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Saving Manufacturing from the Fiscal Cliff: Recommendations for Washington

Posted By David Brousell, December 12, 2012 at 3:31 PM, in Category: Industrial Policy

Following the special, open Manufacturing Leadership Council call on the Fiscal Cliff last week, the Council contacted the Obama Administration and the leadership of the House and Senate to communicate the Council's recommendations on key tax and spending policies. The following is the text of the letter.

Dear Mr. President,

As you well know, the manufacturing industry has played a key role in fueling this nation’s recovery from the depths of the recent Great Recession by increasing productivity and innovation, aggressively seeking out emerging markets, and investing in capital equipment and breakthrough technologies.

The Fiscal Cliff that now faces the country threatens to undo all of the gains that U.S. manufacturers have fought for over the past four years. With the Fiscal Cliff threatening to pull $600 billion out of the economy, manufacturers already have seen orders fall, as customers in the U.S. and overseas pull back, due in large part to uncertainty raised by the Fiscal Cliff. As growth slows, manufacturers must postpone hiring and capital investments, undermining the nation’s economic momentum.

With these concerns in mind, the Manufacturing Leadership Council recently held a special meeting to create recommendations for policy makers to restore a business environment in which manufacturing can once again lead the nation’s growth. The Council is a community of 5,000 senior executives from across the country, representing all industries within manufacturing. We trust that as you endeavor to fulfill your responsibilities, you will carefully consider and adopt these recommendations of the Manufacturing Leadership Council:

  • The President and Congressional leaders must negotiate in good faith and with urgency to reach an agreement to avoid the Fiscal Cliff. Council members favor a comprehensive agreement that addresses entitlement-program cost reductions in a way that sustains these programs over the long term, as well as increased taxes for high-income individuals. But the priority must be an agreement that avoids the Fiscal Cliff. The nation and its manufacturers cannot afford the effects of another recession brought aboutby the failure of political leaders to reach an agreement.
  • Opponents of proposals to restore pre-Bush-era tax rates on high-income individuals and families should be more willing to compromise to achieve a comprehensive agreement that includes entitlement spending reductions. Manufacturing Leadership Council members believe they have far more to lose from another recession than from the restoration of higher tax rates on high-income earners.
  • Policy-makers should look to limit the impact of tax increases on small and mid-sized, family-owned manufacturing companies, which are frequently taxed at individual, rather than corporate tax rates due to their status as S corporations or partnerships.
  • Policy-makers should extend the payroll tax cut in order to avoid burdening middle-class families and increasing the likelihood of another recession.
  • Policy-makers should increase the bonus depreciation on tangible property and retract the proposed changes to eliminate Safe Harbor for Routine Maintenance. Forcing manufacturers to depreciate these assets over extended periods reduces their incentive to invest in equipment that increases competitiveness and productivity, and reduces the production of large capital equipment.
  • Policy-makers should make permanent the Research and Development Tax Credits that are due to expire. These tax credits are the single most effective element of government’s industrial policy, encouraging manufacturers to invest in new technologies that improve productivity and stimulate the economy. Periodic uncertainty over whether R&D tax credits will be renewed undermines manufacturers’ ability to plan capital spending and, ultimately, to improve their competitiveness.
  • Policy-makers should avoid reductions in military spending, as such spending supports manufacturing as well as innovation.
  • Policy-makers should allow extended unemployment benefits to expire. This would encourage more qualified workers to seek employment sooner rather than waiting for benefits to run out. However, Council members would welcome extended unemployment benefits in exchange for comprehensive reforms in entitlement spending.
  • Specific, scheduled reductions in entitlement spending must be part of the Fiscal Cliff agreement. Policy-makers can no longer defer action on these important reforms, which are needed to reduce government spending and restore confidence in the economy. Among other reforms, policy-makers should consider raising the cap on Social Security withholding, and gradually extending the age for Social Security eligibility.

Thank you for carefully considering the recommendations of the Manufacturing LeadershipCouncil.

Yours sincerely, on behalf of the Manufacturing Leadership Council

David R. Brousell

Global Vice President and Editorial Director

Manufacturing Leadership Council

Manufacturing Leadership Council members include representatives from companies such as Advanced Micro Devices, AT&T, Baxter Healthcare, Campbell Soup Company, Cisco Systems, Colgate Palmolive, Cummins, Dell, Dow Chemical, DuPont, Eaton, Ford, General Dynamics, Graphicast, Kennametal, Kohler, Lion-Vallen Industries, Lockheed Martin, Oracle, Owens Corning, Procter & Gamble, S&S Hinge Company, Steinwall, Inc., and VirTex Assembly Services.

Category: Industrial Policy
Written by David Brousell

Global Vice President, General Manager and Editorial Director of the Manufacturing Leadership Council

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