Both President Obama and Governor Romney have put the manufacturing industry as the cornerstone of their plans to strengthen the U.S. economy and revitalize business activity. How would their differing plans affect manufacturers, and which would provide the most benefits to the manufacturing industry?
Government has the most impact on the manufacturing industry with regard to its tax, regulation, energy, and trade policies, but budget priorities of an administration also have a powerful effect for the good or the bad. We will use these policies and priorities to compare the plans of President Obama and Governor Mitt Romney. Governor Romney’s plan is extracted from his “Believe in America – Mitt Romney’s Plan for Jobs and Economic Growth” available on his website. President Obama’s plan is derived from his record and his “Blueprint for an America Built to Last,” released by the White House on January 24, 2012.
Taxes: The more taxes a business pays, the less money a business has to grow the company, buy equipment, conduct R&D, expand into new markets, and hire more workers.
President Obama’s plans include:
- Reduce overall corporate rate to 28 percent with an even deeper cut to an effective tax rate of 25 percent for corporations manufacturing in the U. S.
- End tax breaks for outsourcing and provide a 20 percent tax credit for expenses of moving manufacturing operations back to America
- Expand, simplify, and make permanent the R&D tax credit
- Extend the 30 percent-Advanced Energy Manufacturing Tax Credit for clean energy manufacturing projects
- Introduce a new Manufacturing Communities Tax Credit to encourage investments in communities affected by job loss
- Reauthorize 100% expensing of investment in plants and equipment
Governor Romney’s proposal includes:
- Reduce the overall corporate tax rate to 25 percent
- Make permanent the R&D tax credit
- Reduce the top individual tax rate from 35 percent to 28 percent since most small businesses pay taxes at the individual level, not corporate taxes
- Eliminate the Death Tax
- Pursue a Fairer, Flatter, Simpler Tax Structure
Taxes on corporations and individuals will increase January 1, 2013 when the current tax rates that have been in effect for 11 years expire (referred to as the Bush tax cuts) and return to the higher rates in effect under President Clinton. There are additional taxes that will go into effect at the same time as a result of the Patient Protection and Affordable Care Act, commonly called Obamacare.
As Governor of Massachusetts from 2003-2007, Mitt Romney closed a $1.3 billion state budget deficit in 2004 without raising taxes by using a combination of funding cuts, fee increases, collection of more business taxes from eliminating tax loopholes, and drawing from the state’s “rainy day fund.”
Regulations: Regulations function as a hidden tax on manufacturers. A multitude of rules, restrictions, mandates, and directives impose stealth expenses on businesses and acts like a brake on the economy at large. The federal Office of Management and Budget own study places the annual cost of regulation on the economy at $1.75 trillion, which is nearly double the total of all individual and corporate income taxes.
President Obama’s record:
- The Federal Register’s compendium of new rules and regulations hit a record in 2010 of 81,405 pages with a projected annual cost of compliance of $26 billion.
- In one month alone, July 2011, the Obama administration issued 229 proposed rules, 379 final rules, and 10 economically significant rules—totaling more than $9 billion in regulatory costs.
- The over 2,000-page Dodd-Frank Act mandates 259 rules and suggests another 188.
- The Patient Protection and Affordable Care Act (PPACA) may generate up to 10,000 pages of regulations to implement.
- The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 produced federal restrictions on credit card companies that have led to higher interest rates, higher annual fees, and lower credit limits.
Governor Romney’s proposal:
- Issue an executive order paving the way for Obamacare waivers for all 50 states and work with Congress to accomplish full repeal
- Seek to repeal Dodd-Frank and replace it with a streamlined regulatory framework
- Eliminate the regulations promulgated in pursuit of the Obama administration’s costly and ineffective anti-carbon agenda
- Press Congress to reform our environmental laws and to ensure that they allow for a proper assessment of their costs
- Order all federal agencies to initiate repeal of any regulations issued by the Obama administration that unduly burden the economy or job creation
- Impose a regulatory cap that forces agencies to recognize and limit these costs
- Restore a greater degree of congressional control over the agency rulemaking process
Trade: The U. S. had an overall trade deficit of $558 billion in 2011, but our deficit with China was $295.5 billion, and the combined deficit with Canada and Mexico rose to a combined $185 billion of the total. In fact, we have a trade deficit with 66 countries. Both President Obama and Governor Romney support current trade agreements and propose additional agreements.
President Obama – As a candidate in 2007 and 2008, he said, “there’s no doubt that NAFTA needs to be amended,” in December 2007 at the Des Moines Register debate, and at a June 2008 speech in Flint, MI, he said,” If we continue to let our trade policy be dictated by special interests, then American workers will continue to be undermined, and public support for robust trade will continue to erode.”
But as president, he pushed hard for passage of the trade agreements with Korea, Colombia and Panama, which were passed and signed in October 2011, all drafted on the NAFTA template. He has instructed his team at the U.S. Trade Representative’s office to spearhead the proposed Trans-Pacific Partnership, a trade agreement involving nine Pacific region nations, including Vietnam and Brunei, two undemocratic countries with serious and well-documented human and labor rights problems.
Unlike his predecessors, he has imposed tariffs on imported Chinese products that have been determined to be “dumping, such as the 2009 tariff on imported Chinese tires, and the recent Commerce Department final determination of anti-dumping duties from just over 31 percent up to 250 percent on photovoltaic solar cells, and anti-subsidy duties of up to more than 15 percent were also recommended.
His Blueprint states that he will:
- Create a new trade enforcement unit that will bring together resources and investigators from across the Federal Government to go after unfair trade practices in countries around the world, including China
- Enhance trade inspections to stop counterfeit, pirated, or unsafe goods before they enter the United States
- Put American companies on an even footing by providing financing to put our companies on an even footing.
Governor Romney – As a candidate, he supported the free trade agreements with Korea, Colombia and Panama and also calls for passage of the Trans-Pacific Partnership, in addition to new FTAs with nations such as Brazil and India.
Romney would pursue the “formation of a ‘Reagan Economic Zone.’ This zone would codify the principles of free trade at the international level and place the issues now hindering trade in services and intellectual property, crucial to American prosperity and that of other developed nations, at the center of the discussion.”
Romney proposes to get tough with China in the following ways:
- Impose “targeted tariffs” or economic sanctions for unfair trade practices or misappropriated American technology
- Designate China as a currency manipulator and instruct the Commerce Department to impose countervailing duties
- Improve enforcement at the border by allocating the necessary resources to investigate the actual point of origin for suspect products arriving on our shores
- Impose harsher penalties on those who would circumvent our laws
Energy: The manufacturing industry both produces and uses energy; therefore, government policies affecting energy have a major impact on the growth, development, and financial position of manufacturers. Energy policy is critical to our country’s economic future, and we have the natural resources we need to be more energy independent.
President Obama’s plan:
- Promote safe, responsible development of the near 100-year supply of natural gas, supporting more than 600,000 jobs while ensuring public health and safety
- Incentivize manufacturers to make energy upgrades, saving $100 billion over the next decade
- Create clean energy jobs in the United States
President Obama’s Track Record:
- Imposed a moratorium in 2010 on underwater drilling that eliminated more than 10,000 jobs and cost $1 billion in lost wages.
- Delayed the construction of the Keystone XL Pipeline, which would bring enormous supplies of Canadian tar sands oil from Alberta to the U. S and create an estimated 25,000 to 100,000 American jobs.
- Proposed a cap-and-trade system that was a complex plan for allowing industries to trade the right to emit greenhouses gases, which failed to pass Congress.
- Under Obama, the EPA has issued a 946-page “hazardous air pollutants” rule mandating “maximum achievable control technology” under the Clean Air Act, which could put 250,000 jobs in jeopardy.
- New regulations for industrial boilers—the so-called “Boiler MACT”—may put another 800,000 jobs at risk.
Governor Romney’s proposed energy policy focuses on significant regulatory reform, support for increased production, and funding basic research instead of specific technologies, including the following:
- Streamline and fast-track the permitting process for exploration and development of oil and gas
- Consolidate procedures for issuing permits so that businesses have a one-stop shop for approval of common activities
- Overhaul outdated legislation such as the Clean Air Act, Clean Water Act, and other environmental laws
- Reform the regulatory structure of the nuclear industry
- Inventory our nation’s carbon-based energy resources
- Explore and develop our oil reserves wherever it can be done safely, taking into account local concerns, including the Gulf of Mexico, both the Atlantic and Pacific Outer Continental Shelves, Western lands, the Arctic National Wildlife Refuge, off the Alaska coast, and the more recently discovered shale oil deposits
- Partner with our neighbors Canada and Mexico to develop their oil reserves
- Pave the way for the construction of additional pipelines that can accommodate the expected growth in Canadian supply of oil and natural gas
- Extract natural gas by means of “fracking” (hydraulic fracturing, coupled for these purposes with horizontal drilling)
- Redirect government funding of clean energy spending towards basic research and development of new energy technologies and on initial demonstration projects that establish the feasibility of discoveries
Manufacturing has been a key driver of what limited economic recovery we have had since 2009 and will play a major role in U.S. economic success in the future if it gets the right support. On the surface, Obama and Romney seem to have roughly the same economic goals – stimulate job creation, boost American competitiveness in the global market and drive down the deficit, but as we have seen, their plans for reaching these objectives differ greatly. I urge everyone to carefully compare their plans and what they have said and done before choosing for whom to vote. Don’t waste the precious freedom to vote that our ancestors risked or gave their lives to gain.