Article published in the Akron Beacon Journal, August 1, 2012 - 07:10 PM
By Joseph A. Carrabba
Few people realize the outsized role that the American manufacturing sector has played in the nation’s economic recovery. According to research from the National Association of Manufacturers, manufacturing has added nearly a half million net new jobs since the beginning of 2010 alone.
But the economic role of manufacturing is far more complicated than the contribution of those half-million jobs.
Take a look at the steel sector, an industry at the very heart of this manufacturing revival. Steel manufacturing is so interrelated with other sectors of the economy that each steel job supports seven jobs in the broader U.S. economy. That means that, directly and indirectly, the steel industry adds over 1 million jobs to the U.S. economy.
Combine that with the steel industry’s purchases of products and services from other sectors — and its contribution of billions of dollars in tax revenues — and the steel industry emerges as one of the most critical components of America’s industrial machine.
The steel industry serves as a prime example of the interconnectedness, complexity and economic importance of American manufacturing, which is playing a central role in America’s continued economic recovery.
This example also makes one thing clear: Policymakers should do everything they can to promote the health of U.S. manufacturing — or imperil the nation’s still-uncertain recovery.
This is an election year. It is a time when the pressures and demands of electoral politics often interfere with the real business of Washington. Sometimes even the most important issues get muffled.
But 2012 is more than an election year. It’s a pivotal year for America’s economy — a time during which the recovery will surge or falter depending on how well and how swiftly government decision-makers respond to the needs of U.S. manufacturers.
It is a year in which Congress and the Obama administration must look above politics and support a pro-manufacturing agenda that will keep the nation on the path to economic recovery. In that regard, our industry is appreciative of Congress’ recent bipartisan effort to successfully pass transportation reauthorization legislation, something for which the steel industry has long advocated. The 27-month, $120-billion program is essential to give states the certainty they need to contract for the type of long-term capital projects that can rebuild America’s bridges and highways while creating high-paying jobs.
With that important step accomplished, here are three things Congress and the White House should tackle to keep U.S. manufacturers on solid ground.
• Tax reform must be a key aspect of a pro-manufacturing agenda. America needs tax reform that promotes increased investment in manufacturing plant and equipment. The only tax reforms that will strengthen the U.S. industrial base and the overall economy are those that reduce — not increase — the tax burden on manufacturers.
Proposals put forward in recent months, including the president’s recently released Framework for Business Tax Reform, would reduce the federal corporate tax rate from 35 percent— the highest among industrialized nations — to 28 percent.
While that may sound good, many of these proposals would pay for that rate cut by eliminating a number of corporate credits and deductions that are critical to promoting investment and creating U.S. jobs. If not properly done, swapping credits and deductions for a lower rate could produce a net tax increase for manufacturers.
Policymakers also have proposed sacrificing accelerated depreciation as a way to pay for a lower corporate tax rate. But accelerated depreciation is a key incentive for manufacturers to pursue new investment. Scrapping it would be a detriment not only to new investment, but to job creation as well.
• Current economic conditions require the administration to take a much closer look at how existing and proposed regulations affect the competitive position of U.S. manufacturers in global markets.
For example, rules that introduce uncertainty over energy costs, but gain little in the way of environmental benefit, can be counterproductive to industrial expansion. A case in point is the development of America’s vast shale natural gas resources.
Most of the states in which shale production is taking place have already had robust regulatory programs in place for decades; others are currently in the process of updating regulations. Manufacturers need a level of certainty to make spending decisions, especially in shaky economic times. Overly burdensome regulations work against making those investment commitments.
• What transpires in the global marketplace can make or break U.S. manufacturers.
Manufacturers can keep the American economic engine running smoothly only if the U.S. strictly enforces trade agreements, and actively fights protectionist policies promulgated by foreign governments.
And those policies do persist. China’s failure to abide by its World Trade Organization commitments, for example, continues to undermine U.S. domestic economic growth and job creation.
With economic conditions degrading in parts of Europe, and other nations entering periods of economic uncertainty, it is more important than ever to maintain and strengthen trade remedy laws to guard against dumping, subsidies and other unfair and illegal practices.
It may be an election year, but Congress and the White House need to gather the political will — right now — to make the tough choices that will allow American manufacturing to preserve the gains it has made in reviving the economy and restoring jobs. They must implement policies that will enable manufacturers to continue to play a major role in driving the nation’s economic resurgence.
America is at an economic turning point. Which direction we go from here requires the right actions now.
Carrabba is chairman, president and chief executive officer of Cliffs Natural Resources in Cleveland. The company is the largest producer of iron ore pellets in North America and a major supplier of metallurgical coal to the steel industry. He is also the chairman of the American Iron and Steel Institute.
Link to the Ohio.com website version of the article.