Leroy, here's why US production can go up:

1. Grassroots protectionism. The chinese cannot be trusted not to poison food and toys. This will help ensure that US consumers will buy american in reaction to the downturn.

2. localization. more and more, to tighten supply chains and defense against protectionism and changes in taste, the answer is to put final assembly as close to the end consumer as possible. You'll notice, for example, Toyota chooses to build many cars for the US market here in the US, rather than ship them from overseas. Chinese companies also have factories in the US.

3. non-maximizing investors. while it's true that most investors can be trusted to chase investments where they can maximize returns, other investors have a "hometown bias" of sorts, and will feel compelled to invest in projects which create jobs locally.

"One in seven American adults does not even have the literacy needed to be able to read a typical article in a daily newspaper, according to one recent report."

Immigrants! As I've shown before, the number of people who go to college in the US has been rising, not falling.

"A much smaller percentage still has the requisite math skills and basic scientific literacy that would allow America to build a 21st century manufacturing industrial sector."

We have some of the best schools in the world though. Face it: when unemployment is 4%, the demand for job-creating jobs is low(why build a factory if you can't hire workers for it?). We'll be able to pump out the math nerds as times toughen.

"In other words, not only have the factories been lost, but the skill sets and human capital needed to run such factories has been lost as well."

We have all the skill we need to run any kind of factory. It's just that labor things cost more in the US. China has way more unemployed and underemployed people than we do, which pushed down wages. 43% of the Chinese labor force is still in agriculture. That means, 41% of the chinese population is UNDER-employed, because a nation only needs to devote 2% of the population to the task of food production. If we had 40% of our population as farm workers, you'd find we could build factories left and right, and the skill sets you thought US workers didn't have would be regularly put to use.