Made In Arizona
Why manufacturers are optimistic
June 23, 2017
Energy and confidence defined the latest National Association of Manufacturers annual summit held earlier this week in Washington, D.C.
The right mix of policy reforms and executive and legislative branch leadership has put optimism among manufacturers at a 20-year high.
The Arizona Manufacturers Council, an entity of the Arizona Chamber of Commerce & Industry, serves as NAM’s state affiliate for Arizona. I attended the summit on the AMC’s behalf and came away more excited than ever about what’s in store for this sector.
Manufacturing produces over $2 trillion in economic output and over 13 million jobs. In Arizona, we’re leaders in aerospace, defense and semiconductors. We also manufacture items ranging from golf clubs – PGA-tour-event-winning equipment by Karsten Manufacturing’s PING, for example – to the world’s best refrigerators from Sub-Zero and Wolf.
The sector is defined by cutting-edge technology and innovation, and it’s growing in jobs and output.
Summit speakers included Vice President Mike Pence and Speaker of the House Paul Ryan. Leadership at the highest levels is behind manufacturing now more than ever, a vital sector for economic growth.
We need to convert this attention and energy into the passage of NAM’s legislative agenda. The four top legislative priorities highlighted at the summit:
Tax reform. Speaker Ryan called this a once-in-a-generation opportunity. The vice president also stressed the importance of tax reform. The keys to this effort are to reduce the U.S. corporate tax rate – the world’s highest rack rate – to 15 percent, and to reduce the personal income tax rate, which applies to two-thirds of manufacturers as well.
We need to move to a territorial tax system and eliminate the death tax that harms capital intensive family businesses. Maintaining and even enhancing the permanent research and development tax credit and reducing taxation on capital expenditures are also important for our efforts to accelerate innovation.
Infrastructure investment. Manufacturers need a modern infrastructure to move goods efficiently from shop floor to market. Complex supply chains and just-in-time inventory management require no less. For Arizona, a key here is to build out Interstate 11, which would connect Las Vegas and Phoenix, the nation’s largest cities not currently connected by an interstate.
Regulatory reform. This is an area where much progress is being made, and necessarily so. A 2014 NAM study pegged the cost of regulations for manufacturers at a whopping $19,564 per employee.
Speaker Ryan spoke of implementing reforms in waves.
The first wave was to use the Congressional Review Act to reverse regulations enacted at the end of the previous administration. This mechanism has been used now a record 14 times. Executive orders and other administration activity is also moving at a feverish pace to undo some of the overregulation of the past eight years. The reversal of the punitive gainful employment regulations for higher education is one example.
The next wave is a two-out, one-in approach to any new regulations. It’s not a gimmick. NAM found in a 2016 study that manufacturers face 297,696 restrictions on their operations from federal regulations. If any sector could stand some regulatory relief, it’s manufacturing.
More difficult, but also important, is to pass into law regulatory reform bills that require more robust cost-benefit analyses to justify their necessity.
Workforce development. Skills, skills and skills. Both the vice president and speaker stressed this area. NAM is putting muscle behind legislation that would reauthorize and improve the Perkins Act, which covers career and technical education and vocational programs.
There was also excitement at the summit about the president’s apprenticeship announcement, intended to create a new workforce development program that other countries have used successfully to prepare willing workers for available jobs. As we enter what some are calling the fourth industrial revolution, workforce readiness is critical.
NAM’s work on international trade is also important. It has been a privilege to serve on NAM’s NAFTA Task Force led by Linda Dempsey, NAM’s vice president for international economic affairs. Linda is one of Washington’s most important players when it comes to the NAFTA modernization effort. NAM understands that a new and improved NAFTA is critical to our continent’s highly integrated manufacturing supply chains and our ability to sell products marked Made in the USA to the 95 percent of consumers who live beyond our borders. Let’s modernize and improve NAFTA and hold it up as a model for future trade agreements.
The energetic NAM president and CEO, Jay Timmons, cheerfully told the summit crowd, “This is our time.”
He’s right. Manufacturers have every reason to be excited.