Cost-Benefit Analysis

This report provides a comprehensive cost-benefit analysis of the Manufacturing Renaissance Legislative Package, consisting of four coordinated bills designed to rebuild American manufacturing competitiveness. It also provides a set of philosophical/practical questions for Congress, Administration, and Committee consideration.

Manufacturing competitiveness supports national security, GDP, job growth, trade, and economic statecraft. It ensures Americans cannot be held hostage by adversaries. Reshoring and rebuilding American manufacturing prowess, capacity, and leadership will not be fast, easy, or free.

This package presents a "next step" after the One Big Beautiful Bill, which Congress can and must take, in some form, to increase the chances that the 21st Century is an American Century. These proposals add well to the Pax Silica concepts supporting physical products embodied by AI.

The government should not pick winners except when it has to. The scope of manufacturing inputs lost over the past 30 years extends across 600,000 manufacturing companies from the bottom to the top of all supply chains. We cannot "winner pick" to recreate it.

The bills are "blunt instruments" applying to ALL manufacturing companies in the NAICS 31-33 categories in the first bill (with a 6% DVA Credit) and to ten critical sectors and their supply chains in the second bill (14% DVA credit). These bills offset the lower average returns in U.S. manufacturing, responding to China's subsidies to its manufacturing sector. They are, effectively, free market subsidies to the entire manufacturing sector, with more to critical sectors, without picking company-specific winners.

The below are beyond the scope of the initial proposals requiring Congress and Administration input. The final versions of each bill must also consider:

• •Additional limitations on the use of the manufacturing tax credit, such as restrictions on top management compensation, dividends, or buybacks.
• •Tying the manufacturing tax credit to scale with average return on equity to limit its use by manufacturing businesses that already earn high returns on equity.
• •These bills are America-specific. There is no incentive to build factory capability outside the U.S. in allied nations. A DVA credit, perhaps 50% of the U.S. one, could be part of these bills. This is a Pax Silica consideration.
• •The bills do not include the agricultural sector, which is arguably a form of manufacturing. Agriculture already benefits from extensive policy. If it needs similar support, it should be part of an overall agricultural policy review and revision.
• •How do these proposals work with U.S. based joint ventures with allies, partners, and Chinese companies?
• •How do these proposals work with foreign companies operating in the U.S., allied, partner, and otherwise?

Year 1 Annual Credit = $2.2T × 62% × 0.85 × 75% × 6% = $51.6 billion

Behavioral Adjustment Factor: 80–86%. Not all growth translates directly to additional credit claims. Some companies will use credits for existing production. Adjusted range: $649B × 80–86% = $519–558B, rounded to $500–560B.

Strategic sector DVA is estimated at $400–500 billion annually. Additional 14% credit rate applied. DO IT NOW assumes sector growth as companies respond to strategic incentives.

10-Year Cost = ~$380–480 billion (accounting for sector growth and 20% floor). The higher credit rate for strategic sectors reflects the larger cost disadvantage these sectors face versus Chinese competition (30–60% cost gap).

Initial appropriation provides a capital base for loan guarantees. Per the Manufacturing Finance Corporation Act, the program assumes manufacturing industry loss rates of 4–5% (higher than the SBA 7(a) benchmark).

The first-loss bank structure ensures market discipline — banks share risk on every loan they originate. Warning: Lessons from Fannie and Freddie on risk management must be learned and followed.

Based on existing QSBS exclusion costs and manufacturing business succession volume. QSBS-style 100% capital gains exclusion (up to $250M) for long-term manufacturing business succession. Creates opportunities for succession and for entrepreneurs to acquire, run, expand, and sell businesses with a 10-year holding period, or go public.

This analysis examines the fiscal exposure of the Mannie Mac program under various default rate scenarios, using the 4–5% loss rate assumption from the Manufacturing Finance Corporation Act.

Baseline Program Parameters

Default Rate Stress Test Scenarios

Federal Loss = Guaranteed Volume × Default Rate × (1 − Recovery Rate) × Guarantee %

This package uses market-based incentives rather than direct government spending, industrial policy mandates, or tariffs alone. The key advantages:

This analysis employs estimation methods informed by Congressional Budget Office (CBO) practices but differs in important respects: