President Barack Obama and Mitt Romney each have detailed plans to strengthen the U.S. economy and revitalize business activity. How do their differing roadmaps for growth affect the manufacturing industry, which has been one of the key pillars of the economic rebound in recent years, and what can manufacturers expect once this pivotal election is over?
The United States economy is facing significant challenges, with sluggish job growth, mounting debt, instability in international markets and gridlock among lawmakers in addressing major financial issues, such as the looming fiscal cliff. These issues mean that the upcoming presidential election will be a pivotal one for the country’s future, as either Barack Obama or Mitt Romney will have to work to overcome major obstacles to get the U.S. back on track.
Although Obama and Romney both have roughly the same economic goals – stimulate job creation, boost American competitiveness in the global market and drive down the deficit – their plans for reaching these objectives differ greatly. One key area where the candidates distinguish themselves is in their approach to manufacturing, which has been a key driver of the economic recovery since 2009 and will play a major role in U.S. economic success in the future – if it gets the right support.
“As the U.S. presidential campaign heats up and the candidates hit the debate stage in full force, it seems that the future of manufacturing and energy is high up on the agenda,” Advance Staffing Solutions notes. “While the manufacturing industry is still rebounding from years of recession, there is a renewed focus on how those involved in the management of energy resources and re-building of America will become a critical factor in the coming administration.”
Part of Obama’s platform is the stated goal of doubling U.S. exports by 2015 through the National Export Initiative and to create 1 million new manufacturing jobs domestically. To that end, U.S. manufacturing has added 459,000 jobs since January 2010, the highest growth rate in the past decade, though much of that growth was a rebound from historic lows.
In terms of boosting American manufacturing, President Obama emphasizes research and development, workforce training and education, clean energy and infrastructure. The White House recently introduced a program to provide $30 million in federal funding for the National Additive Manufacturing Innovation Institute, a public-private partnership designed to boost U.S. manufacturing competitiveness. The Obama administration has also dedicated $20 million for 10 additional manufacturing public-private partnerships across America.
Obama plans to cut the top corporate tax rate on manufacturing income down to 25 percent as part of an overall tax restructuring and to lower the rate further for income from advanced manufacturing as a form of added support to high-tech production. He seeks to lower all corporate taxes to 28 percent from their current top rate of 35 percent by closing loopholes and exemptions.
On the other hand, Romney plans to lower corporate tax rates down to 25 percent not just for manufacturers but for all corporations. Part of this would be accomplished through the closing of loopholes and exemptions, as the president has proposed. Unlike the president’s plan, Romney has also stated he would cut numerous regulations (as yet unspecified) to lower operational costs for businesses and would work to make North America energy independent by 2020.
“Romney founded Bain Capital, a private equity fund that backed start-up companies and sought to buy and turn around failing businesses. Bain invested in scores of companies in a range of sectors…Romney has said that the companies that Bain invested in have created a net gain of more than 100,000 jobs – a figure that news outlets have not been given enough information to confirm,” the Milwaukee Journal Sentinel reports. “Romney says his years in the business world prove that he knows what companies and their workers need to succeed and that it would give him an edge in boosting the national economy.”
Romney’s strategy for the manufacturing workforce centers on two key principles: additional training/retraining for existing workers and creating conditions that attract more skilled foreign talent to the U.S. According to Plant Engineering, he plans to accomplish these goals through six key measures:
- Cutting redundancy in federal retraining programs by consolidating programs and funding streams, centering as much activity as possible in a single agency;
- Granting states greater authority to manage retraining programs by block-granting federal funds;
- Switching from unemployment insurance benefits to a system of personal reemployment accounts;
- Promoting more private sector involvement in government retraining programs;
- Raising the visa cap for highly skilled foreign-born workers; and
- Providing permanent residency to eligible foreign graduates with advanced degrees in math, science and engineering.
Meanwhile, Obama’s manufacturing workforce plan is focused on eliminating incentives for outsourcing and encouraging more companies to shift production back to the U.S. The key points in his approach include:
- Removing tax deductions for shipping jobs overseas and introducing income tax credits for bringing back domestic jobs;
- Making the current deduction for domestic production focused specifically on manufacturing activities and doubling the deduction for advanced manufacturing;
- Providing a new credit for qualified investments that help finance projects in communities that have suffered major manufacturing job losses;
- Extending tax credits to provide $20 billion of investment in domestic clean energy manufacturing;
- Extending a provision that allows businesses to expense the full cost of their equipment purchases; and
- Closing a loophole that allows companies to shift profits overseas from intangible property created in the U.S.
Obama and Romney also differ on the issue of China. In a recent ad, President Obama claimed he is “challenging China’s unfair trade practices that hurt American autoworkers” by filing a considerable number of trade complaints against the Chinese. However, the Alliance for American Manufacturing points out that so far he has passed up seven opportunities to label China a currency manipulator.
“Romney is pledging, on his first day in office, to designate China a currency manipulator, a step no U.S. administration has taken against any country for 18 years,” the Associated Press notes. “That could lead to tariffs punishing China for policies that Americans believe unfairly keep Chinese products cheap, hurting U.S. manufacturers. Tariffs could trigger a trade war with a country that is the fastest-growing market for U.S. exports. Even if they don’t, the designation would instantly set back relations with Asia’s emerging superpower.”
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