President Donald Trump has promised that dying American industries and factory towns will come “roaring back” under his presidency. But if his budget proposal for 2019 is any sign, his administration won’t do much to make that happen.
In the budget plan released Monday, the Trump White House proposed slashing more than $300 million in spending on some of the few federal programs meant to boost manufacturing in distressed communities — the same industrial towns in decline that turned out heavily for Trump. The White House had proposed the same thing last year, though Congress kept most of the funding in place for 2018.
Trump’s administration wants to end key economic development programs run by the Department of Commerce. The budget calls for the Commerce Department to completely eliminate the Economic Development Administration (EDA), which, among other things, provides grants to help American manufacturers compete with global competitors. The administration also wants to do away with the Manufacturing Extension Partnership, which helps funds manufacturing innovation centers in every state and Puerto Rico.
These programs are “unnecessary,” and “duplicative,” according to the White House budget plan.
Yet the companies and workers that rely on that money disagree.
“It really points out the hypocrisy of the president’s messaging,” said Scott Paul, president of the Alliance for American Manufacturing, a nonpartisan business and labor group in Washington, DC. “These programs help the very communities that have suffered the manufacturing job losses that Trump said he supported.”
Rust Belt states could lose millions in economic development grants
The budget plan aims to save $251 million by eliminating the Economic Development Administration.
The EDA bills itself as the only federal agency focused entirely on promoting economic development in the United States. It was launched under the Commerce Department in 1965. The agency focuses mostly on providing matching grants for local programs to boost business development in distressed areas. It has programs to promote business innovation in coal communities and in declining manufacturing areas.
In other words, these are the kinds of places that turned out heavily for Trump in the 2016 election.
In Flint, Michigan, for example, the agency invested $1.9 million to build an automotive research center in partnership with a local university, according to its 2016 annual report. The agency said four Fortune 500 companies wanted to partner with the center in 2016 to test self-driving cars and other automotive technology.
That year, the agency also invested $2 million in Bluefield, West Virginia, to renovate an old train station depot and launch a business incubator to revive the shrinking industrial manufacturing economy. The incubator helped launch a small business focused on producing industrial casings.
In fiscal year 2016, the agency invested $15 million in coal communities and $13 million to help struggling US manufacturers find new ways to compete in a globalized era. Most of the grants for manufacturers hurt by NAFTA went to states that supported Trump in the election — including Michigan, Pennsylvania, and Texas.
Now the White House wants to dissolve the entire EDA because it says the agency’s grants have “limited measurable impacts.” That is true to an extent.
The Government Accountability Office (GAO) published a report in 2012 saying that the agency needed to do more to fully measure the impact of its Trade Adjustment Assistance program for businesses hurt by international trade deals. However, the GAO’s economic analysis found that a manufacturer's participation in the program is “statistically associated with an increase in firm sales.”
“Notably, 73 percent reported that the program helped them with profitability; 71 percent that it helped them retain employees; and 57 percent that it helped them hire new employees,” the report concluded.
The GAO’s report suggested improving data collection, not eliminating the agency altogether.
In the past, the effectiveness of some of the EDA programs has been questioned. In 1999, the GAO concluded that the agency’s spending on infrastructure development was not linked to an increase in employment in the early 1990s.
Recent research is scarce, but a 2009 report from the W.E. Upjohn Institute for Employment Research suggests the agency’s spending has a positive economic impact on the areas that receive funding.
Budget proposes scrapping manufacturing program
The Trump budget also proposes scrapping another manufacturing-focused program. The Manufacturing Extension Partnership, which was launched in 1988 through the Department of Commerce, is the main source of federal funding for states that are trying to grow their manufacturing industry. The Trump budget plan says eliminating the program will save $125 million.
The program partners with state and local agencies to operate innovation centers in every state. The idea is to help small and medium-size manufacturers develop new products and customers, expand and diversify their markets, and adopt new technologies.
For example, a 2014 audit by the US Government Accountability Office described how the program helped a manufacturing firm in Pennsylvania respond to steep price increases in 2011:
The Delaware Valley Industrial Resource Center ... trained company staff on methods to achieve efficiencies and helped identify areas for improvement in the company’s production process, resulting in increased productivity and reduced inventory levels that allowed the company to save space and lower costs, as reported by the manufacturing firm.
A 2016 analysis by the W.E. Upjohn Institute concluded that the program generated a huge economic return for every federal dollar invested:
Comparing forecasts with and without MEP activities included, the study found that the $130 million invested in MEP during FY2016 generated $1.13 billion in federal personal income tax, which is an 8.7:1 return to the federal treasury.
These are “essential” programs
Scott Paul, of the Alliance for American Manufacturing, says these Commerce Department programs are far from unnecessary — “they are essential,” he says. And they represent only a fraction of what other developed nations spend to boost their own manufacturing economy.
“Now you want to eliminate the small number of federal programs for them?” he asked.
Paul said he’s hopeful that Congress would never agree to make the cuts proposed in the White House budget. After all, last year the White House proposed the same cuts, which never happened. Instead of eliminating the EDA, Congress decided to cut its funding by $12 million for fiscal year 2018. The MEP funding remained intact.
“If you look at what has happened in the past, there is reason to believe there will be pushback,” Paul said.