The Biden administration has proposed reviving American manufacturing by focusing the country’s industrial efforts on so-called green industries and products. A plan to boost the country’s industrial output and bolster America’s supply chains, for instance, includes massive subsidies for products that move the country away from fossil fuels—including substantial investments in powerful new kinds of batteries. Biden and the Democrats in Congress have also committed federal dollars to creating green infrastructure across the country and mandating, through executive order, that half of all cars sold in the U.S. by 2030 be electric.
Serious doubts persist about whether such ambitious goals are achievable, let alone desirable. But the subsidies, combined with the success and cache of some green products, like Elon Musk’s popular Tesla cars, have sparked big new investments in plants and workers by businesses. The irony is that much of the spending so far has boosted Republican-leaning states, which are attracting industrial plants and new manufacturing jobs at a far faster rate than most blue states. Manufacturers are heading to red-leaning states with right-to-work laws that allow workers to opt out of unionization—a key incentive for many manufacturers. Call it the red-state green boom.
The Biden administration has proposed tens of billions of dollars of federal spending to spur a green industrial awakening. The administration’s $1 trillion infrastructure bill, passed last year, includes $5 billion to states to create charging stations for electric cars. Biden has also proposed increasing the tax credit for buying electric cars from $7,500 to $12,500. The administration’s June 2021 report on creating resilient supply chains and boosting manufacturing in the U.S. proposed $17 billion in loans for mining operations that would harvest the rare minerals necessary to make technologically sophisticated batteries. It also recommended $5 billion toward electrifying the federal fleet of cars and trucks, including that of the U.S. Postal Service.
Carmakers are among those taking notice. In March, VinFast, a Vietnamese electric car maker, announced it would spend $2 billion building a 7,500-worker electric-car assembly plant and battery factory at Triangle Innovation Point in Chatham County, North Carolina. A month earlier, Nissan committed to invest $500 million to retool a Canton, Mississippi plant that currently makes gas-powered cars so that it can begin producing electric vehicles. In April, Japan’s Envision AESC said it would spend $2 billion to build a plant in Kentucky that would employ 2,000 workers to make batteries for Mercedes Benz electric vehicles. These plants will join a mammoth effort by General Motors, announced in January, to invest $7 billion to retool plants in Michigan to assemble electric cars and produce batteries for them. The four plants that are the focus of GM’s efforts will employ some 4,000 workers.
These announcements come on top of more than a dozen electric-car plants that automobile companies are constructing or have announced earlier intentions to build or expand. Volkswagen wants to boost production of electric cars at its Chattanooga, Tennessee plant by investing $800 million to hire 1,000 workers to speed up the assembly line. Toyota is spending $1.3 billion on a plant near Greensboro, North Carolina, that will employ 1,750 workers making electrics. Ford said late last year that it will spend more than $11 billion on plants in Tennessee and central Kentucky that will employ 11,000 workers making electric pickup trucks, cars, and the batteries needed to power them.
These types of investments have helped turned around the manufacturing of cars, batteries, and other forms of transportation in the U.S. The number of workers employed making automobiles, for instance, climbed last year to a nearly 20-year high of 141,000, according to the Bureau of Labor Statistics. Employment at factories producing batteries, meantime, hit a 40-year high of 41,000. The gains correspond with a more than two-decade shift of auto jobs from the industrial Midwest to southern states with lower taxes and fewer regulatory hurdles, including right-to-work laws. Of the approximately 120 car models manufactured in the U.S., about half are now built at plants in southern or southwestern states—including many newer plants in places like Tennessee, Kentucky, and Alabama.
To the extent that some midwestern states have been able to claw back auto jobs, it is because they have responded to the competition by making themselves more attractive to businesses. In 2012, for instance, both Michigan and Indiana passed right-to-work legislation. Since then, Indiana has added back 50,000 manufacturing jobs, and Michigan 60,000, after years of industrial-employment declines. Some 15,000 of Michigan’s new industrial jobs have been in the automotive industry, bringing employment in the sector to a 15-year high in the state.
The Biden administration is well aware of the success of right-to-work states in capturing these investments. That’s why it has stipulated that its proposed enhanced tax credit for electric vehicles would apply only to cars made in unionized facilities. But West Virginia senator Joe Manchin has effectively blocked that legislation. (West Virginia adopted right-to-work in 2016.) Biden will likely have to drop the union stipulation to get the enhanced credit passed, and he probably needs to do so before the 2022 mid-term elections in November. A potential Republican-dominated Congress next year won’t be sympathetic to bigger green subsidies, but their states have been the biggest beneficiaries of these handouts so far.
Photo by Bill Pugliano/Getty Images