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Are President Obama's 'Manufacturing Institutes' brilliant or a boondoggle?


Two weeks before he must stand in front of the nation and deliver his annual progress report, President Obama is jetting off to North Carolina today to launch the first of three “manufacturing institutes” designed to stoke innovation and ultimately create jobs.

“My first reaction when I see the President doing this is, don’t look now but this train has already left the station,” says Hugh Johnson, the chairman and CIO of Hugh Johnson Advisors. As he explains in the attached video, the new program, albeit a fraction of what the President originally sought, comes on the heels of two-plus years of expansion in the manufacturing sector as measured by factory jobs and industrial production.

“We’re kind of jumping on board a trend that is already solidly in place,” Johnson says.

As it stands, the North Carolina initiative will bring together the brain power of 18 private businesses and 6 universities in hopes of improving efficiencies in the semiconductors used in auto components and consumer electronics. Had the President not been constrained by Congress and fully kept his pledge from last year’s State of the Union, then there would be 15 manufacturing institutes in place today, enroute to a total of 45 in the next decade.

Without the financial backing of Congress, this three site manufacturing program will be funded by a $70 million grant from the Department of Energy, the same agency that funded Solyndra and several other failed businesses in the alternative energy industry that reeked of cronyism.

“I’m not sure these (manufacturing institutes) are going to be all that effective,” Johnson says, noting the market-lead surges that are already occurring in the energy and auto industries.  

In addition, Johnson points to the budding trend of so-called ‘’on-shoring,” in which companies can financially justify closing plants in emerging markets and moving them back to the U.S.

“Part of the manufacturing rebound is also due to the fact that the wage differentials used to be significant.  It used to really make sense to relocate a manufacturing facility to other parts of the world” Johnson says. 

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