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Regaining the competitive edge The president's plan to aid U.S. industry may not do much for struggling manufacturers, experts say

As Delphi Corp. languishes in bankruptcy, and General Motors and Ford prepare to cut thousands of jobs, President Bush this week announced a strategy to once again make American industry a competitor around the globe.

Will it work? The experts say: probably, years from now, for some companies. But for industrial giants being felled by rising health care costs and other pressing issues, it may all happen too late.

"Long term, I think he's on the right track," said Brian Lipke, chairman of Gibraltar Industries, a growing steel products company that employs 350 in the Buffalo area and 4,500 worldwide. "Short term, we've got a lot of issues to face."

Above all, health care costs are rising at double-digit rates every year, Lipke noted. Yet Bush unveiled no massive new effort to rein in those costs, no major effort to directly aid the auto industry, no big plan to keep energy affordable for American manufacturers.

Instead, Bush focused on a handful of widely popular tax breaks and programs that tend to win support from both Democrats and Republicans. His 10-year, $136 billion proposal would give companies tax credits for research and development expenditures, expand the government's own research spending, and bolster math and science education nationwide.

"Perhaps the most important thing of all is to make sure that we lead the world in innovation and technological development, and make sure we have a work force that has the skill sets necessary to do so," Bush said Friday in a panel discussion on the issue in New Mexico. "And that's really the heart of the American Competitive Initiative."

>More engineers needed

To Lipke and many in the business community, it makes perfect sense. "Right now, we're graduating fewer engineers than China and India," Lipke noted. "And if we're not going to be graduating the best and brightest engineers in the world, we're going to lose the technology advantages that we currently have."

Bush's plans would have a particularly strong impact on the technology industries, said David Patterson, president of the Alliance for Computing Machinery.

"Innovation deserves a prime place in the national agenda because of its ability to create new industries and new jobs," he said. "But the only way to assure continuing innovation is to focus on improving science, math and technology education, and to increase funding for fundamental research at the federal level."

Such thinking is becoming conventional wisdom in Washington. In fact, Bush's proposal in some ways mirrors one put forth last September by Democrats in the House meaning the competitiveness effort might well find widespread support in Congress.

"House Democrats are ready to work with the president to move our country forward and keep America competitive," House Minority Leader Nancy Pelosi, D-Calif., said after Bush unveiled his proposals. "Nothing could be more important."

Then again, plenty of people in Washington and elsewhere also think Bush's plan doesn't go nearly far enough. In particular, they say the plan seems far more geared toward emerging industries than the ones that are now struggling.

American automakers pay more than 10 times as much for employee health care as their counterparts in Canada, noted Kevin Donovan, Buffalo area director of the United Auto Workers. "That's where the cost disparity is," Donovan said. "I think that's the number one issue."

And yet Bush's State of the Union address included only modest efforts on health care, such as expanding health savings accounts and again trying to persuade Congress to put limits on malpractice lawsuits.

Such initiatives could help American automakers, but unless health care costs stop spiraling, the industry will remain deeply troubled, said David E. Cole, chairman of the Center for Automotive Research.

Those modest Bush health initiatives have something in common with another Bush proposal: a 22 percent increase in spending on alternative-energy research, which also eventually could aid the auto industry.

"What he talked about was reasonable and practical," Cole said. "This had some achievable goals, which is good."

But Rep. Brian M. Higgins, D-Buffalo, said Bush should have set out a broader plan for helping revive the American auto industry. "There's nothing new here," Higgins said. "And regarding the auto industry, they never even acknowledged a problem."

Similarly, Bush's energy initiatives left the National Association of Manufacturers underwhelmed. John Engler, the group's president, noted that alternative-energy research won't pay off for many years while American manufacturers need relief from the world's highest energy prices now.

"The president is committed to economic growth, and his reliance upon the private sector to lead the way is commendable," Engler said. "But ours is a manufacturing economy, and there is much we need to do to strengthen manufacturing."

Politicians in Washington have been talking about doing such things for years. In fact, "competitiveness" was a buzzword of the 1980s, when then-Rep. John J. LaFalce, D-Town of Tonawanda, held a series of hearings calling for more federal involvement in the industrial economy.

And when Bill Clinton became president in 1993, his economic plan included increased spending on research and job training, the focus of Bush's new initiative.

>'Nothing new' offered

Not surprisingly, Peter Morici, a business professor at the University of Maryland, saw nothing really new in Bush's plan. "It's all repackaged and recycled," Morici said. "It makes you wonder if he has any original thoughts at all on the subject."

For his part, though, Bush said his plan fit neatly into his view of the federal government's limited role in the economy. "First of all, the government can't do everything," Bush said in his New Mexico appearance. "The government is a partner. For those of you who think the government can solve all problems, this is not the way it works. Most problems are solved locally."

e-mail: jzremski@buffnews.com

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