Will a New 4-Pt Plan Save US Manufacturing?
On his global blog "Manufacturing Crunch," Pat Cleary skeptically points to a plan by Rep. Kirsten Gillibrand (D-NY) to jump-start the U.S. manufacturing sector. Her four-point plan promises to:
- Transition manufacturers to clean energy production, by investing $30 billion for states to help manufacturers develop clean energy manufacturing.
- Provide $1.5 billion for the Manufacturing Extension Partnership to help manufacturers transition to clean-energy manufacturing technologies.
- Ease health care costs for small manufacturers by enabling them to buy into an insurance pool with other businesses and by offering tax credits.
- Expand rail infrastructure to help manufacturers connect to new markets and move their products faster and easier.
Everyone knows that US manufacturing is under tremendous stress right now. It's shedding jobs, its costs continue rising, current inventories aren't moving, profits are way down, and our best and brightest students are sidestepping the sector for other careers. And this isn't just bad news for manufacturers -- it's bad news for the country as a whole. Study after study has shown that a strong manufacturing sector, with a vibrant innovation process, has been the foundation for economic growth here for many decades. The spillover from all the R&D expenditures alone has helped create new industries in this country.
So will Rep. Gillibrand's four-point plan "save" American manufacturing? Well, it will help a little. The incentives do promote R&D in an area (clean energy) that holds much promise for innovation. And health-care costs are a huge burden for small manufacturers in particular. Still, this plan doesn't address enough of the underlying problems hindering U.S. manufacturing competitiveness.
Here's my four-point plan for making U.S. manufacturing more competitive and jump-starting the economy:
- Reduce the corporate tax rate. The effective corporate tax rate in this country is higher than any other country's but Japan. That harms our competitiveness.
- Make the R&D tax credit permanent. It would provide an incentive for innovating and remove uncertainty about this aspect of the tax code.
- Reform our tort laws. We pay more for lawyers -- not just to defend against lawsuits but as prophlactics -- than any other country in the world. Why not discourage gold-seekers and allow manufacturers to invest that money on research, employees, and new equipment?
- Tell Congres and the administration to get out of the way. While the federal government plays an important role in policing the bad guys, regulatory policies that shackle the good guys are a a drag on economic growth. The vast majority of American manufacturers follow the rules; they shouldn't have to worry about their own government slowing them down as they race against foreign competitors.
I commend Rep. Gillibrand for at least recognizing the importance of manufacturing to her own state and to the country. We just need a more activist strategy if we're going to preserve a vibrant manufacturing base in this country.
07-09-2009 8:52 AM