A concise description of why the US cannot afford to loose its manufacturing base.

1. Can the US afford to continue its decline in manufacturing? Glenn S. Daehn Director, Ohio Manufacturing Institute December 2009

2. governing question: Is it a problem if US manufacturing disappears? Disclaimers: Not a formal economic analysis. Based on easily-available data and interactions with manufacturers.

3. national debt Bottom 2

4. primary losses in US wealth Cost of foreign conflicts (Iraq, Afghanistan) Oilimports Net imports ofmanufactured goods Let’s compare magnitudes…

5. military intervention Iraqi Conflicts Afghan Conflicts Source: “Cost of Afghanistan, Iraq and other Global War on Terror Operations Since 9/11”, Congressional Research Services (RL33110) http://www.fas.org/sgp/crs/natsec/RL33110.pdf

6. oil imports Net Imports 105 Barrels/day Crude Cost / Barrel Net cost oil imports Net imports of oil from: US Govt Energy Information Administration: http://tonto.eia.doe.gov/country/country_energy_data.cfm?fips=US (sourced Dec 5, 2009) Price/Barrel from: Illinois Gas and Oil Association: http://www.ioga.com/Special/crudeoil_Hist.htm (sourced Dec 5, 2009)

7. hope for the service economy Data from Bureau of Economic Analysis (US Department of Commerce) http://www.bea.gov/international/index.htm , Sourced Dec 5, 2009

8. goods & services balance of payments Net Balance on Services Total Net Balance Net Balance on Goods Data from Bureau of Economic Analysis (US Department of Commerce) http://www.bea.gov/international/index.htm , Sourced Dec 5, 2009

9. summary in round numbers Cost of Conflicts $175 B/Year Net Oil $300 B/Year (declining) Net Services $140 B/Year Net Imports of goods $850 B/Year Other Initiatives: ARRA – 2009 Stimulus Package -- $787 B Health Care Bill -- “$1.5 Trillion over 10 Years”* *Common Media Quote – exact estimate not possible.

10. graphically, where’s our money going?

11. importance "The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil... Right now, the rest of the world owns $3 trillion more of us than we own of them.” Warren Buffet, AP, 1/20/2006

12. conclusions Trade balance in manufactured goodsrepresents the largest hemorrhage of wealth andpossibly THE biggest challenge to American economic security. This may be the easiest of the primary sources to control.

13. optimism The US is still the largest manufacturing country in the world. We have the most transparent business environment and still a great manufacturing infrastructure. Companies, equipment and a skilled workforce remain. Modern manufacturing is not terribly labor intensive. High wage countries can compete! (note Germany, Japan) Modern operational methods and energy costs favor short supply chains. Midwestern American manufacturing is central to the largest markets in the world.

14. pessimism • Manufacturing companies are highly-interdependent (think ecosystem or coral reef). • Many types of manufacturing have fully left the US, greatly damaging the network. • The machine tool industry has been especially hard-hit and used machine tools are selling for pennies on the dollar and leaving the country.

15. OMI postulates Local manufacturing is centrally important in national security and prosperity. Local investment in a trained workforce and new processes, R&D and equipment is key in local manufacturing competitiveness. The marketplace is global. We must stay globally competitive locally.