We've heard many a great speech from President Obama before. Last night's State of the Union was no exception. Here at The Economic Populist we say show me the money. We've heard soaring rhetoric from President Obama too many times, yet behind the words, deeds are either opposite or M.I.A.
Still, Obama gave a lot of lip service to U.S. manufacturing and jobs. To even get U.S. manufacturing on the national policy radar is a feat in and of itself. The actual SOTU transcript is on the White House site with a flurry of videos, social media and round tables to boot. Can't say this administration suffers from a lack of word generation!
That said, we all take President Obama at this point with a strong grain of salt. We've been so disappointed already.
Kudos to him for continuing to highlight this important issue, but he failed to mention the main cause of our manufacturing woes in the first place: currency manipulation.
The Alliance for Manufacturing had this to say about the manufacturing talk:
SCOTT PAUL/AAM: "Strengthening American manufacturing and growing manufacturing jobs will lay a solid foundation for a new middle class and economic security for the next generation. We commend President Obama for focusing on manufacturing in a way no president has for 25 years or more."
The President said: "Think about the America within our reach: A country that leads the world in educating its people. An America that attracts a new generation of high-tech manufacturing and high-paying jobs."
SCOTT PAUL/AAM: "A speech alone won't change policy, but it can lay the groundwork. We look forward to working with the White House as it cracks down on China's cheating, which is stealing jobs and jeopardizing our economic future."
The President said: "Tonight, I’m announcing the creation of a Trade Enforcement Unit that will be charged with investigating unfair trade practices in countries like China."
SCOTT PAUL/AAM: "Congress can and should pass key legislation right away, starting with a major investment in infrastructure and a bipartisan bill to stop China's currency manipulation. Congress should also work to pass a package of pro-American manufacturing tax incentives for innovation, insourcing, training, and domestic capital investments."
The President said: "We should start with our tax code. Right now, companies get tax breaks for moving jobs and profits overseas. Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it. So let’s change it. First, if you’re a business that wants to outsource jobs, you shouldn’t get a tax deduction for doing it. That money should be used to cover moving expenses for companies like Master Lock that decide to bring jobs home. Second, no American company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas. From now on, every multinational company should have to pay a basic minimum tax. And every penny should go towards lowering taxes for companies that choose to stay here and hire here."
SCOTT PAUL/AAM: "Both parties should recognize the economic importance of manufacturing, as well its political appeal to voters of all stripes. Voters rightly understand why manufacturing must be central to a real recovery, and know we can't afford to cede global leadership to China."
Financial Fraud Commission
Some are saying President Obama's new Financial Fraud Commission maybe a pig in a poke. Check out this Tom Ferguson interview where new financial fraud commission could actually slow down investigations and charges.
Stop Congressional Insider Trading
Unfortunately President Obama will be relying on Congress to police themselves. We know how well that works out. If you don't know how Congress is allowed to play the stock market, while crafting legislation which will affect those very trades, watch this 60 Minutes segment.
3 Million Foreign Workers
Like 'em or not, labor statistics are labor statistics. Reduced immigration group NumbersUSA noted Obama's great job growth equals the number of foreign workers allowed into the U.S. during the same period.
What really galled me, though, was Pres. Obama bragging about more than 3 million U.S. jobs created during the last 22 months.
That could have been good news for unemployed Americans. But during that same period, the Obama Administration issued more than 3 million work visas to new immigrants and other foreign workers (more than half of them permanent).
What is the point of all that talk in the speech about creating jobs when the federal government is importing so many new workers? Although the number of work permits issued is primarily controlled by Congress, Pres. Obama could be asking for reductions to give relief to all those Americans who have been unemployed for such long periods. He said nothing. And he gave no sign tonight of having the slightest interest in how immigration affects the labor market.
Who can forget the soaring yes we can and change you can believe in campaign of 2008, only to get Tim Geithner, Larry Summers and shadows of Goldman Sachs, G.E. in the White House? You're not alone if you felt a flashback to 2008.
Obama's speech was a compilation of highlights from his past ones. One part optimism, two parts repetition equals one total uninspiring. Maybe it’s so boring, because it matters so little at this point. Taking away popularity polls, our national threshold for belief in hope or change has been trampled, not just because of Obama or Romney, but of the whole political apparatus that thrives on deflection of reality and posturing. We don’t have the same energy to expend listening to politicians, the endless spin that renders fact obsolete, responsibility absent, and true accomplishment, unnecessary.
When writing this overview, I literally linked to last year's SOTU and didn't even notice the difference, even though I watched the speech and read it previously. That is how tone deaf Obama's words without deeds has become.
Bath Water & Babies
Yes, we've heard it all before. Yes, we're aware this administration is as corporate corrupt as the last one. Still, the administration seems to be doing a few good things, as announced on the White House blog. For example, securing the global supply chain is not something you'll hear about from pundit talking heads, yet vital to the national interest.
Another is a recently released manufacturing factsheet on how to help bring jobs home. Now this policy initiative actually has many ideas we've promoted on this site and the main policy points are reprinted below.
1. Removing tax deductions for shipping jobs overseas and providing new incentives for bringing them back home (revenue neutral): The tax code currently allows companies moving operations overseas to deduct their moving expenses – and reduce their taxes in the United States as a result. The President is proposing to change that. These deductions will be denied, and companies will no longer be provided deductions for moving their operations abroad. At the same time, the President is proposing to give a 20 percent income tax credit for the expenses of moving operations back into the United States to help companies bring jobs home.
For example: If a company was closing a plant to move that plant overseas and incurred $1 million in expenses – ranging from the cost of scrapping equipment to shipping physical capital to clean up costs – it could right now deduct those expenses, and get a tax reduction of $350,000 (assuming the firm faces the 35 percent statutory tax rate). The President proposes to eliminate this tax deduction. And, if a corporation moving jobs to the U.S. incurred similar expenses, the President proposes to provide that company with a tax credit of $200,000 to help offset these costs and encourage investment here at home.
2. Targeting the domestic production incentive on manufacturers who create jobs here at home and doubling the deduction for advanced manufacturing (revenue neutral): In conjunction with the President’s broader commitment to corporate tax reform, the Administration is proposing measures to provide incentives for manufacturing in the United States. The Administration is proposing to reform the current deduction for domestic production by more narrowly focusing it on manufacturing activities—for example, it would no longer cover oil production. These savings would be invested in expanding the deduction for manufacturers and doubling for advanced manufacturing technologies from its current level of 9 percent to 18 percent.
3. Introducing a new Manufacturing Communities Tax Credit to encourage investments in communities affected by job loss ($6 billion in credits): The President is proposing a new credit for qualified investments that help finance projects in communities that have suffered a major job loss event. This credit will provide $2 billion per year in incentives for three years. For this purpose, a major job loss event occurs when a military base closes or a major employer closes or substantially reduces a facility or operating unit, resulting in permanent mass layoffs. The tax credit would support qualified investments in this affected community – made in conjunction with State Economic Development Agencies and other local entities – that improve local economic growth.
4. Providing temporary tax credits to drive nearly $20 billion in domestic clean energy manufacturing ($5 billion in credits): The President is proposing to extend tax credits to drive nearly $20 billion of investment in domestic clean energy manufacturing, ensuring new windmills and solar panels will incorporate parts that are produced and assembled by American workers. This Advanced Energy Manufacturing Tax Credit – which was oversubscribed more than three times over – goes to investments in clean energy manufacturing in the United States. The additional $5 billion in tax credits the President is proposing will leverage nearly $20 billion in total investment in the United States.
5. Reauthorizing 100% expensing of investment in plants and equipment ($4 billion): The President is proposing to extend for all of 2012 a provision that allows businesses to expense the full cost of their investments in equipment, spurring investment in the United States. Over the next two years, this would provide businesses large and small with $50 billion in tax relief, with much of that recovered by the Treasury in subsequent years.
6. Closing a loophole that allows companies to shift profits overseas (raises $23 billion): Corporations right now can abuse the tax system by inappropriately shifting profits overseas from intangible property created in the United States. The President is proposing to close this loophole.
These manufacturing initiatives are great ideas but must pass Congress, in an election year to boot. We can only pray you write your Congressional representatives so maybe, finally, we can get just a few good policy ideas enacted into law. Don't bank on it happening though. U.S. multinationals love their offshore outsourcing, sending hordes of corporate lobbyists like army ants over Capitol Hill to destroy anything in their global labor arbitrage path, including solid manufacturing policy initiatives.