CPA Report Shows Higher China Tariffs Could Increase U.S. Jobs and GDP

August 19th, 2019

On July 22, 2019, the Coalition for a Prosperous America released an update to their study on the effects of increasing tariffs on all imported Chinese goods to 25% that had originally released in May. The study was conducted by CPA’s Chief Economist Jeff Ferry and Steven L. Byers, Ph.D. The Coalition for a Prosperous America is a non-profit, non-partisan organization working to eliminate the trade deficit with smart trade and tax policies to create jobs and prosperity.

According to the report, “The tariff revenue totals $547 billion over five years. If those funds are reinjected back into the economy each year, this additional stimulus to growth results in a $167 billion boost to GDP and 1.05 million additional jobs in 2024…The results of the Coalition for a Prosperous America (CPA) model show that tariffs will have a sustained, positive impact on the US economy, including jobs, output, and investment.”

The report states:  “The tariff would stimulate the US economy through two channels: first, the relocation of US-bound production from China to other nations would lead to a reduction in the average cost of imports because many alternative production locations ,such as those in Southeast Asia, today have lower costs of production than China; and secondly, because a portion of the production in China relocated to the US, would directly stimulate the US economy.”

In stark contrast, the opinions of professional economists are reflected in an article titled, “Trade Wars Are Not Good, or Easy to Win” in The Atlantic on August 5, 2019, staff writer Derek Thompson, wrote, ” President Donald Trump has stubbornly insisted on Chinese tariffs over the objections of his economic advisers—not to mention the near-universal outcry of the professional economic community. In a University of Chicago poll of several dozen international economists, zero disagreed with the statement that “the incidence of the latest round of US import tariffs is likely to fall primarily on American households.”

Why do the conclusions of the CPA research directors differ so greatly from the opinions of the economic community? The authors explained, “Our results differ remarkedly from other economic modeling efforts regarding tariffs…The differences result primarily from different assumptions about how businesses and consumers react to tariffs. Other models reflect a pro-free-trade bias and assume that (a) no production returns to the US as a result of tariffs (b )prices of US imports always rise when imports move from China to third countries and (c) US consumers react very negatively to higher prices, leading to educed sales and output in the US economy. A close study of the available empirical evidence shows these assumptions are unwarranted.”

The report states:  “Our model consisted of two parts:  a partial equilibrium model, which looked at how production in China for export to the US responded to the presence of a permanent across-the-board tariff, and a general-equilibrium model, based on the widely-used REMI  economic model to explore the effects of production shifts on the US economy over a five-year forecast period.”

The report takes into consideration China’s retaliation against the tariffs and China’s moving manufacturing to the U.S. or other countries. It shows that the tariffs will encourage production relocation out of Asia and generate significant reshoring of manufacturing to the US by American manufacturers who had established plants in China. This opinion concurs with the data collected by the Reshoring Initiative for several year showing that “the location decision for manufacturers is not just about cost: reliable supply, closeness to customers, political stability, and building customer/consumer brand awareness all matter!”

The original May report went into more detail about the benefit of reshoring, stating, “The US job gains from PATB-25-induced reshoring are disproportionately concentrated in the manufacturing sector, with 192,416 additional manufacturing jobs (27 percent of total jobs created by the tariff). This is because the vast majority of US imports from China are manufactured goods. By 2024, our model forecasts that $69 billion worth of annual production will have migrated from China to the United States. While US production costs in many industries remain higher than in China, that is not the whole story. Locating production in the US offers other advantages, including lower transportation costs, more logistical flexibility, and closer connectedness to consumer markets, distributors, and senior management. Relocating in the US also insulates companies against the uncertainty of potential future trade tensions. Some industries, such as apparel, have already seen reshoring due to these advantages. A permanent tariff would speed up the process.”

In a webinar to CPA members on August 1st, Ferry cited several examples of American companies reshoring production to the US; namely, Caterpillar, Stanley Black and Decker, Hasbro, Whirlpool, Optec, and West Elm.  The website of the Reshoring Initiative lists  nearly 3,000 companies that have reshored, and the list grows by the week.  

In an interview for The Epoch Times,  Ferry said: “As time goes by, people are accepting it because they’re seeing that tariffs are not provoking huge increases or any increases in consumer prices. They’re not disrupting our supply chains”

He also said “the goal of the U.S. government is to fix these problems and to restore prosperity to the United States, and he thinks tariffs have their role to play. If the trade deficit continues, and if we want to see certain manufacturing industries grow in the United States, I think we need to do more, and tariffs on all Chinese imports is a good solution…It’s a delicate and dangerous game [the Chinese regime is] going to have to play to pivot from being an economy that’s completely dependent on exports to being a more balanced economy, and it’s anybody’s guess whether they can pull it off.”

I’m betting that the conclusions reached by CPA would prove true if President Trump did impose 25% tariffs on all imports from China because of the strong evidence of the benefit of reshoring to the US economy.  According to the Reshoring Initiative, data from the manufacturing employment low of January 20190 through 2018, 749,000 jobs have been brought back to the US from offshore. In addition, manufacturing jobs pay higher than service and retail jobs, so tax revenue will increase from more people having higher paying jobs.  Another benefit would be that as we reduce our imports, our trade deficit would go down. However, the best benefit is that as we resume making the products and systems needed to defend our country in the US, we will protect our national security.

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San Diego Has Largest Woodworkers Guild in U.S.

August 6th, 2019

On June 29,2019, I attended the San Diego County Fair held at the Del Mar Fairgrounds with my family as I have done annually for the past 20 years. One of my favorite exhibits is the fine woodworking exhibits, actually divided into two exhibits, one for hobbyists and professionals and one for students.  For the first time, I picked up a pamphlet about the San Diego Fine Woodworkers Association (SDFWA) and a flyer for the Cabinet and Furniture technology program at Palomar Community College.

The pamphlet described the new woodworking shop in San Diego, open for all woodworkers to join. The shop is a membership based, non-profit, all volunteer shop run by the SDFWA.  I was able to interview Gary Anderson, Member Shop Chairman about the organization and its history.

Gary said, “The Association was started by Lynn Rybarczyk in 1981 after he had seen some beautiful custom furniture in the San Francisco Bay Area. At that time, woodworkers in San Diego had few opportunities to collaborate and had no way to show their work to the public. Lynn was motivated to present the idea of creating a fine woodworking exhibit at the San Diego County Fair to the exposition staff, who agreed to develop an exhibit as long as there was an active community woodworking organization to sponsor it. 

Fortunately, San Diego’s first retail store selling woodworking supplies, tools, and materials opened about the same time —The Cutting Edge. The owner allowed Lynn to set up a card table at the store during the grand opening, and Lynn began to sign up the members of what became the San Diego Fine Woodworkers Association.

During 1981, regular meetings were held at local public schools to attract members. The San Diego Fine Woodworkers Association (SDFWA) was organized as a 501(c)(3) non-profit corporation in early 1982, and by June of 1982, the first annual show, initially called The Southern California Expo Fine Woodworking Exhibit displayed 45 pieces selected from 95 entries, all submitted by SDFWA members.  The show was such a success that Fine Woodworking Magazine gave it a multi-page spread.”  

He added, “The exhibit at the Fair is now called the Design in Wood Exhibition, and has grown to display more than 300 entries. It has achieved national and international recognition and includes demonstrations by wood turners, scrollers, carvers, and model ship builders – all members of local organizations. A traditional woodworking shop at the exhibit produces red oak children’s chairs for donation to local social service organizations. More than 1,700 chairs have been donated over the past 34 years.”    

In answer to my question about the growth of the association, Gary said, “Membership steadily increased and peaked at 1690 members in 1999. There are actually over 200 woodworking guilds/associations in the US., but San Diego’s is the largest with about 1200 members.  As far as we know, only four have their own woodworking shop.”

I asked what the difference between a “guild” and “association,” and he said that the term “guild” is often used interchangeably with “association,” but guilds historically referred to individual craftsmen rather than company members.

He explained that most of their members are doing woodworking as a hobby, and only about 10% or less are professionals who make a living from woodworking.

Gary added, “Members have access to a variety of special interest groups that provide the opportunity to connect with experts in a variety of woodworking, such as carving, CNC machining, toy building, and women in woodworking.”

When I asked when the association opened the Member Shop, he replied, “We opened the shop in June 2017, and it is 4,000 sq. ft in size.  Membership provides access to just about every kind of power and hand tool and equipment that a woodworker would need to complete a project, including, saws, router, sanders, lathes, etc.  It also has an extensive library, design software, classes, and a 3D printer.”

He explained, “One of our reasons for opening the shop was that we were concerned about the diversity of membership, both with regards to age and ethnic diversity.  Before we opened our Member Shop, we were an association of “old white men,” above the age of 60. We recognized that we needed to attract more diversity in age and ethnicity. Now, we have a lot of young people joining as members. When the shop opened, only about 3% were female and now 40% of  our new members are female.” 

The SDFWA pamphlet listed two levels of annual membership:

Silver at $250/year, which provides 15 slots (a slot is one visit to the shop for up to three hours

Gold at $395/year, which provides 50 slots

When I asked if they also have an hourly rate like a “makerspace, he said, “no, you have to be a member to use the facilities.  We don’t have provision for using on an hourly rate.”

I told him that I had also picked up a flyer at the Fair for the Cabinet & Furniture Technology program at Palomar College and asked if the association has a relationship with the college

He replied, “We have an Informal, but students have to pay to be a member to use facilities.  Some of their members have taken or are taking woodworking classes at Palomar to get more training on to expand on the member shop classes.” 

When I asked if there are any other colleges in San Diego that have a similar program, he replied, “I don’t know of any other college that has a program as complete as Palomar, which is a nationally recognized program, but I did hear that SDSU has a small program as one of its instructors became a member.”

In answer to my question as to whether there are any high schools that have woodworking shop classes, he said that he heard that Oceanside High School has a program, but he didn’t know of any others. I told him that the San Diego Continuing Education Center on Oceanview Blvd. has a small woodworking shop and classes, and the MakerPlace on Morena Blvd. in San Diego also has a small woodworking shop and classes. After the interview, an internet search showed that Escondido High School also had a woodworking shop and classes

With regards to whether or not there are any local furniture manufacturers, he responded, “I don’t know of any furniture manufacturers in San Diego other than shops making cabinets. But, SDFWA President, Travis Good, recently visited a lumber supplier by the name of Bennett-Crone, and the vast amount of their business is with woodworking manufacturers in Mexico.

After doing search on the internet, I found seven furniture manufacturers listed in San Diego County, but three of the seven have addresses down in Otay Mesa, which is the industrial park on the U. S. side of the border with Mexico, and companies in this park usually have offices on the U. S. side and manufacturing plants on the other side of the border in Tijuana, Baja California, Mexico.

There are two musical instrument companies that would utilize the woodworking skills of SDFWA members:  Deering Banjo Company in Spring Valley, and Taylor Guitar Company in El Cajon.  However, Taylor Guitar also has a plant in Tecate, Baja California, Mexico.

I thanked Gary for all of the information and arranged to visit the Member Shop soon. I enjoyed learning about the background of my favorite exhibit at the San Diego County Fair. If any furniture manufacturers doing business in China and other parts of Asia decide to return manufacturing to America, the San Diego region would have an abundance of skilled workers to staff their plants

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Brookings Recommends New Focus for SBA’s Small Business Investment Corp Program

July 9th, 2019

can better support America’s advanced industries.

On June 26, 2019, Mark Muro, Senior Fellow, Brookings Institution Metropolitan Policy Program submitted testimony to the U.S. Senate Committee on Small Business & Entrepreneurship regarding the “Reauthorization of SBA’s Small Business Investment Company Program,” and particularly on how the Small Business Investment Company (SBIC) program.

Mr. Muro’s expertise is in America’s advanced industry sector, which are the high-productivity, high-pay innovation industries that anchor American competitiveness and are critical to America’s prosperity.

In his testimony, Mr. Muro wrote that advanced industries are identified using two criteria and must meet both criteria to be considered advanced.:

  • “industry’s R&D spending per worker must fall in the 80th percentile of industries or higher, exceeding $450 per worker
  • The share of workers in an industry whose occupations require a high degree of STEM knowledge must also be above the national average, or 21 percent of all workers”

He explained, “Based on this definition, the U.S. advanced industries sector encompasses 50 diverse industries, including 3 energy, 35 manufacturing, and 12 service industries. These prime industries include manufacturing industries such as automaking, aerospace, pharmaceuticals, and semiconductors; energy industries such as oil and gas extraction and renewables; and critical service activities such as R&D services, software design, and telecommunications.”

He wrote, Advance industries matter because they “are in many respects the nation’s core sources of prosperity and economic preeminence.” Specifically, the advanced industries sector:

  • Encompasses many of the nation’s most crucial industries
  • Represents a key site of innovative activity
  • Trains and employs much of the nation’s STEM workforce

In addition, “its sizable advanced manufacturing sub-sector—delivers critical, specific, under recognized value to the nation and its people and places:”

  • Employment – “In 2018, the 50 advanced industries in the United States employed 14 million U.S. workers, or nearly 10%of total employment. Of that, the 35 advanced manufacturing industries contributed 5.7million jobs and 4% of U.S. employment.”
  • GDP – “U.S. advanced industries generate $3.7 trillion worth of output annually, or 18.5% of U.S. GDP in 2018…advanced manufacturing was a particularly sizable contributor of $1.4trillion worth of U.S. output.”
  • Productivity – “Each worker generated approximately $260,000 worth of output compared with $120,000 for the average worker outside advanced industries.3For the advanced manufacturing sub-sector the figure is $250,000.”
  • Pay – “In 2018, the average advanced industries worker earned $103,000 in total compensation, double the $51,000 earned by the average worker in other sectors. And real absolute earnings in advanced industries grew by 63 percent between 1975 and 2013, compared with just 17 percent for other workers…”
  • Multipliers – “Every new advanced industry job creates 2.2 jobs domestically—0.8 jobs locally and 1.4 jobs outside of the region…On average in other industries, new jobs create only one additional domestic job—0.4 jobs locally and 0.6 jobs outside the region.”
  • Innovation – “Advanced industries perform 90%of all private-sector R&D and develop approximately 82%of all U.S. patents.”

Muro explained that these advanced industries need government financial support because “there is now abundant evidence that the primacy of America’s advanced industries, and especially its advanced manufacturing sector, is being aggressively contested—and eroding.”

The challenge is succeeding because China and other competitor nations “are accelerating their investments in the key inputs to advanced-sector competitiveness—basic and applied research and development (R&D), STEM worker development, regional supply chain deepening—just as the U.S. commitment has weakened.”

He asserted, “As a result, the future competitiveness of the U.S. advanced industries sector has become uncertain because the United States is losing ground on important measures of advanced industry competitiveness.” In fact, “the U.S. has since 2000 run negative trade balances with both China and the world on advanced technology products, with the deficit continuing to grow.”

“On innovation, for example, the U.S. share of global patenting and R&D is falling much faster than its share of global GDP and population. While the U.S. lost 1.6 percentage points in its share of world populationbetween1981and 2016, its shares of global patenting and R&D spending both fell by over 15 percentage points.”

He pointed out that “when the ‘Made in China 2025’ industrial policy implies direct support to thousands of firms through state funding, low-interest loans, tax breaks, and other subsidies to the tune of hundreds of billions of dollars according to third-party estimates, U.S. advanced manufacturing firms—especially smaller ones—struggle to access affordable capital.”  

He added that “while the United States has the most developed venture capital (VC) system in the world, that system remains difficult to access for manufacturing firms…the natural biases of VC and other capital sources skew the existing small-firm finance system far away from capital-intensive manufacturing enterprises and are leaving them to face a debilitating lack of access to critical finance in the United States.”

Because “innovative firms engaged in complex, advanced manufacturing production require greater capital and more time to make a profit than non-production firms…most existing small-firm finance sources (especially venture capital) default to the low-risk, high-reward nature of digital start-ups and stay away from the longer profit horizons of manufacturing.”

He explained that “Tech” companies, after all, can produce fast-turnaround, consumer-facing products with little-to-no physical infrastructure. Advanced manufacturing firms, by contrast, require much more time, risk, and capital to develop products, bring them to market, and achieve scale, ensuring they get fewer VC opportunities.”

He concluded that “acute capital shortfalls are likely hobbling the ability of smaller advanced manufacturing concerns to grow their operations, contribute to local supply-chain deepening, and enhance U.S. competitiveness, community by community.”

Next, his testimony focused on how the SBIC could offer the ideal tool for assisting advanced manufacturing concerns in the coming years.  However, the current SBIC program has “several limitations that prevent it from investing as helpfully in growth as it might.” He stated that “the lack of sectoral specificity in SBIC loan-making means that public funds are not always channeled toward the highest public benefit—most notably that of advanced industries…[and}

its repayment structure, which begins immediately and is comprised of an SBA annual charge plus interest due semiannually, is not conducive to the nature of the longer-term product development timelines that advanced manufacturing firms require. In general, the SBIC’s offerings are not “patient” enough to optimally support advanced manufacturing business models.”

In order for the SBIC to help fill the void and maximize the program’s benefit to U.S. competitiveness through the support of U.S. advanced industries, he recommended that policymakers should:

  • “Explicitly prioritize advanced manufacturing growth in the SBIC’s equity capital toolbox.”
  • “Encourage robust and patient capital in SBIC funding.”

He explained that these actions are needed because “advanced-sector production enterprises are not specifically mentioned in program policies and criteria. They should be, because as of now they are losing out.” And “currently the program favors low-risk, high-reward, relatively short-term enterprises, which discriminates against advanced manufacturing concerns.

Accordingly, the committee should amend the Small Business Act to create within the existing SBIC a program that will offer preferred financing terms to VC firms that invest in advanced manufacturing firms. To determine eligibility for participation in this funding activity. manufacturers’ ‘advanced’ status could be confirmed by their location in designated NAICS codes, employing the same definitional methodology and industry list as employed in this testimony…Funding, therefore, should be growth-oriented, as much as possible—not time-bound. Changes can include tying repayments to a percentage royalty from sales, as well as denoting full repayment as a multiple of the original loan amount, rather using the current fixed payment-plus-interest model.”

In conclusion, he stated, “American’s medium-and long-term competitiveness and economic prosperity will be determined by success in a few select, but significant, industrial sectors: namely, the nation’s advanced manufacturing, energy, and digital industries. Success or failure there, meanwhile, will be determined by our choices, both what we choose to do and choose not to do, in world of state competition for valuable industries. Fortunately, one tool for which we can make good choices is the SBA’s SBIC program. Given its important role in enterprise finance, it is well worth the time and effort to make sure it is optimized to serve as a tool for national competitiveness. If rigorously targeted to investment in America’s advanced manufacturing sector, it will absolutely help us reassert national competitiveness, support vibrant communities, and promote dignified work.”

I’ve worked in the advanced manufacturing sector my whole career and was part of the team of a startup technology-based manufacturing company in the past. I’ve been a volunteer mentor for startup entrepreneurs for the San Diego Inventors Forum for the past ten years and was also a mentor for entrepreneurs in the CONNECT Springboard program simultaneously for three years. I know how hard it is for entrepreneurs to raise seed capital, but the crowd funding programs such as Kickstarter and IndieGoGo are greatly helping.  I’ve seen entrepreneurs raise all the money they needed to get their product into the marketplace, but it’s raising the funds to scale up to full production that is the problem.  Investors are looking for quick profits or the kind of company that will be able to do an IPO rapidly.  I believe that the Brookings recommendations for expanding the scope of the SBA SBIC program will be beneficial in helping to rebuild America’s advanced manufacturing sector.

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Unique Maker Skills Academy launches in California

June 25th, 2019

On June 11th 2019,  I received a press release announcing the launch of the Vocademy Maker Skills Academy (MSA) — a one-of-a-kind, hands-on skills training program. This intensive program covers many of the vocational, career, and soft skills that are no longer taught in our schools. The kinds of skills thousands of employers are seeking. The program is available to anyone over the age of 16, with no prerequisites, transcripts, or GPA requirements.  The first ten-student MSA team starts July 8th, so enrollment is now open.

It is well documented that there is a massive skills gap in traditional and advanced manufacturing in America today. In past articles, I’ve mentioned that an estimated one to two million good-paying manufacturing jobs are going unfilled due to a lack of people with the right skills. There are also thousands of young adult makers looking for effective alternatives to college. The press release states: “An ideal solution has not existed …until today. This truly unique type program addresses the desperate needs of thousands of employers.”

In 2016, I wrote an article about Vocademy when it was essentially a traditional makerspace open to the public and beginning to offer skills training classes to high school students during the day. During that visit, founder and president Gene Sherman told me, “I started Vocademy because I had witnessed the demise of hands-on skills teaching in this country over the past 20 years. Schools have done away with these critical classes that taught practical life skills like woodworking and metal shop. These were the classes where people learned how to use tools and technology and develop the mindsets necessary to create new and amazing things.

When I saw ‘makerspaces’ springing up, I wanted to combine that type space with teaching the kinds of skills that were previously taught in ‘shop’ classes. I wanted to create a place for those who want to use their hands, in addition to their minds ? makers, inventors, and dreamers. I believe that if our country loses its ability to make and build things, we will have lost what made America great.

I wanted to provide access to these tools, but with proper and practical instruction on how to use them correctly and safely. I wanted a place that teaches the most state-of-the-art manufacturing techniques, not just traditional shop skills. I wanted to teach these important skills without the bureaucracy of academia because many more Americans should have the same opportunity to innovate, collaborate, learn, and create their dreams.”

 I visited Vocademy, located in Riverside, CA, on June 20th and interviewed Gene to find out more about the transformation from a makerspace to a skills discovery and training center.  Gene said, “Employers today are looking for those with a breadth of hands-on and soft skills. They want generalists and not specialists because the economy and workplace are changing at a rapid pace.  We have created the Maker Skills Academy to meet the needs of a career-centric workforce. Our goals are to teach real world skills, get our students career ready, and show them the amazing opportunities in the world of making. We’re looking forward to changing lives and creating the makers of the future. The program only takes six-months to complete. We do this by including over 90 fundamental classes in real-world subjects,” such as:

  • 3D Printing and Computer Aided Design
  • Laser Cutting and Engraving
  • Sewing and Textiles
  • Plastics, Vacuum forming, and Composites
  • Costume, Prop, 3D Papercraft, and Model Making
  • Fundamental Electronics, Soldering, Raspberry Pi and Arduino.
  • Robotics, Automation, and Hardware Programming.
  • Machine Shop Basics and CNC machining
  • Welding, Fabrication, and assembly
  • Wood Working.
  • Hand Tools, Power Tools, and support equipment 
  • Life and career soft skills for manufacturing, engineering, entrepreneurship and many other jobs

He emphasized that “by including the soft skills classes employers are seeking, the Maker Skills Academy is the perfect way to prepare for jobs in advanced manufacturing and other maker careers.

And unlike any other training programs or schools, MSA students will also have access to using our equipment every single evening to practice their skills, collaborate, create amazing resumes, and build capstone projects.”

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As Gene led me on a tour of their facility, he explained, “Classes have minimal theory or history and lean heavily toward hands-on, practical skills learning. There are only eight to ten students per MSA team. We have a high instructor-to-student ratio for effective and intimate learning of skills. Our modern facility has over $500,000 of traditional and state-of-the-art manufacturing equipment.

During the tour, I saw that Gene had upgraded the 3D printing lab with all industrial machines rather than the hobby-type machines previously in the lab.  He had also upgraded to industrial sewing machines from the home-type machines he had previously, and there were now two cutting machines in the laser workroom. There were two new park bench projects in the fabrication workroom that the students had built themselves to utilize their metal fab and woodworking skills. He showed me the Little Free Libraries projects that are being placed in front of homes in neighborhoods, which are the capstone projects for the woodworking class.

Gene said that the Maker Skills Academy is perfect for those looking for:

  • a unique alternative to college, with real job and life skills
  • an ideal learning program to explore a multitude of maker skills
  • an effective pre-engineering program before entering university
  • an intensive course in maker skills for entrepreneurs or inventors
  • a set of job skills that will make STEM or maker careers future-proof

The website provides the following description of what is included in the Maker Space Academy program:

  • Six months of subjects and classes designed by industry experts and based on real-world needs of companies.
  • All raw materials, tools, and supplies the student will need for the classes in this program.
  • Six months of maker lab access with use of all equipment the student has been trained to use. 7-days-a-week, 5-10pm.
  • A Vocademy Maker Academy work shirt, basic measuring and hands tool set, a shop apron, and safety glasses.
  • An incredibly creative environment, surrounded by other makers, students, and engineers.
  • An Intellectual Property (IP) free facility. Student developed products or inventions are the property of the student.
  • A unique learning experience for anyone seeking to become more valuable to the world.
  • To develop an amazing set of skills for a career, personal enrichment, or for entering engineering schools.
  • Student graduates will receive Vocademy Certificates of Completion for every subject completed.
  • The opportunity to collaborate and work on your projects or ideas using modern and traditional industrial equipment.
  • To create an incredible resume full of projects, practical skills, and hands-on experience.

I asked what was expected of students, and Gene replied, “There are no mid-terms or finals. Students must commit to classes, self-guided learning, and the creation of projects. They sign a Commitment Pledge to put forth their best effort to ensure a successful learning experience. Students must be willing to continue self-guided depth learning and skills practice during maker lab hours and personal time. And, students are expected to complete a final capstone project for their maker portfolio/resume either solo or as part of a team.”

When I asked what his future goal is, he said, I want the Maker Skills Academy to be the choice of manufacturers for training employees, both existing and those being hired.  I want the MSA to be considered as the “Olympic training center” for manufacturing skills. I envision local manufacturers becoming partners with Vocademy for their employee training.”

I told him that I hope he realizes his goal because programs like his would go a long way in solving the skills gap and attracting the next generation of manufacturing workers.  It is critical that we get back to being a nation of “makers” as manufacturing is the foundation of the middle class, and our middle class has been shrinking for the last 30 years as we moved more and more manufacturing offshore.   

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Congress Must Strengthen Buy America Act

June 4th, 2019

The Buy American Act was passed by Congress in 1933. It required the U.S. government to give preferential treatment to American producers in awarding of federal contracts. The Act restricted the purchase of supplies that are not domestic products. For manufactured products, the Buy American Act used a two-part test:  first, the article must be manufactured in the U.S., and second, the cost of domestic components must exceed 50 percent of the cost of all its components.

After the end of the Cold War and the end of the subsequent Gulf War in 1991, the provisions of the “Buy America Act” were eased to allow purchasing off the shelf commercial parts (COTS) from foreign countries by the Defense Department and other government agencies if they met the same fit and function of parts made to strict military specifications. Previously, parts, assemblies, and systems were required to be substantially made in the United States or in a NATO country, such as Great Britain, France, or Germany.

In the early 1990s, most commercial parts were still being made in the United States, with some outsourcing to the Philippines, Hong Kong, and Singapore, so this change was pretty safe. However, permitting commercial parts to replace Military Specification parts probably drove out of business the small companies that catered exclusively to the military and provided Traceability of Origin per Military Specifications for parts supplied to government agencies, military contractors, and subcontractors. This was all done in the name of cost savings.

Gradually over the last 26 years, the manufacturing of most commercial electronic components and microchips was transferred offshore, so that now they are fabricated in China, Vietnam, or South Korea. 

This is the root cause of counterfeit Chinese parts becoming part of the military/defense industrial supply chain.

The President has authority to waive the Act in response to the provision of reciprocal treatment to U.S. producers. Under the 1979 GATT Agreement on Government Procurement, the U.S.-Israel Free Trade Agreement, the U.S.-Canada Free Trade Agreement, the North American Free Trade Agreement, the Central American Free Trade Agreement, and the Korea Free Trade Agreement, access to government procurement is granted by certain U.S. agencies for goods from the partner countries to these agreements.

It was reported by Reuters in January 2014 that “The Pentagon repeatedly waived laws banning Chinese-built components on U.S. weapons in order to keep the $392 billion Lockheed Martin Corp F-35 fighter program on track in 2012 and 2013, even as U.S. officials were voicing concern about China’s espionage and military buildup.”

To address weaknesses in the defense supply chain and to promote the adoption of aggressive counterfeit avoidance practices by the Department of Defense and the defense industry, an amendment to the National Defense Authorization Act for Fiscal Year 2012  was adopted in the Senate and signed by President Obama.

Instead of implementing the requirements of the Act, it appears that DOD “entered a new phase… characterized by globalization of supply chains” according to Richard McCormack, publisher and producer of the Manufacturing & Technology News, May 20, 2015 edition.

McCormack reported on comments made by Bill Lynn, CEO of Finmeccanica North America and former Deputy Secretary of Defense from 2009 until 2011, at the April 29, 2015 meeting of the Center for Strategic and International Studies in Washington, D.C.

The defense sector and the U.S. military have “moved from being a net exporter of technology to a net importer,” Lynn stated, adding “When their R&D budgets are combined to total a scant $3 billion (or only 1.6 percent of revenue), the five biggest defense contractors — Boeing, Lockheed, Raytheon, L3 and Northrop — would not even make the list of the top 20 global companies that invest in R&D.”

Lynn told the meeting, “Those are things where the commercial industrial base is stronger than the defense industrial base and in many ways the key to maintaining our future [defense] technology edge is to be able to import those technologies into our defense industrial base… Since many of the underlying technologies now reside outside of the United States, DOD has to figure out how to deal with foreign corporations and state-owned enterprises that hold the keys to its success.”

McCormack noted, “The Department of Defense and its major contractors are now dependent on foreign manufacturers for many of the military’s most advanced weapons systems…The defense industry is a shadow of its former self, representing less than 3.5 percent of the U.S. economy, a position that continues to decline as defense budgets reach new lows with no chance of them growing faster than the economy.”

Lynn commented that “DOD is slowly catching up to the structural change caused by globalization of technology and supply chains. It is wrestling with the regulatory and procurement systems it has in place to monitor and conduct business with foreign suppliers, but it has little time to waste.”

Lynn stated “that changing perceptions about foreign involvement in the defense industry are similar to what happened in the U. S. auto sector…Americans and their representatives in Congress were skeptical about foreign nameplates. But as foreign auto companies started building technologies in the United States and hiring American workers, the tide turned… “

It is incomprehensible to me to compare what happened to the U. S. auto industry to what is happening to the U. S. defense industry. The whole purpose of the defense industry is to protect our national sovereignty and national security. How can anyone in their right mind want to make our defense supply chain vulnerable to the foreign country, namely China, that has a written plan to replace the U.S. as the world’s super power? The Chinese have stolen our technology to build up their own military power as evidenced by the uncanny similarity of China’s stealth fighter, the J-31and the Chengdu J-20 fighter jet to the F-35 Lightning II advanced fighter jet. 

Does anyone believe that we will get the parts and assemblies needed by our defense industry when China has decided we are so weak that we cannot stop their aggression in Asia? We are not even safe to have parts sourced in Taiwan, South Korea, the Philippines, Malaysia, Indonesia, or Vietnam. These countries would all be targets for takeover by China once the Chinese lose their fear and respect for U. S. naval and air power.

Four of the last five sessions of Congress attempted to address this problem, but the following bills to strengthen the Buy American Act introduced in Congress failed to be enacted: 

H.R. 4553 (111th), introduced February 2, 2010

S. 2391 (113th), introduced May 22, 2014

S. 2167 (114th), introduced October 8, 2015.

At least, President Trump issued an Executive Order on Buy American and Hire American onApril 18, 2017, which set forth a policy to “maximize …use of goods, products and materials produced in the United States” through federal procurements.

This was followed by the introduction of the 21st Century Buy American Act (S.2196) on Dec. 6, 2017 by Sen. Chris Murphy, D-CN, and a similar bill, H.R. 4812 introduced in the House by Representative David Cicilline. D-RI.  Both bills aimed to strengthen existing Buy American standards, but after considerable support, both failed to be enacted. The legislation focused on five change areas.

  1. The cost of components test for non-commercial-off-the-shelf items would be modified to require that an item’s U.S. component costs exceed 60% of the item’s total costs for the item to be deemed “domestic.” From the current 50%
  2. The so-called “overseas exemption” regarding items procured for use outside the United States would be limited significantly.
  3. Agencies would not be permitted to apply a public interest exception unless it considers the short-term and long-term effects of applying such exception on employment within the U.S.
  4. A program to make or guarantee loans would be created for contractors seeking to manufacture certain items that are not currently manufactured in the U.S.
  5. Actions would be taken to increase transparency related to the use of exceptions

On May 2, 2019, Congressmen Dan Lipinski (IL-3) and Mike Bost (IL-12) “reintroduced the BuyAmerican.gov Act, which helps ensure that federal agencies adhere to Buy American laws and prioritize the purchase of American-made goods. The legislation, H.R. 2472, directs the General Services Administration to establish a website, BuyAmerican.gov, to collect and display information about each request by a federal agency to bypass ‘Buy American’ laws and purchase foreign-made products.  Once the law is approved, manufacturers and others will be able to use the site to identify contract opportunities and challenge pending ‘Buy American’ waivers sought by federal agencies.”

The press release stated, “In the last five years, federal agencies have spent $34 billion on goods manufactured by foreign firms.  The Department of Defense, the largest purchaser of manufactured goods in the world, has spent almost $200 billion on manufactured goods made by foreign companies since 2007.…This bill applies “Buy American” requirements to federal spending programs that are not covered under current law and closes loopholes in “Buy American” programs.

Under current law, federal agencies are exempt from following Buy American laws if American-made goods are unavailable or cost-prohibitive. Unfortunately, federal agencies are too often abusing this waiver authority and there’s no way to hold them accountable,” Lipinski said.”

Senators Rob Portman (R-OH), Chris Murphy (D-CT), Lindsey Graham (R-SC), and Sherrod Brown (D-OH) introduced companion legislation the same day in the Senate.

This bill increases transparency related to waivers and exemptions to the Buy American Act, but it doesn’t address the other four issues that previous bills addressed.

Congress must act to strengthen the Buy American Act, not weaken it, eliminate the incentives for offshoring, and provide incentives for bringing manufacturing back to America. We must protect the supply chain for defense and military products and systems, so that the Defense Department can fulfill its primary mission of defending our country.

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Urban Workshop Sets High Bar for Makerspaces

May 21st, 2019

·         Autodesk Fusion 360 Software -Free Fusion 360 software for Urban Workshop and for all members.

After the NACCE summit I attended on April 27th formally ended at 1:30 PM, I went on the optional tour of a nearby makerspace, the Urban Workshop in Costa Mesa. It is the largest makerspace I have visited in my travels around the country and is the largest makerspace in southern California.

“Urban workshop was born out of my engineering and manufacturing company called Automotive Technology Group Inc., which opened in 2001. Prior to the economic downturn, we were one of the top EV and hybrid vehicle engineering houses in the country doing advanced R&D for the large auto makers and smaller startups such as Fisker Automotive. We also did a small number of professional motorsports.

When the economy slowed, most of the engineering services and manufacturing dried up but the motorsport business swelled. The rich guys who were racing cars weren’t affected by the downturn of the economy so we did well. Around January 2013, I started doing STEM presentations to kids at local high schools and colleges to tell them about the race cars hoping to peak their interest in the sciences. I had heard about makerspaces and started asking some of the teachers their opinion about them. Jokingly, they started to introduce me as the guy who is opening “The Shop.”  I didn’t correct them, and before I knew it, people were showing up at ATG asking if this was “The Shop” and if it was open yet.

The Urban Workshop was founded by, and is privately owned by, Steve Trindade. During the tour, Steve told the story of how he started the makerspace, and later emailed me the following story:

“By January 2014, I had become very frustrated with the engineering services business due to customers not paying or going out of business leaving me holding the bag. Simultaneously, three to five people per week were stopping by to look for “The Shop.” That was when I decided to go for it. We wound down the projects we were working on, and signed a lease for a 5,500 square foot R&D space in May 2014.”

Steve said, “Our facility was basically built, painted, and set up by volunteers. People who walked in the front door and asked, is this “The Shop?”  I said, It’s Urban Workshop, but we aren’t open yet. Almost always they replied, can I help? I said yes, and put them to work.

In the end, we renovated the facility and got ready to open with nearly all volunteer help. Using all volunteer help, we set up the new facility and opened as Urban Workshop on July 2014. We had a similar experience with volunteer help when we moved into our current larger building in April 2015.

Since then, the business has grown significantly, and our membership is over 1,700. Our small business members do approximately $20M in annual revenue directly out of our facility, and collectively they have raised nearly $70M in angel and venture funding. In 2015, we added youth programing similar to the old school shop classes and now serve over 1,000 students age 10 to 16 years old annually.”

I was impressed by the kind of equipment and resources the Urban Workshop provides. It is a full-scale DIY workshop and makerspace meaning that it includes all aspects of engineering, prototyping and manufacturing equipment.  Steve said, “We have nearly $1M worth of equipment and because we used to be a professional services company, all of the equipment is current state of the art industry relevant equipment as opposed to the typical hobby level equipment you find in all other makerspaces. We teach classes on all the equipment and continue to add classes as fast as we can generate the course materials.

The equipment I saw on the tour included computers and software, large format plotters and printers, 3D printers, laser etchers, sheet metal fabrication equipment, manual and CNC machines, MIG and TIG welding, a vacuum forming machine, an autoclave, a silicone molding pressure pot, an extensive wood shop with a large CNC router, a composites fabrication shop, a vinyl cutter, sewing equipment, an electronics lab, and an auto shop with five auto lifts. 

On their website, the following companies are listed as commercial partners/supporters:

·         Epilog Laser Etchers – Educational pricing on equipment and extended warranty support to Urban Workshop

When I asked what “Making” meant to him, he said, “In one word, opportunity. Opportunity for our members to learn new skills, open a new business, fix something, help others, learn a new skill, make a new friend, complete a personal project or who knows what. It has been very satisfying to watch people come in the shop with one idea and end up making five more things they never thought of before on equipment they have never used before with the help of someone they met at Urban Workshop.”

·         Haas CNC Machines Educational pricing on equipment, extended warranty support, free computerized training and simulation station to Urban Workshop.

·         Autodesk HSMWorks Free HSMWorks CNC programming software for members to use on site.

·         SolidWorks– Free engineering software for members to use on site.

·         Laguna Tools – Educational pricing on equipment, software and extended warranty support to Urban Workshop.

·         National Instruements – Free Virtual Bench all-in-one test equipment and LabView software for members to use on site.

·         Ingersoll-Rand – Educational discount on machine tooling and fixtures to Urban Workshop.·        

Steve said, “The initial response to Urban Workshop was overwhelmingly positive, and the level of enthusiasm was incredible. The response continues to be great and the level of excitement and comradery continues to grow. Almost weekly a member comes to my office to thank me for opening the shop and enabling them to be able to make their dream project or start their new business. I knew this would be fun and satisfying, but I never imagined the extent that it would be so well received.”

One other observation he made is that whether you call it hacking, making, or tinkering, “the desire people have to use their hands is universal and fundamental. It is extremely satisfying to figure something out, address a problem or need one has or create something from scratch. I believe it has a therapeutic value and allows one to focus on something for a time without distraction. This is something that is unusual in these days of smart phones and social networking.”

In describing the projects his members are working on, he said, “Theyvaryjust as much as the members do. We have young professionals who are starting their own businesses all the way to the “burning man” crowd. It is impossible to nail it down and give a simple example. I have seen everything from ruggedized super tablets designed and manufactured in the shop to an Arduino controlled dog feeder and a talking Wi-Fi enabled Christmas tree. Urban Workshop’s membership is approximately 45% startups developing and manufacturing new products, 40% hobbyist, and 15% students. The hobbyists are the most diverse and work on home projects, vehicle restorations, boats, motorcycles, gifts, tons of wood working and cabinetry, arts and crafts, holiday decorations, cosplay, prop making, toys, and you name it.”

When I asked what his future plans are, he said, “Our long term the goal is to open additional locations. Currently, we are expanding our class offering to include many more project classes that will help guide people on the path of making. The youth program continues to grow, and additional levels will be added. Our most promising new product is the licensing of our operational procedures and class documentation to other makerspaces world-wide, providing operational training, and instructor training to enable them to prosper and help even more people.”

I’ve only visited one other makerspace about which I wrote, Vocademy in Riverside, that had a plan to expand to other locations, but its focus was on working with high schools to provide the career technical training that high schools used to provide.  With the depth and breadth of Steve’s business experience, he is more likely to succeed with his future plans than others. 

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Makerspaces Play new Role in Career Technical Training at Community Colleges

May 8th, 2019

The National Association for Community College Entrepreneurship held a Makerspace Ecosystem Summit titled “Make/Shift” in Irvine on April 24-26th, and I was able to attend the last day.  I learned that in 2016,”the California Community College Chancellor’s Office, Workforce and Economic Division funded the $17 million CCC Maker Initiative for three years under the  Doing What Matters for Jobs and the Economy  framework.  It was the first statewide initiative to grow a system of community college makerspaces and included funding for 800 internships.

After a rigorous application process, 24 “California community colleges were awarded grants to establish makerspaces — do-it-yourself centers where students have access to technology that allows them to create, invent, learn and share ideas. Each of the selected colleges was awarded from $100,000 to $350,000 per year for up to two years.” The makerspace at Mt. San Jacinto Community College in Menifee that I visited last October on MFG Day was one of the funded makerspaces.

“Makerspaces —also known as fablabs — are places in a community where people get together to learn and invent using technology such as 3-D printers, computer-aided design (CAD) software and manufacturing equipment that might otherwise be unaffordable for an individual to purchase.” The California Community College (CCC) “Maker initiative is aimed at strengthening the workforce by inspiring students to learn by doing, teaching in-demand skills for jobs in science, technology, engineering and math fields, partnering with employers to provide internships…”.

The makerspace grants were planned to coincide with a program by the CCC “to promote its more than 200 career education programs as affordable training for good-paying jobs.” The CCC is the largest provider of workforce training in the U.S. with 114 campuses across the state serving 2.1 million students per year. Its career education programs are developed in partnership with local industries and taught by instructors with direct work experience.

At the first session on Friday, Willy Duncan, Superintendent and President of Sierra College said that while the initial funding has ended, he is committed to continuing the good work and getting follow up funding for the makerspaces. He emphasized that entrepreneurship in 4th Industrial Revolution is being led by entrepreneurs disrupting existing technologies.  He said that the Fourth Industrial Revolution is interacting with other socio-economic and demographic factors to create a perfect storm of business model change in all industries, resulting in major disruptions to labor markets. It is a fusion of new technologies and talents.

The skills needed are more complex and cut across disciplines. Artificial Intelligence, Industrial IoT, automation, and robotics have the potential of creating new jobs, but will widen the skills gap.” He referenced the Future of Jobs Report, which states that automation will accelerate skills shift and social and creative skills will be more important — 42% of skills will change and  

75 million jobs could be displaced. The less you make now will put you at risk for being displaced.

He mentioned that a study by the USC Annenberg School for Communication and Journalism on Third Space Competencies stated that “third places” are places where you can connect to unlock innovation, drive collaboration, and develop talent.  He recommended that educators need to create third places within makerspaces. He said, “A mindset of agile learning will be needed on the part of workers in the future.  Project-based learning is the hallmark of makerspaces, and students who struggle in traditional leaning may excel in project-based learning. The future will require life-long learning to continually acquire new skills.”

Mr. Duncan said we need to figure out how to revamp learning to stay relevant. It can’t take years to change. Collaboration is critical to implementing change and learning how to lead “from the middle.”

Partnerships through collaboration within the College as well as within the community

Amy Schultz – Dean of Continuing and Technical training at Sierra College said that they partnered with Hacker Labs to create their Makerspace and said their makerspace has an advanced manufacturing. lab with Haas CNC equipment. Partnerships succeed when each partner benefits so it can be sustained.

Dr. Cathy Kemper—Pelle, President of Rogue Community College, in Grants Pass, OR said they partnered with local community to create a makerspace in the downtown area of the city. They bought an old manufacturing building and converted it into large Makerspace, and students are participating in Invent Oregon.

Cabrillo College in Aptos, near Monterrey Bay, partnered with local Goodwill for creating internships for makerspace students and held a joint internship fair.

Dr, Carlos Turner-Cortez. San Diego Continuing Ed. said that their Center provides noncredit training classes that are free.

Some insights from the session were:

  • Artificial Intelligence is allowing companies to develop new products at a faster pace
  • Transportation is going autonomous and vertical at the same time
  • Mode of teaching is being disrupted by online learning and compressed learning
  • Try non-credit training if you want to innovate

Next, I attended the breakout session, Building a Strong Workforce – A TED talk panel discussion – The Future is Happening Now – Cari Vinci of InVINcible Enterprises

In Ms. Vinci’s presentation, she noted that the goal of 70% of students is to go to college, but 75% are undecided about a major.  In the 21st Century workplace, only 23% of future jobs will require 4-year college degree, 34% will require an associate degree or some college, 34% will require a High School diploma or less, and only 11% will require an advanced degree. Today’s education isn’t meeting the needs of the workplace.  A Gallup poll showed that the role of higher education needs to be “purpose-based education.” A mindset of lifelong learning and an understanding of what’s going on globally will be necessary. The new ”Power Skills” for technical skills is to learn what robots and Artificial Intelligence can’t do yet. Students need to acquire the 21st Century Power Skills to ensure success.  Her Playbook for Teens helps students become the CEO of their life and find their career sweet spot.  Community Colleges and makerspaces are catalysts to connect the dots through internships, apprenticeships, and entrepreneurship.

Panelist Andy McCutcheon, Dean of the School of Humanities and Maker Space, College of the Canyons, shared that their MakerSpace is part an integrative learning model that encourages the development of 21st century technical and professional skills while connecting students with community and career paths. Their MakerSpace offers unique opportunities for helping students to connect classroom content and theory with real world problem solving while exploring career opportunities within and beyond their majors and foster connections that may lead to work-based learning opportunities like internships and apprenticeships.  MakerSpace 100 is a project that has placed 25 COC students with two local community partners, JPL’s Mars Rover Team and the Santa Clarita City Hall “Green Streets” team. Students are working in teams to develop solutions related to a NASA payload project and the Sustainable Santa Clarita project gaining important workplace experience while earning college credit and being paid through the CCC Maker Grant.

Panelist, Sarah Boisvert has over 30 years’ experience in advanced manufacturing and is the author of the book, The New Collar Workforce. She is the co-founder of Potomac Photonics, Inc. a laser machine tool company, which she and her partners sold in 1999. Since “retiring”, she founded Fab Lab Hub, located in Santa Fe, NM, which is a member of America Makes, the National Additive Manufacturing Innovation Institute. Ms. Boisvert highlighted the re-emergence of manufacturing and briefly presented a blueprint of how to leverage this new, new manufacturing in colleges. She explained that the new collar workforce is a combination of entrepreneurial, design, fabricators, business, and other skills that is turning the traditional workforce training model on its head. She said that where blue collar assembly line positions are being replaced by robots, a new collar job is being created to maintain and control the systems. She said that the evolution of traditional blue-collar jobs into new digitally minded jobs that work symbiotically with robots and intelligent technology will be the key to exponential growth, and many new collar workers are attending vocational schools and community colleges rather than attaining traditional four-year degrees.

The final session featured a discussion of sustainability and funding insights from Foundation leaders:

Stephanie Bowman, Manager, HP Foundation – she said that the HP Foundation provides HP Foundation provides core business and IT skills training free of charge for start-ups, students, and small businesses through HP LIFE (Learning Initiative for Entrepreneurs)  Each module takes one hour and you get certificate when complete. They have awarded $23 million in grants in 42 countries. The mission of the HP Foundation is to make life better for undeserved and underrepresented communities by providing technology-related learning experiences and opportunities.

Rachel Burnnette, Program Officer, Lemelson Foundation (Portland, OR) – she said that the Foundation uses the power of invention to improve lives, by inspiring and enabling the next generation of inventors and invention-based enterprises to promote economic growth in the US, and social and economic progress for the poor in developing countries. The Foundation has provided or committed more than $185 million in grants and Program-Related Investments in support of its mission. They run their funding through Venturewell.

I’m very glad to see that community colleges are taking the lead in providing career technical training to bridge the widening gap of job skills for the 21st century workplace. Makerspaces are uniquely poised to foster real world connections between theory and practice and between the classroom and what a student might want to do with his or her life.  What concerns me is that many of the 24 California Community Colleges may wind up struggling to keep their doors open at a time when colleges across the state are looking for ways to cut costs in response to the statewide shortfall caused by a new funding formula. New programs without ongoing funding may be the first to go as districts tighten their belts. I can only hope that private foundations like those mentioned above and collaborative industry partnerships will alleviate the funding gap.

Jelani Odlum, Michelson 20MM Foundation (Los Angeles) – she said the Foundation supports innovation in education and higher learning initiatives. The Foundation’s founder, Dr. Gary Michelson,  has several hundred patents for his company. She explained that the vision for their Spark Grants program is to introduce an innovative just-in-time grantmaking process to fill urgent needs for education organizations that are well-aligned with their key target outcomes. They seek to fund highly impactful initiatives that would not be possible if they needed to wait through a traditional grant decision timeline.

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The High Cost of Trade Deficits

April 9th, 2019 
 
 

Free trade has resulted in enormous trade deficits in goods for the United States for over 40 years. Our last year of a positive trade balance was 1975. At best, free trade has benefited large, multinational global corporations that have manufacturing facilities located in other countries. At its worst, it is the primary source of our trade deficit and loss of good paying manufacturing jobs.

Even with the tremendous resources we have, what was once the world’s largest manufacturer of products has accumulated $14.379 trillion worth of deficits in goods for all countries since 1991.

A fact sheet generated by the Coalition for a Prosperous America for 2018 show ten countries account for 97% of our trade deficit: China, Mexico, Japan, Germany, Ireland, Vietnam, Italy, India, South Korea, and Malaysia. Our trade deficit with China alone was $419 billion, representing 47.9% of our trade deficit.  Since 1991, we have accumulated over $9.144 trillion worth of trade deficits with just the top four countries. If we had fair trade, we would not have these constant trade deficits.  The drastic effect China has had on our trade deficit is demonstrated by the fact that in 2001 when China joined the World Trade Organization, we had a total $412 billion deficit in goods, but in 2018, we had a $879 billion deficit in goods. 

 

For every $1 billion of trade deficits in goods, it’s been estimated that 6,000 – 7,000 jobs are lost, at about $80,000/job. This means that 8 – 10 million more Americans willing to work could have a comfortable middle-class job in America. Instead, we lost 5.8 million manufacturing jobs from the year 2000 to 2010. 

 

In terms of purchasing power, workers’ wages in the U.S. have been stagnant since the 1970s. The significant collapse in the income of average Americans can be attributed to the vast decline of jobs in the U.S. manufacturing sector. This is the reason average U.S. wages have fallen over time, especially since 2001. From 2001 – 2013, the average U.S. wages fell by 3.5%. In contrast, as Chinese workers flocked to cities for manufacturing jobs, wages have grown substantially, averaging an 11 percent increase per year from 2001 to 2015. 

 

According to the Pew Research Center, 61% of American households were part of the middle class in 1971, but by 2015, only 50% of Americans were part of the middle class. “In 2002, China’s middle class was only four percent of its population. A decade later, this number had climbed to 31 percent, constituting over 420 million people. In contrast, in 1999, only 2% of the Chinese population was a part of the middle class, but by 2013, 39% of the Chinese population was in the middle class.

 

Since China joined the World Trade Organization, the bi-partisan, 12 member U. S.-China Economic and Security Review Commission (USCC) has been required to submit annual reports to Congress. These reports document China’s non-compliance with the WTO and the effect it has on the U. S. economy.

For example, the 2007 report included a case study of the local impact of trade with China on North Carolina. The USCC report stated “the accelerating decline in North Carolina’s manufacturing employment is due in large measure to increasing competition from imports mostly from China . . . The combination of China’s 2001 admission to the World Trade Organization (WTO), which gave it quota-free access to U.S. markets for its textile and clothing exports, and the subsequent U.S. grant of Most-Favored (Trading) Nation status that lowered most tariffs on Chinese imports, battered North Carolina’s textile and apparel industries, and they never recovered.”

Because a greater proportion of North Carolina’s workforce had manufacturing jobs than any other state, North Carolina’s workforce was more vulnerable to competition from imports than the workforces of other states. North Carolina’s manufacturing economy was made even more vulnerable by its concentration in the import-sensitive sectors of textiles, apparel, and furniture. North Carolina is one of the southeast states that had a large number of textile companies, and as a result, North Carolina has been the most impacted state in the nation by layoffs due to trade. Between 2004 and 2006, almost 39,000 North Carolina workers were certified by the Trade Adjustment Assistance program as having lost jobs to trade, more than 10 percent of the U.S. total of 387,755. 

According to the Social Science Research Institute (SSRI) of Duke University in North Carolina, there were 2,153 textile and apparel plants in North Carolina employing 233,715 people in 1996. By 2006, the apparel industry had experienced a 70% decline in jobs and 55% loss of plants. The textile industry by comparison had only lost 63% of jobs and 32% of plants from 1996 to 2006. 

The loss of these well-paid manufacturing jobs in North Carolina’s textile industry may have resulted in families losing their homes and/or being forced to relocate to other areas of the country to find jobs. Taking lower paying jobs in their own communities may have resulted in families no longer being in the middle-class income range. And, those who have not been able to find any work or only part-time work may have even dropped down to the poverty level.  It is not just people losing jobs and not being able to find other employment that pays as well as their former jobs, “hundreds of small towns throughout North Carolina impacted by plant closures are dying.”

Remember that it takes taxes paid by three to four working Americans to pay for the unemployment benefits of a non-working American. The cheaper China price of goods that we import instead of producing here in the U. S. results in a cost to society as a whole. We need to ask ourselves:  Is the China price worth the cost to society?  I say a resounding NO! We need to stop shooting ourselves in the feet. We need to stop benefitting the one percent of large multinational corporations to the detriment of the 99% percent of smaller American companies.

China, Germany, Japan, and many other countries have built their currency value around making certain all of their countrymen have a good job, even if that destroys America’s work force. As a result, these countries have maintained constant trade surpluses with the U. S. for many years, which would not have happened if we had fair trade.

 

It is impossible for the U.S.to remain competitive if our currency is not fairly valued. In order to move manufacturing jobs back to the U.S., we need to move our currency value down by at least 27% because the currency of Germany and Japan are undervalued by about that same amount.  China has rigged its currency between 15%-40% below its fair value since joining the WTO, and this gives a subsidy to their imports to the U.S. and imposes a direct cost on U.S. exports to China.

Devaluing our currency would allow many more products that we import from overseas to be made here. Unfair trade practices of currency manipulation, government subsidies, product dumping, and state-owned enterprises have allowed China to buy our raw materials and our low-cost energy to become the largest producer in the world of paper, aluminum, and steel even though labor costs are small compared to the cost of raw materials, energy, and transportation.

We need to focus on eliminating our trade deficits and achieving balanced, reciprocal trade in all future trade agreements. The last thing we need is to increase our trade deficit more than it already is.

 

In addition, we need to continue on the path of returning more manufacturing to America by reforming our tax policies and making regulations less onerous to manufacturers, without compromising our commitment to protect our environment. This is the only way that we will be able to simultaneously reduce our trade deficit and the national debt.

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Congress Must Protect Inventor Rights

April 2nd, 2019

Ever since the Leahy-Smith America Invents Act was passed by the 112th Congress in 2011, inventors have been discouraged to innovate by failing to secure the exclusive rights to their inventions through a patent.

It was bad enough that the Act changed patent law from a “first to invent” to “a first to file” for patents. It also created new and easier ways to invalidate an existing patent. Prior to this, to invalidate a patent required going to a judicial court with a jury and its various protections offered to the holder of a property right. The Act created procedures for an administrative court, the PTAB (Patent Trial and Appeals Board), that does not have the same protections.  PTAB has become a nightmare for inventors because it allows infringers to challenge the validity of patents in the PTAB. Some inventors have faced hundreds of thousands of dollars in legal expense and annihilation of their patent rights in unlimited third-party patent validity challenges. Serial petitions are common with valuable patents suffering a dozen or more attacks with costs typically being in excess of $350,000 for each PTAB defense.

Some inventors have endured up to a decade and spent tens of millions of dollars in legal expense to obtain a final judgment in court against infringers of their patent.  Even then, inventors have not been not compensated fairly or sufficiently to prevent infringement of their patent rights.

For example, in the Amazon documentary, Invalidated: The Shredding of the U.S. Patent System,  Josh Malone, the inventor of Bunch O Balloons, stated that his court case against Telebrands has cost over $20M.  It also documented how Dan Phillips, inventor of the Bionic Wrench, has been fighting Sears in court since 2012. A judge recently tossed out the jury verdict that held Sears liable because of their bankruptcy. I understand his appeal process will take several more years. (Note:  The full version is available now on Amazon and iTunes)

It’s not just China that is stealing our technology; it is U.S.-based corporations stealing technology from inventors right and left. Google, Apple, Amazon, Telebrands and other big corporations are getting away with profiting from pirated product. Why should large corporations be allowed to steal inventions and block access to the legal system for private inventors and small businesses? How can a small business survive if it takes a decade and millions of dollars in legal expense to protect intellectual property rights? 

According to Randy Landreneau, President of US Inventor, Inc., “Current policies and case law focus instead on patents as monetary assets held by corporations, injecting extremely high cost and risk to enforcing any single patent and making patent enforcement a ‘game of kings.’ Big corporations play the game by hiring dozens of lawyers, hoarding hundreds of patents, and pouring millions of dollars into litigation. Inventors cannot play that game and need a viable path to enforce their patent rights because PTAB rulings have canceled claims in 85% of issued patents. This is disheartening and discouraging to inventors and startups in our community.”

He added, “In the rare instance that the PTAB permits an inventor to keep his patent, there is no monetary recovery. This means the inventor has nothing to offer a law firm to take the case on a contingency basis. Pro bono defense is not available either. Inventors with valuable inventions have virtually no chance of keeping their patents in the PTAB.”

Last year three bills were introduced to Congress to protect inventors rights, but these bills never got out of committee for a vote on the House floor:

H.R.6557, Inventor Protection Act – “To amend title 35, United States Code, to restore patent rights to inventors, and for other purposes.” It was designed to restore patent protection for inventors by reversing a generation of laws and regulations. 

S.1390, Stronger Patents Act of 2017 – A bill to strengthen the position of the United States as the world’s leading innovator by amending title 35, United States Code, to protect the property rights of the inventors that grow the country’s economy.

H.R.6264 – Restoring America’s Leadership in Innovation Act of 2018 – A bill “to promote the leadership of the United States in global innovation by establishing a robust patent system that restores and protects the right of inventors to own and enforce private property rights in inventions and discoveries, and for other purposes.”


In order to foster the development of American manufacturing, Article I, Section 8, Clause 8 of the Constitution states that the Congress shall have the power “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

This enabled America to become the world leader in innovation, driven largely by this simple yet profound promise to inventors of the exclusive right to their discoveries. Without secure patent rights, inventors are starved of time and capital required to explore and develop new technologies. Today, the United States faces an escalating innovation crisis as we are forced to rely on outdated or imported technologies. Congress must act quickly to restore reliable patent rights for inventors.

As a mentor for San Diego’s CONNECT Springboard accelerator program for a few years and a director on the board of the San Diego Inventors Forum, I work with inventors designing new products or break-through technologies. Local inventors have the opportunity to compete in the San Diego Inventors Forum annual invention contest for best new consumer product or best new technology. All contestants must have applied for at least a provisional patent before they can participate. The future success of their product or technology is contingent upon their having a patent they can protect from infringement. Their ability to raise the financial investment they need to bring their product to the marketplace depends upon their being able to protect their patent.

Why is this important? Because most new technologies, especially break-through or disruptive technologies, come from individual inventors who either start a company or license their technology to companies that are more able to take them to the market. It is critical for inventors to be able to have some assurance that the rights to their patents will be reviewed in a consistent manner so that they will be able to secure investors and get their product into the marketplace.

Inventors must be equipped and motivated to apply their knowledge and creativity to solving problems.  In order to encourage inventors to share their discovery in exchange for a time-limited exclusive right, patents owned by the original inventor must be protected from the policies that target assets held and traded by non-inventors.

The United States must retake the lead in the next wave of technological innovation in areas like quantum computing, artificial intelligence, and medical diagnostics. Protection for discoveries is these fields is the absolute best way to promote progress in science and useful arts in our modern day.

US Inventors started off The Inventor’s Project in February by co-hosting an open house on Capitol Hill with the Congressional Inventions Caucus. A bipartisan group of Congressional members and staff attended. As a result, the Inventions Caucus will continue to grow and support the mission of educating Congress on the importance of innovation and small inventors and promote the Inventor Rights Resolution.

SUMMARY OF THE RESOLUTION

Our patent system is in crisis. Recent changes to patent laws and Supreme Court decisions have adversely affected inventors such that the requirement in Article I, Section 8 of the Constitution of “securing for limited times to inventors the exclusive right to their discoveries” is no longer achieved. It is nearly impossible to stop an infringer from using an invention without permission, or to make them to pay for the damage caused when they do. The undersigned inventors call on Congress to pass legislation to address these critical issues.

PTAB

The USPTO Must Stop Taking Back Patents from Inventors

INJUNCTIONS

Courts must prohibit the use of a patented invention without permission

PROFITS

Infringers must not profit by using an invention without permission

We must stop the America Invents Act from gradually destroying the American Patent System. We need to encourage our own Congressional Representative to co-sponsor or support an Inventor Rights Act to restore our rights as inventors in this Congress and reinvigorate the famous American innovation system.  Join us by signing the Inventor Rights Resolution

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Are Tariffs Reducing the National Debt and Federal Deficit?

March 6th, 2019

There is increasing evidence that Trump’s tariffs are working to expand American manufacturing and create jobs.

According to the February 11, 2019 U.S. Manufacturing Technology Order Report press release of The Association for Manufacturing Technology, “The year- end order total for 2018 was $5.5 billion, up 19 percent from the annual sum for 2017…’We finished a fantastic run up in manufacturing technology orders during 2018, with most analysts looking for good growth in units and modest growth in revenue in 2019,” said AMT President Doug Woods.”

In an Op-Ed for The Hill on February 12, 2019, Michael Stumo, CEO of the coalition for a Prosperous America, wrote: “There’s no doubt that America’s manufacturers are currently rebounding. The tariffs that President Trump imposed a year ago on steel, aluminum, solar panels and washing machines have already created more than 11,000 new jobs.”

In 2016 when he was a candidate, Trump told the Washington Post that he could make the U.S. debt-free “over a period of eight years.” Thus, the question is:  Are Trump’s tariffs reducing the Federal budget deficit and paying down the national debt?

For clarity, the Federal budget deficit is the annual difference between what the federal government takes in as revenue and what it spends for expenses. The U. S. has run a federal budget deficit every year since 2001 by spending more than it raises. The national debt is the total amount of money that has been borrowed and not yet repaid.  

At 7 PM on March 6, 2019 when I finished writing this article, the national debt was $22.109 trillion, and the Federal budget deficit was at $846.945 billion according to the U. S. National debt clock website (it registers an increase every second.)  In a CNN Business article by Lydia DePillis, on January 4, 2019, “The US national debt stood at $21.974 trillion at the end of 2018, more than $2 trillion higher than when President Donald Trump took office, according to numbers released Thursday by the Treasury Department.” On the other hand, the national debt nearly doubled under Obama’s eight-years as President going from $10.626 trillion when he was sworn on January 20, 2009 to $19.947 trillion when he left on January 20, 2017.

A Bloomberg article by Mark Niquette on January 17, 2019, states, “According to data from U.S. Customs and Border Protection, more than $13 billion in duties imposed by the Trump administration were assessed on imported goods as of Dec. 18…Customs and Border Protection collects the tariffs based on the price paid for shipments and the tariff rate in effect, and duties are charged when shipments are released into the U.S. The assessed amount now tops $13 billion, with $8 billion coming from the duties on Chinese goods…The duties are deposited in the U.S. Treasury.”

Thus, although President Trump claims that the tariffs are being paid by China and other countries, the tariffs are actually being paid to the U. S. Treasury by companies that import products.   

As I wrote in my last article, tariffs were a large source of revenue for the U.S. government for over a hundred years. However, in 1913, the 16th Amendment established Congress’s right to impose a federal income tax, and tariffs have represented a smaller proportion of receipts ever since. 

According to an article on the Center for Strategic International Studies website, “As of 2017, 47.9 percent of revenue came from individual income taxes, 35 percent from payroll taxes, 9 percent from corporate income taxes, 5.6 percent from other taxes, and 2.5 percent from excise taxes (taxes on specific goods like gas).”  Their projections for 2018 were that of the “$3.34 trillion in revenue in FY 2018, just $40.437 billion of that is projected to come from customs duties, representing 1.21 percent of the government’s total expected receipts.”

Since nearly half of tax revenue comes from individuals, the growth of high-paying manufacturing jobs as American manufacturing expands will generate more tax revenue and lower budget deficits.  Most people are unaware that it takes four to five persons paying taxes to pay for the unemployment benefits for one out of work person. Therefore, more people working and paying taxes lowers the Federal government’s expenses for unemployment compensation.  In turn, more people working stimulates the economy through their increased spending and consumption.

In fact, economic growth and the tariffs have helped make up for the decline in corporate tax revenue as a result of the reduction of corporate tax rates from a high of 34 percent down to 21 percent. A Breitbart article by John Carney on January 9,2019 states, “Revenue from taxes on corporate profits declined by $9 billion or 15 percent due to the deep cuts in corporate tax rates…The decline in corporate tax revenue, however, was nearly entirely offset by a rise in tariff revenue. These jumped by $8 billion, largely because of new tariffs on steel, aluminum, and Chinese imports imposed by the Trump Administration last year.”

Carney wrote, “Fiscal year i2019 will be the first to fully incorporate the tax cuts passed by Congress and signed by President Donald Trump in 2017. The first quarter’s numbers show that tax receipts have not declined but are in fact rising, albeit at a slower pace than spending. Which means that thanks to the economic acceleration of 2018, tax cuts are close to achieving the Trump administration’s projection that they would pay for themselves.”

We know that President Trump has proposed a 25 percent tariff on $200 billion of imports from China and another 25 percent tariff on all cars and car parts.  Even if the proposed tariffs get up the projected $140 billion, it would still be a long way from making up for the projected budget deficits to pay down the Federal budget deficit, much less start to pay down the national debt.

However, saving the American steel and aluminum industries, fostering the expansion of our domestic manufacturing industry, and preventing the loss of more manufacturing being transferred offshore to China is still reason enough to impose the tariffs on steel and aluminum and justify the additional tariffs on $200 billion of Chinese goods.  

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