Brookings Expert Lambasts Federal Role in Economic Development

Brookings Institution policy expert Bruce Katz finds the federal government culpable for the declining competitiveness of U.S. manufacturing, especially in states like Michigan. Click here to read the article. Here are the highpoints of Katz's analysis:

The federal government helped to create today's globally competitive economy by relaxing trade restrictions through agreements such as NAFTA, while doing little to help manufacturers retain and upgrade their U.S. plants, help workers adjust to the demands of the new economy or update the ways we provide for health and retirement security.

Simply put, the federal government failed to help retain high-wage, high-productivity manufacturing.

And the global trade agreements have failed to include meaningful, enforceable labor or environmental standards.

The federal government also could have put more pressure on countries such as China to stop keeping their currencies at artificially low values.

Even if federal policymakers had thought it a good idea to give away America's competitive advantage in high-end manufacturing, they could at least have helped laid-off workers adjust to the new economy. But here, too, they failed.

Federal spending on employment and training for dislocated workers was $1.5 billion in fiscal 2005, less than 4% of the amount spent on federal highway aid. At the height of the last economic boom, in fiscal 2000, when the unemployment rate was lower than today, the federal government spent nearly $1.6 billion on dislocated worker assistance.

Federal income-support and retraining for workers who have been laid off because of trade are inadequate. The Trade Adjustment Assistance program provides retraining assistance and a year and a half of income support to some trade-displaced workers.

But it is difficult to access, provides no health insurance assistance and is available only to workers laid off because of imports, not to those laid off because production was relocated abroad.

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