Ten New Manufacturing Ideas for the 112th US Congress

To the members of the 112th US Congress:

As supporters of US manufacturing, we'd like to share with you this open letter. If any confusion exists about what remains important to the vast majority of Americans, we'll rely on that old adage, "It's the economy, stupid" (with all due respect of course). We hope that this Congress views all policies, manufacturing and otherwise, in the context of jobs, specifically the need to create good ones for the millions currently under- and unemployed. Please see the embedded video below:

To that end, we feel several manufacturing (and to some extent, consumer spending) proposals would help accomplish those ends. We believe the 112th Congress can do a lot to re-balance the economy around manufacturing. To think that we can survive as a global super power on services alone doesn't make any sense to us. As a nation, we have always made and built things and legislation should support that. In addition, we'd advocate for policies that apply both carrots and sticks, if you will – a mix of incentives and enforcement. According to NAM, manufacturing supports 18.6 million jobs in the US (one in six private-sector jobs), or 10 percent of the workforce. But as a percentage of total GDP, manufacturing represents 11 percent ($1.6 trillion).

Therefore, we would specifically encourage you to examine the following policies:

  1. Minimize the trade deficit – We would urge you to deploy strategies to minimize the trade deficit, since that represents one of the few areas within GDP that government can influence at this time. (Consumer spending remains in the hands of consumers, government can't control the amount of FDI and stimulus programs do not appear to have broad congressional support). Therefore, we would advocate a few personal incentives on purchases. As an example, a new federal sales tax on consumer items could be applied to the purchases of goods coming from countries in which we have a trade deficit. The goal is to tie consumers more closely to the implications of their spending decisions. Moreover, just as you can buy carbon offsets today you could buy "China offsets" as well (some compelled, some not).
  2. R&D – We believe making the R&D tax credit permanent balances just one leg of the manufacturing stool, so to speak. To really grow the manufacturing sector, we need incentives to keep innovation and production on our shores, across the entire value chain starting with design/engineering and progressing through to service parts. Therefore, we'd advocate using tax credits tied to production either via outsourced domestic partners or the company who developed the product.
  3. Align corporate and personal tax policy with production – Rather than favor hedge and private equity fund managers with lower marginal tax rates as the past tax code did, consider offering lower corporate income (for S-Corps and LLCs, income and corporate taxes are one) and capital gains tax rates to those who create, domestic industrial jobs (i.e., business owners and investors in manufacturing business) with significant onshore production/supply components. Consider capping income tax rates at 20 percent for this group (similar to the former hedge/private equity fund carried interest tax rate) to encourage top performers (e.g., elite MBA graduates) to enter manufacturing rather than investment banking, management consulting, etc. (Brings to mind a recent New Yorker story headlined "What Good Is Wall Street?" and poignantly subtitled "Much of what investment bankers do is socially worthless")
  4. Immigration – We'd urge you to support a strong pro-immigration policy extended to qualified manufacturing trades as well as white collar professions (e.g., IT development). Realizing that high unemployment is as much the result of a lack of qualified candidates as it is excessive supply, it is essential to coalesce the right manufacturing skills to build the economy of the next century.
  5. Reduce business uncertainty – US manufacturing needs Congress to pass a bill limiting the rule-making authority of regulatory bodies such as the EPA, particularly when those rules impact job growth (and/or cause harm). EPA regulation of greenhouse gases from stationary sources serves as one example, as does the EPA's Boiler MACT rules.
  6. FDI – We would urge you to pass legislation on FDI (foreign direct investment) that applies reciprocal rules to both countries (as opposed to the current policy of only examining whether a particular investment in the US poses a national security threat). Let's explain with an example. If today, a US corporation cannot buy into, say, a Chinese state-owned steel mill, then vice versa, a Chinese state owned company should not be allowed to invest in a US corporation; the same rules should apply with regard to intellectual property (e.g. mandatory technology transfer) unless both parties (e.g. countries) come to a mutually agreeable arrangement.
  7. Extend minority- and women-owned tracking of business in supply bases to US-owned and/or operating supplier facilities on a multi-tier level and require federal reporting requirements in this area for government contracts.
  8. Stop the "one hit wonders" – Please don't enact any more one-time expensing options (e.g. $250k deduction allowances for capital purchases). These initiatives hardly represent growth strategies; moreover, they merely push demand forward, but do nothing to create sustainable long term growth.
  9. Follow the lead of Israel in encouraging policy that closely aligns research-university, private-sector and federal-technology transfer by spurring investment in promising areas and incubating new private sector start-ups. Expand the In-Q-TEL venture and public/private collaboration and matchmaking model by creating similar programs with other departments and agencies to encourage the growth of innovative small businesses with breakthrough applications for government (e.g., infrastructure, military, space exploration, etc.).
  10. Lead by example and spend time visiting, encouraging and counseling manufacturing companies and workers in your own congressional districts and states. Let owners, managers and workers alike know that their cause has a voice and that you are listening and want to take their best ideas back to Washington.

Disclaimer: Nucor is a sponsor of Spend Matters and MetalMiner. The views expressed in this article represent the editorial opinions of the authors alone.

- Jason Busch and Lisa Reisman

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