President Trump has pledged to renew Americans’ forgotten manufacturing communities and small towns. But his budget for fiscal year 2019 would mark a major retreat of federal investments in those communities, and in the workers who count on federal assistance to navigate a changing economy.
To rebuild from major jobs losses, these communities need a comprehensive approach that will spur innovation, retain and reshore sustainable industries, mobilize responsible capital, and, most importantly, reinvest in workers. Critically, workers need both education and training opportunities and a strong safety net to navigate through periods of job loss. But, if enacted, the Trump budget would rob hard-hit states and communities of the resources they need to develop these effective response plans for workers and industry.
Investments in Advanced Manufacturing and Community Development
The federal government is a bedrock investor in efforts to bolster innovation among existing manufacturing companies, spur forward new advanced manufacturing sectors, and chart economic development in hard-hit areas. While some of these supports would continue and even expand, they are few in number: in general, the Trump budget belies the president’s stated commitment to manufacturing communities by cutting deeply into critical programs.
Crucially, the budget eliminates the $133-million Manufacturing Extension Partnership (MEP) that helps small- and medium-sized manufacturers maintain their competitive edge. The MEP program has helped 400,000 manufacturers and is credited with spurring $3.6 billion in sales among manufacturers that are assisted. If anything, MEP needs to be expanded, as the United States has consistently been behind other nations, like Germany and Japan, in building up high-tech small manufacturers.
The budget also eliminates the Economic Development Administration (EDA), the leading federal agency supporting strategic regrowth of economically distressed communities. The EDA is especially focused on promoting entrepreneurship and economic expansion in rural communities, many in the Southeast and Midwest. This year, the federal budget for grants from EDA to communities are estimated to be $268 million.
These programs have long been targeted by conservative think tanks like the Heritage Foundation for “meddling in the free market.” Influences like theirs have certainly had influence on the Trump administration’s budget proposals for FY 2018 and FY 2019. Luckily, members of Congress, many of them representing the industrial heartland and rural communities, have pushed to maintain funding for these programs on a largely bipartisan basis. Still, as the official stated position of the president, the budgets sows skepticism among members of Congress—for example, a proposal to fully restore funding to the MEP program was soundly defeated during last year’s budget process.
Other investments in advanced manufacturing fare better in the FY 2019 budget than they did in FY 2018. The Department of Commerce budget maintains the $5-million annually to coordinate Manufacturing USA, and $10 million in direct funding for the National Institute for Innovation in Manufacturing Biopharmaceuticals (NIMBL) in Delaware. Department of Defense spending on basic and applied scientific research goes up in the budget. However, Department of Energy funding for advanced manufacturing is once again on the chopping block. The administration proposes cutting advanced manufacturing supported by the Office of Energy Efficiency and Renewable Energy by $100 milion—from $261 to $167 million—as well as eliminating the Advanced Research Projects Agency-Energy (ARPA-E) for research in renewable energy technologies. According to budget documents, both programs only had partial cutbacks from FY 2017 to FY 2018 once Congress acted.
Reemployment Programs Both Reimagined and Scaled Back
Retraining and reemployment programs are of major importance to states in the industrial heartland. Manufacturing communities have depended on these programs to weather successive waves of job loss, caused by trade policies, technological change, and global competition. This retraining apparatus is critical in helping these communities adjust to rapidly changing skills demands within manufacturing and in other growing sectors of their economies. In a similar blow to the one dealt to advanced manufacturing investment, the Trump FY 2019 budget proposal sustains or advances a minority of these retraining programs, but overall, it seriously undermines the federal commitment to reemployment.
Overall, the Trump budget seriously undermines the federal commitment to reemployment.
The administration proposed a $1.8-billion cut to the Trade Adjustment Program (TAA) over the next ten years (a new proposal in the FY 2019 budget). They are setting the stage for a reauthorization proposal (TAA is up for reauthorization in 2021) that would seriously reduce spending on this promise made to trade-impacted workers. Although the administration has stated that it intends to refocus TAA on apprenticeship, work-based learning, and reemployment services, these are already allowable under TAA and could be expanded without reducing funding for the program. While the details are not spelled out, the implication is that there will be a focus on lower-cost services at the expense of the extended occupational training and income support provided by TAA.
Moreover, the FY19 budget proposes cutting retraining grants for dislocated workers nearly in half from $1.24 billion in FY2018 to $667 million in FY2019—these are federal grants that go to local communities that decide in concert with industry and community leaders how to direct retraining to growth sectors. These programs still have not recovered from cuts stemming from the sequester after 2010, and additional cuts would have a devastating impact. It is worth noting, however, that this cut in funds would dwarf a proposed $100-million increase in grants for apprenticeship, which of itself is a welcome increase. Luckily, as in the case of the MEP program, the recently agreed-upon budget will likely lead to modest increases for these bedrock Workforce Innovation and Opportunity Act (WIOA) programs as negotiations move forward.
Finally, the budget proposes a 40-percent cut to the Wagner-Peyser Employment Service. Wagner-Peyser remains the unsung hero of our reemployment infrastructure. The agency administers federally funded local offices that provide cost-effective job matching services to unemployment insurance (UI) claimants and the public. Despite significant evidence that these programs save money on UI benefits, they have long been targeted for significant reductions. This core infrastructure was cut from $1 billion in 2001 to just over $650 million in FY 2017.
One significant positive move in the administration’s budget proposal is its call to make the Reemployment Services and Eligibility Assessment (RESEA) program a permanent and mandatory part of the budget. RESEA programs provide job search assistance and monitor compliance with the unemployment insurance program’s work-search requirements. The latter provision has been of major concern to advocates for the unemployed. The percentage of UI claimants denied benefits due to non-compliance with work-search requirements has more than doubled in recent years, contributing to record-low numbers of workers collecting benefits. Any increase in RESEA funds would have to abide by the new due process protections for workers included in the Bipartisan Budget Act signed by Congress last week. Close monitoring of RESEA at the federal and state level will be increasingly important as the program grows in prominence.
Typically, the presidential budget of a first-term president sets the tone for budget negotiations on the floors of the House and Senate; but this budget is anticipated to have less impact than in most years. Congressional negotiators set two-year spending limits in last week’s budget deal, and this is likely to have much more impact on the actual spending on programs. That being said, the president’s budget is a crucial statement of the administration’s policy stance towards manufacturing communities, and it bears very little good news for communities in the Midwest.