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September 30, 2014

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A strategy to rebuild manufacturing

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Late last month, President Barack Obama issued an executive order intended to spur job creation in manufacturing. “Accelerating Investment in Industrial Energy Efficiency” recognizes that energy costs can substantially limit a company’s ability to be productive and grow and that there has been “an under-investment in industrial energy efficiency.” This order seeks to aid manufacturers nationwide, but the politics and policy of the order provide an opportunity for the Mountain West region that state and local leaders must seize.

The executive order requires that federal agencies bring together state and local officials, private sector leaders, and others to help address the problem of energy efficiency and motivate private investment in manufacturing. The Obama administration wants to “provide technical assistance to states and manufacturers” and mount a public information campaign about the cost-saving benefits of making industry more energy-efficient. Part of the order also directs federal agencies to “use existing federal authorities, programs and policies to support investment in industrial energy efficiency.” In effect, the president wants more funding funneled to manufacturers and he has told his hand-picked appointees to begin delivering that funding.

Specifically, the executive order will mean that existing energy- and manufacturing-related federal grant programs will support Combined Heat and Power, an energy system that captures excess or emitted energy (such as secondary heat) and converts it into usable energy on site for factory climate control. With CHP, manufacturers will not need to purchase additional energy to heat or cool their facility, a savings that drives down production costs and provides opportunities to expand employment and productivity.

This White House priority may not, at first glance, have deep appeal to the Mountain West. The states in this region are not industrial mammoths like those in the Midwest or Mid-Atlantic, but this region’s manufacturers have suffered tremendously in the past decade. Between 2001 and 2010, the eight states in the Mountain West lost 160,718 manufacturing jobs — or 23.3 percent of the manufacturing workforce.

These industrial losses and the political environment in the region provide an opening for strategic and forward-thinking state leaders to capitalize. State and local governments must respond to this priority and craft relevant federal grant requests to expand investment in CHP. States will be more successful in securing funds by aligning grant proposals with explicit presidential priorities. The outcome will mean industrial innovation, manufacturing efficiency and private sector growth.

What’s more, states in this region are prime candidates to benefit from presidential politics and its influence on federal funding. Presidents frequently use federal funding to bolster state and local economies, but they must pay specific attention to swing states. My own research illustrates that swing states receive disproportionately more federal grant dollars than other states, particularly around election time. Nevada, New Mexico, Colorado and, increasingly, Arizona are highly competitive in presidential elections and are ideal White House targets for programs such as energy efficiency investment. These states need manufacturing help, and presidents need these states.

This alignment of policy and political forces can benefit not just states in the Mountain West region, but their leaders. However, they can only realize such benefits if leaders take action, chase opportunities and make the system work for them.

This issue is not an ideological one, either. States need help; manufacturers need relief; communities need support. Pursuing federal funds will not expand deficits because the money has already been appropriated by Congress. If the funds don’t go to Nevada, Colorado or Arizona, they will go elsewhere. Regardless of state and local leaders’ opposition to the president or to the size of government, these manufacturing investment programs are a reality — and so is voter discontent in this economy. Democrats and Republicans at the state and local levels can use these funds to help cities, sectors and citizens, and you can be sure those citizens be grateful at the ballot box.

John Hudak is a fellow in governance studies at the Brookings Institution.

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  1. Author is right, it's a win win for Nevada.

    CarmineD