While most of the national media concentrates on the troubles with President Obama’s Cabinet, the Washington Post leads with the BIG NEWS.
Senate Democratic leaders conceded yesterday that they do not have the votes to pass the stimulus bill as currently written and said that to gain bipartisan support, they will seek to cut provisions that would not provide an immediate boost to the economy.
Moderate Republicans are trying to trim the bill by as much as $200 billion, although Democrats working with those GOP senators have not agreed to a specific figure.
We respectfully suggest a course of action, a stimulus plan that embraces the provisions identified by the National Association of Manufacturers as having the most beneficial effect on the manufacturing sector and the economy in general.
NAM President and CEO John Engler sent a letter to Senate leadership Monday identifying top priorities for effective economic stimulus. Text follows:
Dear Leader Reid, Leader McConnell, Senator Durbin, and Senator Kyl:
The National Association of Manufacturers (NAM) is gratified by the commitment of the bipartisan, bicameral Congressional leadership and the Obama Administration to move quickly on a legislative package to help get America working again. Manufacturers recognize that immediate action is needed to address the unprecedented challenges faced by all sectors of the economy.
NAM members believe a balanced, fiscally responsible tax and investment package designed to help job providers and the people who depend on them, will go a long way to spur economic revitalization. To this end, we strongly support a number of provisions in the American Recovery and Reinvestment Act (S. 1) scheduled for debate this week and encourage you to consider additional changes that will ensure that the tax and investment provisions have an immediate and direct impact on our economy. Legislation that combines timely, targeted tax incentives and increased investment in areas critical to our competitiveness will help get our nation’s economy back on track and ensure job creation and sustainable economic growth.
In particular, the NAM supports the following measures:
· Tax Relief for Struggling Companies: Net operating loss (NOL) relief has a proven track record of helping companies through tough times. Extending the carry-back period to five years will provide an immediate infusion of cash for struggling companies of all sizes, in a broad cross-section of industries. Similarly, we support an extension of the carry-back period for general business credits earned in 2008 and 2009. The loss and business credit carry back extensions will help companies retain jobs, make critical investments, and in some cases, simply keep their doors open.
· Broad Investment Incentives: Capital investment is key to sustainable economic growth and job creation. Extending the 2008 “enhanced” expensing and “bonus depreciation” provisions that allow all companies to take a current 50 percent write-off will help spur needed investment. For certain companies that currently are in a loss position, we support an extension and expansion of provisions that allow them to use unused AMT and R&D credits in lieu of bonus depreciation.
· Reinvesting in the United States: In general, U.S. companies pay a 35 percent “toll charge” when they bring foreign earnings back to the United States. A temporary “tax holiday” enacted in 2004 gave companies the opportunity to reinvest foreign earnings in the United States at an effective 5.25 percent tax rate. According to IRS, more than 800 U.S. companies repatriated $362 billion from foreign operations. The NAM supports proposals to again reduce the “toll charge” for U.S. companies to bring back overseas earnings to reinvest in the United States. During a time when many U.S. companies face a credit crunch, a temporary tax holiday provision will allow them to bring back money from overseas that can be reinvested in the U.S. economy and help address liquidity problems and job retention and creation. A recent study suggests that a second tax holiday provision could bring back some $545.5 billion to the United States, proving 93,000 new jobs in 2009 alone.
· Retirement Security: The NAM strongly supports adding provisions to address the pension funding crisis. The market losses that occurred at the end of 2008 and the additional drop in the credit bond rate have resulted in massive funding obligations for companies. According to a new report from Mercer, pension plans sponsored by the largest U.S. companies saw significant drops in plan assets during the last quarter of 2008, resulting in $469 billion in losses. Mercer estimates that pension expenses for companies are likely to increase from $10 billion in 2008 to an estimated $70 billion in 2009. The NAM recommends that Congress consider temporary funding relief to help companies through the current economic crisis.
· Housing: The housing market collapse remains at the core of our nation’s economic crisis and it is critical that any economic recovery plan include proposals to stabilize and revitalize the housing industry. The proposed enhancements to the home buyers’ tax credit will encourage people to reenter the housing market, helping to retain and create job opportunities in numerous housing-related industry sectors. We also support proposals to further increase the tax credit and extend it to all home buyers. Similarly, we encourage you to add to the package a proposal that would give qualified borrowers the opportunity to obtain low, fixed rate 30-year mortgages to buy a home or refinance existing loans.
· Cancellation of Indebtedness: In the current economic crisis, temporary tax relief for companies that purchase their own or related party debt at discount will help businesses effectively manage through the recession and save jobs. Under current law, a company that buys its own debt is required to pay income tax on the difference between the purchase price and the original issuance price of the debt. Increasing incentives to purchase discounted debt will reduce a company’s debt payment obligations, enabling it to put more cash towards saving and creating jobs.
· Energy Efficiency and Energy Resources: Energy efficiency upgrades and transmission grid modernization can reduce energy costs and increase supply. Proposed new incentives and extensions and enhancements of existing provisions will encourage investment in energy efficient equipment, materials and technologies, as well as sources of renewable energy, including advanced battery technology. While we support an investment strategy to achieve energy efficiency, the NAM opposes mandates that lock in higher energy costs for manufacturers. We continue to believe that the adequacy of domestic energy supply remains one of the biggest challenges impacting manufacturers and their decisions on where to locate.
· Highway, Aviation and Waterways: Providing additional funding to states and localities struggling to make progress on the growing backlog of transportation infrastructure projects will go a long way to strengthen our nation’s transportation infrastructure, a critical priority for manufacturers. We encourage you to provide at least $30 billion for these highway projects and to allow unobligated stimulus program funds to be redirected at the end of FY09 to go towards federal highway investments. Similarly, including funding for our nation’s airport improvements, as well as funding to support a 21st century satellite-based air traffic control system, will significantly enhance safety and energy efficiency while relieving congestion at our crowded airports. Likewise, funding the Army Corps of Engineers water resources program at a level of $9.78 billion will address millions of dollars of unmet needs in capital improvements and high priority operations and maintenance along the inland waterway system.
· Water and Sewer Facilities: Funding to update and modernize our nation’s drinking and wastewater infrastructure will help promote sound environmental policy and manufacturing competitiveness, while providing manufacturing and construction jobs.
· Health care: Rising health care costs limit manufacturers’ ability to create new jobs and invest in new technologies, ideas, or products. New funding and incentives to promote the widespread adoption of a uniform, interoperable system of health information technology (HIT) will increase transparency, reduce medical costs and improve the quality of patient care. At the same time, it is important not to restrict an individual’s access to medicines, devices or treatments. The NAM supports clear language that the government will not use comparative effectiveness information to influence coverage or payment recommendations. In addition, while the economic downturn has highlighted the need to address the challenges of affordable, quality health care coverage, long term changes to benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA) would create additional burdens on health care costs for employers. The NAM is pleased by efforts to keep COBRA benefits limited and temporary.
· Workforce Development: Many unemployed workers are not trained in the techniques and technologies necessary to fill a number of the jobs existing today and those that would be created by the stimulus package. These technical jobs require either post-secondary training or specific skills, which is why this must be an important component of any economic recovery package.
· Broadband: Initiatives, including both funding and tax credits, to promote the deployment of high-speed broadband infrastructure in unserved and underserved areas will help ensure that high-speed Internet service is available everywhere in America. Benefits will be felt immediately in business, education and health care.
· Basic R&D: Federal funding for basic research and development by the Department of Energy’s Office of Science, the Department of Commerce’s National Institute of Standards and Technology (NIST) and the National Science Foundation will support our nation’s ability to strengthen innovation in industries, foster a green economy and create new jobs in cutting-edge technologies.
While we support much of the economic recovery package, the NAM is concerned about the “Buy American” provision that was added in the Appropriations Committee mark-up. American exports provide a significant economical benefit to the American economy. Even though this section may be well intended, NAM members are very concerned that the new “Buy American” provisions in the bill will potentially backfire on the United States and end up harming American workers and companies across the entire U.S. economy. These new rules could result in mirror-image trade restrictions abroad that would put huge amounts of American jobs and exports at risk. Existing “Buy American” laws and regulations already require the use of U.S. goods for federal projects, except in specifically defined circumstances that are consistent with our obligations under the World Trade Organization and our bilateral and regional trade agreements. The proposed provisions ignore those obligations and could trigger a global race toward protectionism that will dearly cost U.S. jobs. Additionally, the provisions risk raising costs to many U.S. manufacturers, costs they cannot pass on to their customers in the current economy.
If the National Association of Manufacturers can provide any information on these or any other issues, please do not hesitate to call me at (202) 637-3000.
Thank you for your leadership.
cc: All Members, U.S. Senate
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