"Comeback: Why the Future of Industry is In America" wrongly breeds complacency. If claims of an industry rebound are continually fostered, Washington can continue to ignore manufacturing and not put in place necessary policies.

ITIF president Rob Atkinson will moderate a Microsoft Conversation on U.S. manufacturing on October 23, 2012. In an election cycle marked by many divisive issues, both parties have identified the creation of jobs in the manufacturing sector as key to America’s economic success. Policy makers and industry leaders are looking with optimism to the potential for a “manufacturing renaissance” to strengthen American growth and competitiveness.

October 5, 2012 is National Manufacturing Day. The day is being marked with events around the country highlighting the importance of manufacturing to the U.S. economy and celebrating innovations in fields ranging from aerospace and automobiles to nanotechnology and medical devices.

From 1960 to 1982, manufacturing remained America’s largest employer, and as late as 2000 the third-largest employer. It wasn’t until the 2000s that U.S. manufacturing employment really went into a nose dive, with one out of every three jobs being eliminated. Yet, virtually all economists and pundits attribute this massive decline to superior productivity performance, arguing that as manufacturing became more productive, fewer workers were needed to produce more. In this narrative, all is well.It is disturbing to say the least that on perhaps the single most important question related to the health of the U.S. economy – how healthy is U.S. manufacturing? – the consensus view is so utterly wrong. And because it is so wrong it is lulling the public and policymakers into a sense of complacency and leading policymakers down the wrong road.

It will be difficult for America to enjoy robust economic growth if its globally traded sector industries (e.g., manufacturing, software and Internet, motion pictures and music, etc.) are not competitive. Unfortunately, America’s traded industries have lost competitive advantage. In the 2000s, the United States lost a greater share of manufacturing jobs than in the Great Depression and more than 60 percent of the losses stemmed from declining global competitiveness. In fact, from 1990 to today, the United States has achieved virtually no net growth in traded sector jobs. Meanwhile, our rank on most global innovation indicators has fallen, in some cases significantly.

While both parties talk about the importance of traded sectors, they diverge sharply on how to strengthen it. As a general rule, Republicans focus more on reducing taxes and regulations, while Democrats favor public investments in science, technology, education, and training. The next administration needs to make traded sector competitiveness a top priority and not only would reduce taxes and streamline regulatory burdens but also push for significant increases in public investments in technology and skills.