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Build Back Better-Trade Offs & Managing Expectations

Bloomberg Businessweek March 15, 2021 pp28-30 |Economics|”An Industrial Policy With U.S. Characteristics” “Biden’s $4 trillion Build Back Better plan faces plenty of hurdles beyond Republicans” “The Bottom Line Biden’s ambitious plan to reinvigorate manufacturing may be powerless to alter a trend in which the U.S. never fully recoups blue-collar jobs lost in recessions.”

Read the article for all detail.

Summary of the article.

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The $4 trillion Build Back Better plan calls for a decade of building “infrastructure and strategic industries such as semiconductors, renewable energy, and electric vehicles.” In aggregate the initiatives should create modern jobs, help with climate change, modernize ageing infrastructure and improve America’s technological competitiveness. The plan is to have “$300 billion in new federal investment to research programs and $400 billion in federal government procurement of American made goods”…plus incentives to boost investment in “domestic plants and repatriate supply chains.” This push comes after America underperformed in response to the COVID-19 pandemic. Jonathan Gruber (MIT) notes that “U.S. achievement such as robotics and synthetic biology” have lost leading status “’at the end of the day if you are worried about competing with China, it is not tariffs that’s the answer, it’s out-inventing them.”

Of course, nothing good is easy and these efforts if funded appropriately will take time…”building new fabs is extraordinarily expensive and takes years.” Building American supply chains will take more than federal spending. The National Association for Manufacturing is calling for “a surge in infrastructure investment…tax breaks to encourage domestic production, more spending on R&D…and “more federal dollars to fund worker training programs.” Also noted as problems to America’s competitiveness are “rising healthcare costs”, Biden’s desire to “reverse Trump’s reduction in the corporate tax rate” and the strong dollar. The dollar remains the global reserve currency of choice making exports less competitive but efforts to change that are unlikely under “a traditionalist like Janet Yellen.” If anything, Build Back Better spending could further “bolster the dollar, which could act as a powerful break on any industrial policy push.” Shifting away from internal combustion-powered vehicles to electric-powered vehicles will greatly change and some say simplify the current automotive supply chain. According to Todd Tucker (Roosevelt Institute) “A lot of what industrial policy is about is shifting the composition of jobs and not necessarily adding jobs.”

In some ways technological innovation and a drive for direct-to-consumer customization may also be changing the landscape of manufacturing. At a company known as Model No. “lounge chairs, tables and other home furnishings” are made by “6-foot tall 3D printers” that operate on demand “meaning it fires up its 3D printers only when an order comes in through its website.” CEO Phillip Raub (Model No.) “’says he’s certain [they] can compete with lower-cost factories in Asia…by [establishing] a U.S. network of 25 to 30 ‘microfactories’ each employing 25 to 50 people..,”

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