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It’s Not a Tax on a Cadillac People

The Affordable Care Act has a provision in it that is commonly referred to as the “Cadillac Tax.” Well, it’s not a tax on the storied line of cars manufactured by GM, it’s a tax on employee benefits – a 40 percent tax on the benefits employees receive over a certain value – it should be called the Employee Benefits Tax (EBT). (continue reading…)

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Veterans Are Critical to Success of Manufacturing

Tomorrow is Veteran’s Day. A day we set aside to honor and celebrate the men and women who have given service to our nation in the Armed Forces. This one day is rightfully dedicated to them in gratitude, but manufacturers believe our nation’s veterans deserve our support the other 364 days of the year as well. The challenge for members of the armed services transitioning out of service and into the private sector is often translating how those skills are valuable to the private sector. (continue reading…)

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Medicare Part D is Popular and Sound

Two important reports about Medicare Part D came out this week and reaffirmed once again that the program is a success. Each year, Medicare Today and KRC Research conduct a survey of Medicare Part D beneficiaries every year and this year’s results showed it continues to be extremely popular with 86 percent of seniors saying they are satisfied with the program. The Congressional Budget Office also issued a report titled “Competition and the Cost of Medicare’s Prescription Drug Program.”

The CBO report showed that competition within the Medicare Part D program is an important part of how the program has held down spending and remains successful overall. In fact, the program continues to operate at a cost significantly lower than initial projections – nearly 50 percent below what CBO projected when the program was created. The report also pointed out flaws in proposals to import Medicaid-style rebates for medicines purchased by low-income Part D beneficiaries that have been pushed by President Obama and others. The CBO acknowledged that implementing Medicaid rebates in the Part D program may decrease the cost of some drugs in the short-term, but it is not a permanent solution to lowering costs of prescription drugs and may reduce choices for seniors, reduce incentives for innovation and increase premiums.

As I’ve said before, Medicare Part D should be looked at as a model for reform and the results of these two reports confirm that to be the case. Real competition and real choices lead to real solutions for affordable and accessible healthcare.

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A Presidential Laboratory of Bad Ideas

This afternoon, President Obama is expected to sign yet another executive order and this one will create significant problems for businesses who wish to provide goods and or services to the federal government. According to reports, the order will require federal procurement officers to effectively act as enforcers of labor laws that even the Department of Labor itself has difficulty understanding, which is a dangerous game for our President to be playing with federal contracts. Effectively, the President is sanctioning a practice known as “blacklisting” companies from federal contracts due to even minor infractions of complex labor laws under the Fair Labor Standards Act. While true bad actors deserve consequences, there are already procedures in place to address those cases.

The Fair Labor Standards Act is a labyrinth of federal statute, regulations, guidance and case law that ensnares even the most cautious employers. It encompasses things like how employees are classified, overtime pay and recordkeeping requirements. All of these issues are fraught with landmines that even sophisticated employers can run into without knowing it. In fact, even the Department of Labor itself ran afoul of employee classification regulations recently and were forced to issue back-pay to a number of the nearly 2,000 of its employees who filed a grievance under the FLSA in 2010. Ironically, the very federal agency charged with enforcing the requirements would be blacklisted or put on a “contract avoidance list” under this new executive order.

Further complicating matters is the fact that the administration is in the process of regulatory rulemaking to change various aspects of the FLSA, which is certain to create violations out of what were once legal practices and bog employers down with additional litigation on matters that have already been largely ironed out in current law. In the end, there is already a process federal procurement officers can go through if there are contractors having trouble complying with the FLSA. Creating a “contract avoidance list” and dispatching a member of the Politburo to each agency to police the list seems unnecessary.

The President seems to be using the federal procurement process as his own little “laboratory” for bad ideas in labor policy and this one is bound to have some unintended consequences. We may not be there yet, but at some point businesses with federal contracts, or those thinking about bidding for them, may decide the additional hoops, hurdles and hassles just aren’t worth it anymore – particularly if they are a small to medium-sized business. There’s likely quite a bit to be concerned with in this executive order and we’ll be going through it very carefully. More to come on this one, I’m sure.

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Are Big Changes Coming to Employer-Sponsored Insurance?

Arguably the biggest outstanding question about the Affordable Care Act is what effect it will have on employer-sponsored insurance (ESI) coverage. According to the Bureau of Labor Statistics, 156 million Americans receive coverage through their employer or their spouse’s employer.

Many employers had to change the benefit structure of their plans to comply with the mandates contained in the ACA, but the larger question looming is whether employers continue to provide coverage at all in the coming years? The frightening thing about this question is no one really knows and there is a wide variance in the estimates out there:

  • One analysis done by the Urban Institute comes to the conclusion that the employer mandate is pretty meaningless and there would be little impact on the decision of employers to provide coverage or not. They estimate that roughly 200,000 fewer employers will provide coverage.
  • Another analysis done by S&P Capital IQ estimates that 90 percent of employers will decide to stop providing employees health coverage in the next six years. That translates to over 100 million Americans moving to the health insurance exchanges because their ESI has gone away.
  • Yet another estimate from Dr. Ezekiel Emanuel, one of the principal architects of the ACA, predicts that 80 percent of employers will suspend offering ESI in the next ten years. If he is right, it’s likely the smaller employers in the fully-insured market that would represent the 80 percent of employers deciding to stop offering coverage.

The two higher estimates are astounding numbers that signal an enormous disruption to millions of Americans in the coming years. As a country we have to determine whether such a dramatic transformation of how we all get health insurance coverage is acceptable – intended or not. Even if the estimates are off by half, we have a fog of uncertainty looming that employers and millions of their employees are going to navigate through in the coming years.

Ninety-seven percent of NAM members provide health coverage to their employees and most, if not all, I speak to want to continue providing that benefit. According to the BLS, manufacturers generally are more likely to offer coverage and their employees are more likely to accept health benefits compared to other sectors of our economy.

The ACA substantially changed the dynamics by increasing regulatory burdens and costs. If 90 percent of employers decide to stop offering coverage, it’s very reasonable to expect some of those employers will be manufacturers. It should be abundantly clear to everyone what forced them to make that decision.

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Manufacturers Lead Charge to Close the Skills Gap

President Obama signs the Workforce Innovation and Opportunity Act into law

President Obama signs the Workforce Innovation and Opportunity Act into law

President Obama put his signature to important legislation to address the skills gap – an issue that has plagued manufacturers in recent years, with 80 percent of them reporting a serious difficulty in finding skilled workers. Recently, a jobs expert took a close look at the skills gap and what manufacturers are facing.

The NAM and Manufacturing Institute have led the business community’s effort to ensure that employers have access to the 21st century workforce that they need to drive innovation, production and growth. Enacting the Workforce Innovation and Opportunity Act into law provides much needed streamlining of skills certification programs and the direction of necessary funding to ensure manufacturers have the workforce they need to succeed in a globally competitive environment.

The United States has long been the home of the most productive and successful workforce in the world. By coming together in a bipartisan manner (a sight too rarely seen in Washington these days), Congress and the President have taken an important step toward ensuring that the American workers’ reputation as the world’s best will continue.

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Setback for the ACA Started Years Ago

To my mind there is no rejoicing in the decision reached by a federal appeals court this morning. The decision determined that subsidies given to those enrolled in federally-facilitated exchanges (FFE) are unlawful because the Affordable Care Act (ACA) law clearly states the subsidies are for those in state-based exchanges. This decision is a severe blow to the Administration and supporters of the ACA as a majority of the exchanges up and running around the country are now ineligible for subsidies to offset the cost of coverage.

The reason there is little to rejoice about this decision is the origins of the decision began about five years ago, before the ACA was the law of the land. What it demonstrates to me is that the legislative process matters and is ignored at the executive’s peril. It also shows us that bad things are more likely to happen when one party decides to effectively cut the other out of the process. Remember, the House was forced to take up the poorly written Senate version of healthcare reform, because Senator Ted Kennedy was replaced by a Republican during a special election held due to his death in 2009, which reduced the Senate Democratic Majority to 59.

Further exacerbating the situation, the White House insisted today that the subsidies will continue to be distributed – in clear contradiction to a federal court decision. The Jacksonian reaction to effectively ignore the decision is only going to create more trouble and puts the millions of Americans who are caught in the middle of this fight in a position of accepting something the federal judiciary has deemed unlawful.

It’s long past time for the President and his administration to accept that the legislative process is integral to the functioning of our government and is not something to be ignored or tolerated. It’s also time for Congress to be legislators.

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21st Century Workforce Training

When the Workforce Investment Act was passed in 1998, Bill Clinton was the president, Newt Gingrich was the Speaker of the House and we were in the middle of the dot-com boom. Since then we’ve been through the dot-com bust, one mild recession after the events of 2001 and one severe recession, of which we are still seeing the effects. Our economy has grown from $11.5 trillion in 1998 to $15.8 trillion in 2013. A company named Google has gone from a startup few people heard of in 1998 to widespread use as a verb in everyday lexicon. All this is to say our economy and the jobs in it have changed dramatically since the original law was passed. The Workforce Investment Act has been badly in need of modernizing for over a decade and the House is poised to give its approval to legislation that will do just that this week.

The Workforce Innovation and Opportunity Act (WIOA), as passed by the Senate, builds on the work done by the House of Representatives last year to reform the program and bring it online with the 21st Century. It eliminates 15 existing programs, applies a consistent outcome metric for federal workforce programs, streamlines the bureaucracy of the programs and empowers local boards to tailor services to the needs of their local economy. Manufacturers fully support WIOA and key voted in favor of it when it was considered by the Senate. We were pleased to see it pass the Senate by an overwhelming vote of 95-3.

For the last four years, the NAM has been working to ensure that federal workforce training programs emphasize programs that result in a credential or certification that demonstrates they have acquired the skills identified by employers as necessary for success in their field. Those credentials and certifications should be industry-driven to maximize their value to both the employee and the employer. The NAM believes the WIOA achieves this goal by recognizing the importance of certifications and credentials throughout the legislation.

Workforce training in the 21st Century is a constantly evolving and iterative process. WIOA gives federal programs the ability to adapt to the needs and demands of employers and employees in the future. It’s long overdue, but the House and Senate are to be thanked and congratulated for their bipartisan work in reaching this agreement.

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Manufacturers Will Not Give Up on Comprehensive Immigration Reform

The House won’t vote on comprehensive immigration reform this year—that’s the recent word from Speaker Boehner. Manufacturers are disappointed. With each day that passes, Congress misses an opportunity to take an important step forward for our economy and country.

Immigration reform is a priority for manufacturers. With some 80 percent of employers reporting a shortage of skilled workers, reform can provide a bridge so employers can begin to close the skills gap as we simultaneously undertake efforts to improve education and training efforts. And, in addition to the practical considerations, immigration reform is simply the right thing to do.

Of course, while manufacturers are frustrated by the inaction on reform, we’re not giving up. It’s not a matter of if immigration reform will happen; it’s a matter of when. Our country is better than our current, broken immigration system. That’s why manufacturers are committed to advancing immigration reform done right—a comprehensive solution that includes a pathway to citizenship and ensure that those who seek it aren’t denied the American Dream.

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The Worth of American Ingenuity

Manufacturers in the United States are among the most prolific inventors and innovators in the world and the NAM supports policies at the federal level that encourage and stimulate innovation in all sectors of our economy. While Americans and federal policy makers generally understand there are risks associated with research and development, the enormity of the risk is often difficult to convey, but it is absorbed into every product.

The cost of innovation varies from sector to sector, but the drive for solving problems and improving what we have is priceless. It’s what built our nation into an economic workhorse and we ought to have the proper perspective on the value it brings to our lives every day. Manufacturers of all sizes and types strive to improve, build upon or replace the products we use to make our lives easier – in some cases they even make our lives possible. In the words of Thomas Edison, “There is always a better way.”

Manufacturers of automobiles are constantly looking for ways to make our cars more convenient, more enjoyable, more luxurious, more efficient – generally more of everything, including safer. All of those innovations come with a cost that runs into the millions and billions of dollars and sometimes they never make it to the market. Over time, the price of those innovations that do make it to the market declines and becomes part of the base cost of a vehicle. Thirty years ago, fuel-injection wasn’t viewed as necessary or practical for general use. Try finding a new car that isn’t fuel-injected now – you can’t, unless it’s an electric one.

Manufacturers of paints and other coatings are engaged in a constant and epic battle with chemistry, mineralogy, physics, biology and meteorology. Millions of dollars are spent by coatings companies to perfect the color, application and durability characteristics of all their products and we get to choose which of those features we want with each gallon of paint or stain we buy. Whether we realize it or not, that’s part of the reason we see a price differential between a gallon of flat white paint and a gallon of solid stain.

Manufacturers of medical devices, biologics, pharmaceuticals, agriculture, petroleum, and many other products also spend billions each year to improve upon or invent products and treatments that have never existed before – products that enrich our lives or make it possible to continue living at all. That’s why the NAM has a clear and unambiguous policy when it comes to innovation – we are for it. American ingenuity has always, always been worth the investment and it is firmly embedded in the American ethos.

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