Washington View: For manufacturers, action speaks louder than words

By Don Brunell, Columbian business commentator

Published:

 

President Barack Obama and his GOP rival, Mitt Romney, tell voters they want manufacturers to stay in America and create new jobs. The president even promised an audience in August in New Hampshire that he had create 4.5 million new jobs, half of those in manufacturing.

Why all the talk about manufacturing?

Our country is the world's largest manufacturing economy, with 21 percent of the global manufactured goods produced here. China is second at 15 percent, and Japan is third at 12 percent.

U.S. manufacturing supports an estimated 18.6 million jobs, with one in six people employed in plants and factories. In Washington, 256,600 people work in manufacturing.

The largest manufacturing employer in our state is Boeing, with 80,000 people, but plants and factories are scattered across our state. Schweitzer Engineering Labs, founded in Pullman 30 years ago, employs 3,500 people.

Manufacturing jobs pay well. According to the National Association of Manufacturers, those employees earn an average of $77,186 per year.

Manufacturing is linked to another part of our state's economy: exports. On a per capita basis, Washington is the nation's leading exporter, and manufacturing accounts for 77 percent of our state's exports. In a state that's home to Boeing and Microsoft, it might be surprising to learn that nine out of 10 of those exporters are small businesses.

So now that we've established manufacturing's importance, what has to occur to fulfill Obama's and Romney's campaign promises?

Five-step plan

Here are key things the president and Congress can do.

First, they can eliminate the policies they implemented that put American manufacturers at a competitive disadvantage, policies that push costs for U.S. firms 20 percent higher that their global competitors.

The explosion of federal regulations is a key disadvantage, costing $1.7 trillion annually. According to a new study by the Manufacturing Alliance for Productivity and Innovation, regulations on U.S. manufacturers are expected to reduce industrial output by $500 billion and could reduce exports by as much as 17 percent this year alone.

Even more disturbing, since 1998, the growth in regulatory costs has far outpaced the growth of the manufacturing sector. Major regulations are defined as those with compliance costs in excess of $100 million. The Obama administration has imposed an average of 72 such regulations on manufacturers each year, compared to 45 per year under George W. Bush and 36 per year under Bill Clinton.

Second, our corporate tax rate is the second highest in the world among industrialized nations, trailing only Japan. Seven out of 10 manufacturers pay income tax at individual rates, and even though the Bush tax cuts are characterized as giving the rich a break, any increase on individuals is a tax hike on the majority of our manufacturers.Third, lawsuit costs in the U.S. are the highest in the world. In 2009, litigation costs were $248 billion, $808 for each man, woman and child in the nation. Adjusted for inflation, that's a 700 percent increase since 1950.Fourth, health care costs have increased an average of 12 percent a year in the past decade, and with the implementation of the Patient Protection and Affordable Care Act, costs will rise dramatically for employers, workers and their families.

Fifth, schools must emphasize science, technology, engineering and math to ensure that graduates have the skills to get those good manufacturing jobs.

Finally, in Washington, where low-cost electricity has been a key advantage, elected officials and regulators need to ensure that we have a dependable supply of affordable electricity for our homes, factories, hospital and businesses.

Campaign promises are nice, but in the end, they are only words. Action speaks louder than words, and action is what's needed if the U.S. is to remain the world's largest manufacturing economy.

Don Brunell is president of the Association of Washington Business, Washington state's chamber of commerce. Visit http://www.awb.org.