February 26, 2011 Maintaining Momentum

Volume 14 | Issue 1

Manufacturing entered 2011 on a bright note – hiring was up and the sector received support from the Oval Office. Take action to spur compet

In Washington D.C., where U.S. economy intersects with policy and politics, optimism arises. The first month of 2011 provided many reasons for all involved to feel confident about America’s manufacturing sector.

Indeed, the third week of January was one of the best weeks for the U.S. manufacturing economy since the start of the recession. Here’s what we saw:

• Manufacturing reported its first gain in U.S. employment since 1997: The number of manufacturing jobs in the United States in 2010 by grew 1.2 percent, or 136,000. Economists predict the trend to continue.
• Strong signals from the Oval Office: President Obama indicated his administration’s embracement of a more private-sector approach toward economic growth and jobs, initiating a review of federal regulations that burden business. He then announced the creation of the President’s Council on Jobs and Competitiveness, led by General Electric’s Chairman and Chief Executive Officer Jeffrey Immelt.
• Message from Capitol Hill: New House of Representative leadership promised intense scrutiny of anti-competitive laws and regulations. Its first major action sent a message that the past Congress’s excesses would not go unchallenged. The House passed H.R. 2, to repeal last year’s expansion of government control over health care, the Patient Protection and Affordable Care Act.

Manufacturing is at the heart of all these examples of progress. Manufacturing means jobs, and business and political leaders grasp the imperative of putting America back to work.

Challenges remain, given the depth of the global recession. However promising these developments appear, each could prove short-lived if the President and Congress do not act to make the United States more globally competitive. It’s time to make the promise a reality, to sustain the momentum.

But let’s consider the positive news.

DRIVING THE ROAD TO RECOVERY
The 1.2 percent increase in manufacturing jobs reflects several important trends born of economic recovery. Major companies see brighter days ahead, reported The Wall Street Journal on January 19, using the auto sector as a prime example.

At an upbeat Detroit Auto Show in early January, Ford announced plans to add 7,000 new jobs – including thousands of factory jobs and 750 engineering positions – over the next two years as the company builds on renewed consumer demand and new product lines.

Good news about expansions and employment is occurring among both domestic and transplant automakers and along the supply chain. In South Carolina, the German parts supplier, the Dräxlmaier Group, announced it would add 100 jobs in a $10 million expansion of its Duncan plant, where it manufactures interior components for BMW and General Motors.

PRESIDENT OBAMA, JOBS & GROWTH
In several major announcements leading up to his State of the Union speech, President Obama displayed new appreciation for the private sector as the driver of growth and job creation.

Using the market-friendly editorial pages of The Wall Street Journal, the President declared the era of dumb regulations over (or words to that effect) and previewed his Executive Order, “Improving Regulation and Regulatory Review.” He wrote: “This order requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth. And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive.”

Manufacturers and other private-sector employers still face threats from pending regulations, starting with Environmental Protection Agency (EPA) plans to limit greenhouse gases. Not only does the EPA’s scheme circumvent the U.S. Congress, it invents new laws to single out refineries and other industrial activity for controls.

The Heritage Foundation recently reported that federal agencies issued 43 major new rules increasing regulatory burdens in Fiscal Year 2010. The total cost exceeded $26.5 billion, the highest single-year cost ever recorded.

Still, if Executive Branch agencies follow through on the President’s order with a serious review and, more importantly, regulatory relief, this will mark a major change in the Administration’s approach toward business – one that could dramatically improve U.S. competitiveness.

Competitiveness was a key word in Obama’s most encouraging announcement in January: the establishment of the President’s Council on Jobs and Competitiveness. Council leader Immelt not only heads a leading global manufacturer, he has also been a strong voice for manufacturing as a driving force in the U.S. economy. In his June 2009 “American Renewal” speech, Immelt described the need to invest, innovate, manufacture and export. Emphasis on exports is critical. Obama remarked, “When a company sells products overseas, it leads to hiring on our shores.”

Numbers support the declaration: From 2002 to 2008, jobs supported by manufacturing rose from 5.2 million to 6.8 million. Those additional jobs represented 29 percent of private-sector job growth during that period of overall economic growth. Understandably, the President has announced his goal to double U.S. exports within the next four years. Manufacturers support him.

As in regulation, the pressing question remains: On exports, competition and innovation, will the President’s policies match his pronouncements? Manufacturers must be ready to support him when the policies really do promote competitiveness.

CONGRESS, OVERSIGHT & REVERSING PAST MISTAKES
Meanwhile, manufacturers must vigorously oppose policies that damage U.S. competitiveness. The 112th Congress provides a much-improved opportunity to make objections known. Republicans hold a 242-193 seat edge over the Democrats in the U.S. House, having swept into control on a wave of voter dissatisfaction with the growth of the federal government, and they embarked on a concerted effort to review and repeal Congress’ past excesses, starting with the health care law that has so alarmed the public and employers.

The National Association of Manufacturers (NAM) supports such repeal. In our “key vote” letter to the House, we argued that the 2010 health care law will drive up manufacturers’ health care costs and force many companies to consider abandoning the generous benefits they currently offer.

The House passed H.R. 2, to repeal the health care law by a vote of 245-189, and Republicans then set the stage for further legislation to replace the current law. Democrats, meanwhile, declared that the repeal bill would never come to the Senate floor, and the President promised a veto. This is the first of many hard-fought legislative battles to come, and each one allows manufacturers to articulate pro-competitive policies that will spur growth and hiring. In addition, House leadership plans rigorous oversight hearings over Executive Branch activities. Many areas are ripe for examination – starting with the EPA.

Optimism, by its nature, is forward-looking. However, in the interest of U.S. manufacturing competitiveness, America must not be afraid to look backward to correct past policy mistakes.

OUTLINE FOR JOB CREATION
Ultimately, as NAM outlines in our “Manufacturing Strategy for Jobs and a Competitive America,” the best way to encourage job creation is to adopt policies that embrace three guiding principles:

• The United States will be the best country in the world to headquarter a company, due to competitive taxation, regulation, infrastructure and innovation policies.
• The United States will be the best country in the world to innovate, performing the bulk of a company’s global research and development (R&D): Manufacturing productivity increased annually by an average of 3.8 percent between 2000 and 2006, primarily due to innovation and R&D-generated technological progress. Innovation leads to new processes, products and manufacturing jobs.
• The United States will be a great place to manufacture, both to meet the needs of the North American market and serve as an export platform for the world. Manufacturing jobs are again on the rise, as companies make products intended for the domestic market, as well as Mexico and Canada. The more cost-competitive the U.S. business climate becomes, the more jobs we create in the United States.

The first month of 2011 indicated grounds for optimism for the manufacturing sector. Now we must build on the positive trends and enact long-term policies to support manufacturing competitiveness and jobs.

Jay Timmons is president and chief executive officer of the National Association of Manufacturers (NAM) and a leading advocate for the nearly 12 million Americans employed in the manufacturing sector. NAM is the largest U.S. manufacturing association. Its mission is to foster a stronger economy by enhancing the competitiveness of American manufacturers. To learn more about the organization, visit www.nam.org.

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