are the individuals and companies that provide the tax revenues that fund the state government.

In essence, the two opposing sides of these issues are the people that benefit from the expenditure of government funds, and the people and businesses that provide the local and state revenues in the form of taxes and fees.

While it is true that Proposition 25 would eliminate the gridlock over the budget in the state Legislature, the price all Californians would pay would be handing a “blank check” to the ruling party in the state Legislature and its supporters.  We would have a state with one party rule without any “checks and balances” provided by the minority party

The reality is that elected representatives in the state legislature have gerrymandered the state to the point that all but a handful of districts are safe for the incumbent party of the district.  This means that the most extreme of either party gets elected to the state Legislature, and they don’t have to be accountable to independent and opposition party voters.  They only need to please their supporters, who will ensure their re-election or the election of a candidate of the same party when they are “termed out.”

This means that the state Legislature is more like a “jousting arena” in which the extreme of each party is elected to “carry the colors” of their supporters to do “battle” with the representatives of the opposing party.  The state Senate, where state budgets are approved, has been in Democratic control continuously since 1970 as has the Assembly, with the exception of a brief period from 1995 to 1996.  The only power the Republicans have had is the power to hold up the budget because of the requirement for the two-thirds majority vote.

The solution is to make every district a competitive district so candidates will be forced to move to the center to get elected and then be forced to work together in the state Legislature for the good of all Californians.  The best hope for this happening is the drawing of new district lines by the independent commission in 2011.

California has been losing its manufacturing base because of high taxes, undue regulations, workers’ compensation costs, a legal environment stacked against businesses, and lengthy and costly construction permitting requirements.  Irvine business relocation specialist Joseph Vranich has tracked 129 companies that have moved out of California, and I have tracked 32 companies out of my database that have moved out of California since 2001.

California lost 25 percent of its manufacturing jobs between 2000 and 2007, and we know it has only gotten worse since then.  The California Economic Development Department reported that we lost another 23,400 jobs between July 2009 and July 2010.  The unemployment rate of 12.3 percent is now higher than the national average of 9.6 percent.

Make sure you understand all of the ramifications before you decide how to vote on these propositions.  How you vote this fall on these propositions may determine whether the exodus of manufacturers accelerates or diminishes.  The busines you help keep in California or the job you save by how you vote may be your own.