Manufacturing Can Fire Up U.S. Resurgence

September 3, 2011
Cleveland Plain Dealer (Opinion)

By Thomas J. Gibson

With America's debt-ceiling crisis averted for now, it's urgent we turn our attention to the nation's top priority: creating jobs. A lingering lack of confidence among both the investment community and consumers, along with fears of a double-dip recession, is wilting our fragile economic recovery. Not helping is persistent unemployment, which has remained above 9 percent for more than 20 months.

So how do we resolve the current crisis and kick-start our economy?

It starts with job creation.

It is a known fact that manufacturing industries such as steel are the backbone of our economy. The manufacturing sector has served as the engine of growth in the past, and it has the power to create urgently needed jobs today.

In America's heartland, the Federal Reserve Bank of Chicago reports that the manufacturing sector led second-quarter economic recovery and that it will be important in pushing us to further economic revival. Manufacturing has a huge multiplier effect, creating jobs in upstream and downstream industries throughout the supply chain. For every job formed in the steel industry, seven additional jobs are created in other economic sectors, such as raw materials, transportation, computers and related technical services. And these are high-value jobs.

From a manufacturer's perspective, a number of dynamics would raise this job engine to new heights. I'd like to focus on an essential five-point approach: Fix our crumbling infrastructure, move America to energy independence, reform our tax structure to support America's competitiveness, halt overregulation and, finally, secure a level playing field in the global-trade arena.
 
Transportation reauthorization

The most effective way to create good jobs is to invest in America's crumbling infrastructure. Currently, the United States ranks 23rd worldwide in infrastructure quality, which is greatly undermining our competitiveness. Passing a multiyear transportation bill that's funded at levels high enough to address our current needs would help restore our infrastructure system, put Americans back to work and stimulate the economy. According to a recent study by the American Society of Civil Engineers, infrastructure deficiencies add $97 billion a year to the cost of operating vehicles and result in travel delays that cost $32 billion. Plus, every $1 billion invested in federal highways creates 37,000 new jobs.

Energy independence

For energy-intensive manufacturers, such as the steel industry, our competitiveness will increase in direct relationship to our ability to capitalize on the nation's abundant and affordable energy supply. But we must focus on fully developing domestic oil, natural gas, nuclear power and clean coal. In particular, natural gas from the Marcellus Shale and similar formations throughout the country is a strategic resource that provides an affordable and reliable domestic energy supply that will benefit both business and individual consumers and drive economic recovery in manufacturing. By utilizing our natural gas resources, we will reduce energy costs for manufacturers, including the steel industry, which alone supports more than 1 million direct and indirect jobs in the economy.

Corporate tax reform

It is a little-known fact that the United States has the second-highest statutory corporate tax rate among developed countries. While other nations have been lowering their corporate tax rates to encourage economic growth, the United States' combined (federal plus state) tax rate has stayed at almost 40 percent.
There is an urgent need to reform the tax code and make it simpler, fairer and more competitive.

Regulatory relief

Federal regulation is estimated to cost more than $1 trillion annually. The rising volume of new and changing regulations that we have seen from both the U.S. Environmental Protection Agency and the Occupational Health and Safety Administration creates uncertainty and discourages investment that supports economic growth. Simultaneous development of multiple new environmental regulatory proposals across several program areas at the federal and state levels have the potential to limit continued industry advancement while endangering critical manufacturing jobs.
The steel industry places the highest priority on the health and safety of our work force. Yet overly burdensome regulations that are not based on thorough cost-benefit analysis may misdirect priorities and create unnecessary costs for employers that prevent optimum workplace-safety and health benefits from being realized.

There is a need to examine the impact of the EPA and OSHA regulatory agendas on jobs and industrial competitiveness.

Countering protectionism

The United States has the world's largest economy and its most open markets. As long as products are fairly traded by other nations and their markets are open to U.S. exports, free and fair trade can exist. Other nations, however, do not play by the rules. China, for example, is using protectionist policies to give its exports an artificial advantage over American goods by undervaluing its currency by as much as 30 percent.

In the steel sector, China benefits from its government heavily subsidizing its domestic steelmakers, enabling it to send products here that do not reflect the true cost of production. Unless our government enforces our trade laws, foreign competitors will continue to steal market share from American manufacturers and well-paying jobs from American workers.

Given the urgency for creating jobs, we need to move aggressively into action on this five-point plan. We must invest in modernizing America's infrastructure, harness our abundant natural resources and incentivize investment here in the United States.

To support that, we also must foster a regulatory framework that doesn't choke growth and vigorously enforce our trade laws.

The time to act is now. The need is immediate.

Gibson is president and CEO of the American Iron and Steel Institute in Washington, D.C., whose member companies make more than 80 percent of the steel produced in the United States.