In a move that was highly anticipated, considering he had the highest unemployment rate of a president who won reelection, President Obama’s State of the Union address was heavily focused on providing new jobs and promoting economic growth for citizens falling on rough times. Obama affirmed his message by visiting Linamar Corp, an automotive parts plant in Arden, North Carolina on Wednesday that was resurrected from a former Volvo facility.
Although 500,000 manufacturing jobs have returned to the States in the last three years, that only compensates for approximately one-tenth of the losses the manufacturing industry suffered since 2000. So while it may be a challenge to heavily criticize the current president’s performance in this regard, the manufacturing industry continues to search for more definitive answers on how Obama intends to invigorate their sector.
The President outlined his commitment to revitalize American manufacturing during the State of the Union with a four-point initiative –
1) Partnering with businesses and communities to invest in American-made technologies and American workers
2) Ending tax breaks to ship jobs overseas and making the US more competitive
3) Bringing jobs back
4) Leveling the playing field and opening markets for American-made products
To make America a “magnet for jobs,” as Obama stated on Tuesday, his administration appears to relay the basic truth of the cliché ‘knowledge is power’ with the first and third initiatives noted above. Back in November, I wrote about the opening of the Commonwealth Center for Advanced Manufacturing (CCAM) in Virginia; a 62,000 sq ft center that’s devoted to discovering engineering and manufacturing solutions. The Institute combines the resources of the University of Virginia and various manufacturers to greatly benefit students and the industry. He indirectly referenced the CCAM during the State of the Union address while proposing a plan to develop 15 “hubs” across the country, much like CCAM’s business model. Obama stated he is willing to take executive action to launch three new institutes in 2013 no matter what.
While at Linamar Corp, Obama discussed how he envisions the importance of job value in the US. He explained, “It’s not a Democratic thing or a Republican thing. Our job as Americans is to restore that basic bargain that says if you work hard, if you meet your responsibilities, you can get ahead.” Establishing the value of the American manufacturer will be best exemplified when Obama takes aggressive action to “level the playing field,” as he says.
His second and fourth points are a summation of this aggressive action. Two main proposals circulate around adjusting tax codes in the favor of American producers, along with boosting US exports to global trade affiliates. For one, Obama has proposed tax rates be lowered to 25 percent for manufacturers, which will directly ease financial burden across the sector. The Obama administration also offered an ‘offshore tax,’ that would discourage American companies from taking their factories overseas by charging offshore earnings. This will “prevent a race to the bottom in corporate tax rates,” Obama says.
Simply boosting US exports for global trade affiliates would be an understatement for Obama’s export plans. He is three years in to a four year plan to double US exports by the end of 2014 which, according to CNN Money, he will most likely not be able to meet based on intermediate growth. However, if Obama continues to coordinate more substantial trade growth between the US and China, which many speculate will occur, then Obama may be able to see exports soar in a short period of time.
Fortunately, the global pendulum has already begun to swing back in favor of American manufacturing. As costs for labor increase in China, cheap, abundant natural gas continues to flourish and logistics costs remain more economical in America. Companies like Caterpillar, Ford, and Apple have, and will continue to make their way back to manufacturing.
As is the case in any State of the Union speech, every tax, every proposal, and everything encompassing Obama’s speech looks good on paper up to this point. Most Republicans are perplexed as to how he’ll be able to create more jobs without “adding a single dime to the deficit,” as Obama stated during his address, and that’s a valid concern.
Despite strong resistance from Republicans, military cuts may play a considerable role in this debate. More than half of the 66,000 troops still overseas are scheduled to return this year, with a goal of nearly removing all US forces by the end of next year. The Stockholm International Peace Research Institute (SIPRI) estimates that the US spends more money on their military than the next 14 countries combined, most of which are allies. Considering the US spends over $700 billion per year on military efforts, and a sizable amount of that comes from the war in Afghanistan, there’s bound to be some potential for debt relief that could occur from drastically reducing our commitment overseas. Would it be enough to cover all of Obama’s wishes and proposals? Probably not, but the idea’s worth a bipartisan discussion.
Energy Curtailment Specialists, Inc.