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Is Obama plan to reinvigorate manufacturing just political?

Some economists suggest that boosting the service sector might do more for the economy for now.

The Associated Press

WASHINGTON - President Obama is making a strong election-year push for an economic revival "built on American manufacturing." But he faces an uphill slog, with little consensus even within his own party on how to do it.

For decades, the United States has gradually shifted from creating goods to providing services. Fifty years ago, a third of U.S. jobs were in manufacturing. Now they account for just 9 percent, according to the Bureau of Labor Statistics. A manufacturing renaissance is being preached from the White House, on the GOP campaign trail and in Super Bowl commercials.

Economists suggest plans to help boost manufacturing jobs may make more political sense than economic sense.

Obama's prescription for a manufacturing comeback will be fleshed out in the new budget he submits Monday. He is proposing tax incentives to companies that move their overseas operations back to the United States, along with tax penalties for those that don't, more training and additional education.

But few of his ideas are likely to be enacted in this highly-charged election year.

Since the recession officially ended nearly 2 1/2 years ago, manufacturing production has increased 15 percent, helped by the replacement of aging equipment and software and strong demand from foreign markets. But Federal Reserve Chairman Ben Bernanke told Congress this week that the rebound might not last: "More recently, the pace of growth in business investment has slowed, likely reflecting concerns about both the domestic outlook and developments in Europe."

There are political overtones to Obama's State of the Union appeal for "an economy that's built to last, an economy built on American manufacturing." Polls show support for the president has slipped in Rust Belt battleground states he won in 2008.

Despite recent increases in U.S. exports, new trade deficit figures underscored the nation's continuing manufacturing woes.

The U.S. trade gap surged 11.6 percent to $558 billion in 2011, its highest level since 2008, the Commerce Department said Friday. Much of the deficit was driven by higher imports of foreign goods than exports of American products. As a result, some economists say an emphasis on manufacturing may be misplaced.

"The vast majority of jobs in the future are going to be created in the service sector, not the manufacturing sector," said Nigel Gault, chief U.S. economist for the consulting firm IHS Global Insight. He said he thought it was "a bit misleading" to focus so much on manufacturing.