Celeste Drake, a former trade union rep, has a big job: pushing the sprawling federal government behind President Joe Biden's promises to have more goods made in America.
Appointed in April, Drake oversees the first ever Made in America office, a newly created US government group tasked with enforcing government standards about spending more taxpayer money at home. The goal: use the government's $600 billion annual purchasing budget — almost half of which is spent on manufactured products — to encourage more production in the US of A.
In a, Biden proposed tightening existing regulations by raising the amount of a product that has to be made domestically to be considered "Made in America" from 55% to 75%. Drake's office -- part of the Office of Budget and Management -- underscores the urgency of his goals, which also include filling gaps in the US' supply chains for critical products and components and creating jobs.
"We're going to make sure when we're spending money on goods that are made in America, more of it is made in America," Drake, a former union official and trade expert, said in an interview last week. "It's not just a propaganda point. [Biden] believes that American workers and American firms, given a level playing field and the right opportunities, can accomplish anything. And he is putting his money where his mouth is."
The question is how — and how fast — that can be done. Using the firepower of federal spending or procurement to stimulate parts of the economy isn't new. President Herbert Hoover pioneered the idea with the 1933 Buy American Act. Since then, presidents including Ronald Reagan, Barack Obama and Donald Trump have revisited the tactic, to varying degrees of success.
Biden's effort, however, comes after decades of offshoring pushed millions of American jobs overseas, now forcing the US to import some of its most critical goods, like computer chips and medical supplies. The COVID-19 pandemic, which closed manufacturing plants around the world, exposed the fragility of the complex international supply chain that's come to dominate industries ranging from high tech to household appliances.
Drake acknowledges there are challenges. Apple, for instance, started making products including its top-selling iPhone in Asia because of the relatively lower cost of labor compared with the US. Environmental compliance rules also make it more expensive to build products in America.
"But the United States also has a lot of advantages to producing here, in terms of our transportation system, in terms of our justice system," Drake says. And besides, the goal isn't to return all manufacturing to the US but focus on making sure there's redundancy to key supply chains, like computer chips, and giving US companies tax and other incentives to make some of those products here.
"The idea is not to go back to the 1950s. The idea is to capture the industries of the future," Drake says. "This is not about bringing every far-flung supply chain to the United States. But it really does take a lot of work to identify the critical components, and to figure out how we can incentivize making those critical components here."
The Made in America initiative is part of a larger Biden agenda that includes spending on physical infrastructure, like roads and broadband, and human infrastructure, like health care and education. Taken as a whole, the policies represent key components of the American Jobs Plan, which Biden says will create millions of good jobs, rebuild our country's infrastructure and position the US to out-compete China.
As the first director of the Made in America office, Drake's job is to oversee all government agencies to make sure they're applying the administration's rules consistently, she says. Her job includes making sure agencies comply with regulations, especially when seeking waivers for goods that don't meet that 75% Made in the USA goal. It's also about making sure the waiver process is transparent to the American people. Doing so will give the public confidence that goods that claim to be made in the US really are, she adds.
The task isn't an easy one. Drake noted this is the first time an initiative of this scale, which promises to oversee spending across the entire government, has been proposed. There are still issues her office won't be able to address, such as the high cost of labor or a lack of unskilled workers, which are reasons many executives use for basing manufacturing overseas.
Drake spoke with CNET Editor in Chief Connie Guglielmo and Senior Reporter Maggie Reardon over Zoom to discuss her new role, her priorities and why Biden's policy approach is different from past promises from prior presidents. Below is a lightly edited transcript of the conversation.
Q: What is your job day to day? We know that obviously part of it is to follow through on President Biden's initiatives and his agenda.
To say it most plainly, we want to make sure that taxpayer dollars, when they're spent for purchases for the government or they're used for grants for other work, such as building up our National Broadband Network, that as much of those taxpayer dollars as possible go toward US firms. So that we're creating more jobs for US workers and really boosting up US communities.
There's a lot of different ways to do that, such as the Buy American proposed rule that we issued a couple of weeks ago. It's also looking at where those Buy American rules are waived, and seeing if we can reduce the need for a waiver. And it's also looking at a lot of other spaces, identifying gaps in our supply chains, and trying to do what we can to build up manufacturing where we've got those gaps.
Let's talk about that. For most people who will read about the Made in America directive that President Biden signed, it talks about federal procurement, which I think is what you're alluding to. The federal government buys a lot of products, and you want those products to be substantially made or manufactured in the United States. He recently upped the percentage of those products that are required to be made in the US. So just give us a quick sense of how much money we're talking about and what those rules are, generally speaking.
When we talk about government procurement, that's just a fancy way of saying the stuff that the government purchases. The federal government annually purchases about $600 billion. About half of that is for goods. So when we're talking about manufacturing, making things in America, we're looking at about that amount of money.
Some of that we buy American, some of it is waived. And even when we buy American, the current rule says only 55% of the content has to be made in the USA. So the proposed rule that the president announced on July 28 is we'll change that 55% to 60% initially. Then over time, it will go up to 75%.
So we're going to make sure when we're spending money on goods that are made in America, more of it is made in America. And that's going to help support our communities, create jobs, all of those things. We're also going to take initiatives in that role to measure the content better. In other words, make sure when the contractor says it's 75%, we have a better sense that it definitely is 75%.
And use a little bit of those tools, as I mentioned before, to try to fill those gaps and make sure that really important things that we want to make sure remain in the United States are made in the United States. That's why we're giving incentives and price incentives, so that entrepreneurs will have an incentive to invest in America rather than producing overseas, so they can win those contracts.
One more follow-up to that. The government put out a number in 2018 that already 96% of what the federal government buys is made in America, according to the existing definitions at that time. Yes, you're now proposing to change it, but 96% seems like a lot already. Is this really going to move a needle?
When you're talking about these very large numbers, I mentioned $600 billion in procurement — so even if you have a small percentage of that, that's real significant spending.
The other piece is what that means is 96% of the time, waivers weren't issued. But if you were buying goods that were 55% made in America and you're changing those to 75% made in America, you are going to make a real difference because that additional 20% — that's new opportunities for small businesses, new opportunities for medium-size businesses to get into that supply chain. That's all jobs and economic activity and communities across the country in every corner of America, including minority-owned businesses, other underrepresented businesses.
It is going to make a difference. And it's going to be combined with other elements of the president's American Jobs Plan to really support our economy and make sure that we come roaring back from the coronavirus pandemic.
This isn't a new concept, though. All of this is based on a law from 1933 that dates back to Herbert Hoover's era, the Buy American Act. Other presidents have pushed this kind of Made in America initiative — Reagan, Obama, Trump. What is different about it this time with President Biden?
Great question. President Biden views Made in America as a policy, not a promise. And he's backing up that policy commitment with real actions to improve Made in America across the government.
So he's created the first-ever Made in America office, with the first-ever Made in America director. My job is to oversee all of the agencies of the government and to make sure that they're applying Made in America rules consistently and with clarity. And then we're going to make sure that all of the waivers from Made in America rules are transparent. So the public, in other words, can check our work and have confidence that we are doing the most that we can to support US families and communities and firms with their taxpayer dollars.
I want to press on this a little bit more. Again, these policies, or promises, have been around for a long time. But in terms of real jobs — manufacturing jobs in the US — it's been declining since the late '90s. So how is this policy going to translate into new jobs? And how many jobs do you think it can create? Do you have a target that you're working toward?
This is the first time that we're ever trying an initiative as big as this in terms of a whole of government commitment to improving Made in America compliance and increasing the standards. And it's true that procurement policy alone would not bring the manufacturing sector back to the power that it had 50 years ago or even 20 years ago.
But this is a very clear commitment on behalf of the Biden administration to ensure that when we are spending taxpayer dollars, we are doing so in a way that boosts American manufacturing. But it is a piece of the larger Build Back Better agenda, where we are looking at a series of issues — gaps in critical supply chains — and figuring out what are the policy tools to fill those gaps that go far beyond just procurement. And looking at tax policies and other economic policy.
We are looking at why there's been a pattern of the United States being such a great innovator and inventing so many products that are often not actually made here and trying to figure out how we can fill that policy space.
So this is one piece of the president's ambitious agenda that is really going to end up making sure that we never again are caught in a crisis like the COVID-19 pandemic, and without access to really critical goods, because we've let supply chains not only go overseas, but become concentrated in one place where they're not resilient. And then we have real problems accessing everything from semiconductors to PPE. Those things are going to be fixed.
Let's talk about that supply chain, much of which is now centered in Asia. What are some of the issues that you see? I mean, obviously, labor costs are a big factor. You have products like the iPhone, for example, which is simply not made in the US and is made overseas in Asia. The CEOs of Apple — Steve Jobs initially and Tim Cook — have said that it's just too costly to bring some of that manufacturing back.
Certainly, the United States has costs that don't exist everywhere in terms of wages, environmental compliance and others.
But the United States also has a lot of advantages to producing here, in terms of our transportation system, in terms of our justice system. The idea is not to go back to the 1950s. The idea is to capture the industries of the future.
That's why the president's work on critical supply chains is so important. And his work on tackling climate change is so important. Because the clean energy industry, as it will look, 10 years from now or 20 years from now, doesn't even exist yet. What are the incentives that we can put in place to find out where this is going to go? To grab that new innovation and the new manufacturing and procurement will definitely be a part of it, because the United States government is going to be on the cutting edge of procuring electric vehicles, of ensuring that we are leading in clean energy.
You mentioned, though, that there are gaps in the supply chain. So what do you see as those critical gaps and how can the government fill those gaps?
One of his first executive orders after the Made in America Executive Order was the executive order on critical supply chains. It identified six key areas, including information and communications technology, national defense, health care, medicines — six specific supply chains. A 100-day report came out identifying some critical gaps and recommendations there.
Then there's a longer one-year review. And that will become a review on a regular basis to take a strategic look at our industry and say, these are the things that we must have: We must have national defense. We must have a secure public health system.
[So we're] looking to identify very specific gaps and figuring out the best way to go about creating resilient supply chains and so that resilient supply chain has built-in redundancies. This is not about bringing every far-flung supply chain to the United States. But it really does take a lot of work to identify the critical components and to figure out how we can incentivize making those critical components here. And where we're also going to work with our allies and our trading partners to make sure that we have that redundancy and resiliency, so that we're not vulnerable to these problems when there is a pandemic, when there's a natural disaster.
On communications, for example. Semiconductors was a big missing component that manufacturers — in everything from refrigerators, to computers to cellphones — couldn't get their hands on. If the US was to bring that manufacturing back or into the US, how would you do that? We talked about the cost of doing business here being greater. Would the US potentially be providing subsidies to companies? Again, how would you actually get some of those components to be made here? Or is that not the goal, because you also mentioned that maybe this is about building redundant supply chains, like elsewhere in the world?
In semiconductors, the US was the leader and the innovator on developing semiconductors, and in 1990, [it] had about 37% of the global capacity for semiconductors here in the United States. Now we're down to about 12% of global capacity.
Again, there's no need to make every semiconductor that we need for United States products in the United States. But we do need to make sure that we don't have another crisis like we're having right now, where there is a global problem in accessing semiconductors.
You can incentivize investment in the United States by making sure that you are providing opportunities to sell to the federal government because we are a large purchaser. There are also tax strategies, grant strategies, loan strategies — there is a whole host of things that the federal government can do. The Made in America office isn't directing all pieces of the Build Back Better program, but we are one piece. And other components through President Biden's administration, as well as working with Congress, are going to continue to develop a lot of these strategies to build back those critical supply chains.
You mentioned the pandemic. All of us have watched over the past year as ventilators were in the news because they were in short supply, along with protective equipment, face masks, etc. If there were another national emergency of some kind, everything that you're saying makes sense logically, but from a timing perspective, what happens if next year, there's a national emergency? What is the timeline you're looking at to make sure that people understand that this can't be something that we discuss for five more years or eight more years? Do you actually see movement in these supply chains and some of the things that you're talking about in the next one, three, five years?
The president has already taken action and is working with Congress to take additional action. For instance, the Senate just passed its version of the infrastructure and JOBS Act, and also the budget reconciliation bill. And these things implement parts of the president's American Jobs plan and the Build Back Better agenda.
There is a COVID task force that is looking for these important needs. You mentioned ventilators -- it's also medicines, vaccines, personal protective equipment. We are going to be ready because we're already continuing to experience these needs with COVID-19 right now, it's a long-term agenda. But there are also short-term gains, and we are making a difference.
When people think Made in America, polls show a lot of people are behind the concept. But all of the studies also show that they're not voting where it matters — with their dollars. They're buying less expensive goods. So there has to be some sort of a public awareness campaign or mind shift so people understand that perhaps buying something Made in America might cost more. Is there something you're doing or building into your plan to help fill in that gap?
One of the benefits of the president's creation of the Made in America office is that it really gives the issue a high profile, and it puts it top of mind for contracting officers who were making purchases on behalf of the federal government, for Congress and for all of America.
There are many things that we can do to make sure that we have the right amount of manufacturing in the United States, and that we're making critical goods. And one of those things is the president's use of the bully pulpit. He talks about this all the time. It's really important. It's not just a propaganda point. He believes that American workers and American firms, given a level playing field and the right opportunities can accomplish anything. And he is putting his money where his mouth is. And this is a very serious agenda, and we are going to make a difference.