The Obama Economic Plan - How Will It Affect Manufacturing?

December 11th, 2008 at 12:34pm Bob Trojan

From FMA’s “Fabrinomics Dec 10th issue…

There are many details to be developed before this plan is ready for implementation, and the whole process will not get under way in earnest until the Obama term actually starts in January, but there are clues that can be deciphered at this point.

There are two main thrusts of the program. The first relates to creating jobs as a means of stimulating the economy. The second relates to positioning the plan as an investment, as opposed to some form of economy-wide bailout or welfare plan. Phase one will place the emphasis on something that will have an impact in the first couple of quarters. The talk is of pushing projects that can begin immediately, as long as there is funding. This places emphasis on construction projects tied to infrastructure needs. This could include everything from roads and bridges to retrofitting federal facilities to improve fuel efficiency.

The longer-term play is more diverse and it is not at all clear that it will be funded - it all depends on how fast the economy reacts to the first attempts to stimulate. The second phase involves some longer-term construction projects like the expansion of the interstate highway system, building new high-speed railroads, constructing new “green” energy production facilities, and so on. Most of this is pretty extreme and unlikely to win approval from a Congress already set to blow the federal deficit into orbit.

There are implications for manufacturing in all the efforts from Congress these days. The decision to keep the auto industry afloat for another few months is good news for those who are producing parts for the Big Three, as well as for the companies themselves. The emphasis on public works will mean a boon for those who build construction equipment and for the producers of the equipment used in highways and bridge work. There are some areas that will get more attention in this administration than in past. Alternate energy is at the top of the list - good news for a sector already rapidly expanding.

Much of what has gone before in terms of economic stimulus has been rooted in monetary policy and the need to unlock credit markets. The notion has been that the credit crisis had to be broken before anything substantial would change. All the emphasis was on bailing out banks and other financial institutions in order to get them back in the lending game. Some of that activity has been noted, but the rapidity of the response has been less than overwhelming. Now it is the turn of the fiscal plans - based on getting money directly into the economy and promoting job growth. This is the idea behind the auto bailout and the stimulus.

Entry Filed under: Economy