The Senate on Wednesday told business owners to spend their money on IRS paperwork instead of hiring employees when it rejected the Johanns amendment to repeal Section 9006 of the new health care law, which requires that businesses track and report any dealings with vendors that exceed $600 by filing an IRS Form 1099.

The Senate then invoked cloture on the small business finance bill, H.R.5297, Small Business Jobs and Credit Act.

Senate Majority Leader Reid commented: “This is an important piece of legislation. It is the most significant thing we have done since the stimulus bill was passed to create jobs.”

Sen. Mary Landrieu, Chairman of the Senate Small Business Committee, said she was introducing a bill to repeal Section 9006 with different “pay fors” than proposed in the Johanns amendment.

We are going to repeal I am going to file a bill right now to take care of it. We are going to repeal
1099. We are not only going to repeal the portion that was put in by health care–which was not done intentionally, but there are sometimes unintended consequences. Anybody around here who thinks they can write perfect pieces of legislation–they cannot. When you do something wrong, you should correct it. We are going to correct it.

But in addition, my bill that I am going to file right now is going to repeal the $600 requirement that has been in the law for 62 years, and we are going to raise that threshold to $5,000, clean up the way small businesses have to report, and do something good for small business in America. …[snip]

I have heard small businesses in my State, and I know we made a mistake on this 1099 and we are going to fix it. But it does not have to be fixed this morning. It doesn’t even go into effect for a year and a half.

Goodness knows small business reporting could stand a good clean up, but with respect — uncertainty. UNCERTAINTY! Businesses considering expansion or new hiring can gain no confidence about their future costs from a Congress that may or may not take up the issue sometime in the future, possibly. The IRS reporting requirement hangs like the Sword of Damocles over small business.

Sen. Landrieu’s new bill is S. 3777, to amend the Internal Revenue Code of 1986 to increase the threshold amount subject to information reporting at source. The text is not yet available.

The National Association of Manufacturers is active in a broad-based coalition, PACE, which stands for Promote America’s Competitive Edge, which includes major U.S. businesses with international operations. Among the revenue provisions being considered to pay for an expansion of health care coverage are dramatically higher taxes on those corporations for earnings made overseas. The tax hikes would be extremely damaging to U.S. competitiveness.

A PACE letter signed by 280 companies and associations has just been sent to members of Congress, outlining the deletrious impact. Excerpt:

American companies with worldwide operations directly employ 22 million American workers and support an additional 41 million U.S. jobs through their supply chain and through the purchases of goods and services by their employees. A steep corporate tax hike on worldwide American companies, especially during a severe recession, will hinder our ability to protect and create American jobs and will slow our nation’s economic recovery.

The current U.S. international tax system has evolved over decades in a manner that attempts to keep worldwide American companies on a nearly level playing field with competitors in other nations. Meanwhile, other leading economies are moving to make their corporate tax systems more competitive. As a result, the United States lags behind and is increasingly isolated from the rest of the world.

The U.S. business community supports closing tax loopholes and prosecuting those who cheat on their taxes. However, the current international tax rules including deferral, check the box and foreign tax credits are fundamental tax provisions, and are integral parts of the US tax system – not “tax loopholes.” It is inaccurate and misleading to represent them as such.

That’s right. And politicians who decry “tax incentives for shipping American jobs overseas” are engaged in cynical populism.

The letter is a very clear introduction to the dynamics of international taxation and U.S. competitiveness. Highly recommended.

And here’s the news release.

From The Financial Times, “Fed sanguine if dollar descent stays orderly.”

The weak dollar – which last week sank to its lowest level since the era of floating exchange rates began a quarter of a century ago – carries with it both benefits and potential risks for the US economy.

Most commentators emphasise the benign consequences for the US, while noting that it could have adverse effects on its trading partners, in particular in Europe.

This is essentially a current account perspective. A falling dollar – plus slower growth in the US than the rest of the world – boosts net exports and should help offset the effects of the US housing recession on overall growth.

David Heuther [sic], chief economist at the National Association of Manufacturers, says: “Exports remain strong and are holding the economy above water.”

This may overstate the case but virtually all economists are expecting a positive contribution to growth from exports. Equity investors also appear bullish, buying into large cap export stocks.

It’s Huether, u before e. And to respond to the Financial Times’ response, where would the economy be without exports?

More evidence on behalf of the Peru, Colombia, Panama and South Korea free trade agreements, in any case…

If you drive a car, ride a bus or plane, use an elevator, or have typed on a keyboard to get to this blog, then you probably have taken all those things for granted. That’s the way of today’s America–we have more than any civilization in history and yet we take for granted–and sometimes seem to punish–those who give us the wherewithal for all this bounty.

You realize how poorly we understand how our energy got to us when you a read a story about today’s exploration for oil and natural gas at the bottom of the oceans.

Reporters Russell Gold and Ana Campoy brilliantly captured this world of oil and gas exploration that most of us never see in an article recently in the Wall Street Journal and in other newspapers. I’m including a link to one of the articles. It profiles The Independence Hub, floating in the deepest water of any offshore platform. It will pull up a billion cubic feet of natural gas every day! This one platform will produce enough energy to heat nearly 5 million U.S. homes.

The reporters want to tell us how the biggest rigs are used less as smaller reservoirs of gas and aging fields can best be tapped by underwater well heads. Moreover, by having the wellhead gear on the seafloor, it’s out of the way of hurricanes.

Unfortunately the link above does not include the graphics and map that accompanied the WSJ piece on July 26. For me, they were as interesting as the analysis that went with it. Here’s what was in the graphics–

The map shows the Gulf of Mexico overlaid with a grid that shows where some of the most interesting oil and gas drilling it taking place, tiny specks not far from the delta of the Mississippi River. The illustration show one of the floating rigs that operates there–who knew these gargantuan steel structures could float?!!–and the spaghetti of umbilical cords that carry orders, chemicals and electricity down two miles to the well heads on the sea floor. Here are the steps shown in this very effective drawing by Erik Brynildsen:

Step 1: The Platform. Operators monitor production and send orders to the wellhead. If you’ve been on an offshore platform, you know this is much bigger than a lego block.

Step 2: 125 miles of “umbilicals” carry orders, electricity and chemicals down to wellheads. Computers monitor all of this activity and ten different fields feed into the Independence Hub.

Step 3: Modular wellheads or “trees” regulate flow and pressure with valves and chemicals injected into the well. How do they get these well heads atop the pipelines when it is two miles down from the ocean’s surface? I have trouble getting a horseshoe on a metal pole from twenty feet. I can’t imagine the engineering skill to not only match up the wellheads, let alone the drilling that goes below the sea floor to the deposits of oil and gas. Could you do this?

Step 4: Flow Lines. They send production from wells through centralized manifolds and up to the platform.

Step 5: It handles separation of gas from water, sand, etc. brought up from the sea bed. In other words, natural gas does not just flow up ready to get burned in your oven. It’s got to be transformed, clean up and sent onward to customers like you and me.

Step 6: The gas is sent on to the mainland via pipeline, also running along the bottom of the seabed.

Who takes all this for granted? Most of us who have never seen it. And then there’s those members of Congress who not only take all this for granted, but they want to penalize those companies that have the brains and bucks to get all this done.

By the way, if you wondered why I mentioned the keyboard in the beginning, it is because it is made from plastics and of course they are made from chemicals that originate from natural gas feedstocks. There’s another story there, and if you want to know how we are driving U.S. manufacturing abroad because of our short-sighted natural gas policies, read The Manufacturing Institute’s newest report on that topic–The Hidden Backbone of U.S. Manufacturing– by clicking here.

What is manufacturing anyway? It’s the transformation of one thing into something more complex. That can sound esoteric to someone outside of the industry.

So it was really interesting to see some United Technologies ads that give everyone an insight into the complexity that is today’s manufacturing. One of the ads I saw was a cutaway of a bus that highlights its fuel cell technology. Now I ride one every weekday to work, but I don’t usually think about all the elements that make that bus run. United Technologies’ ad — click here to see it – reminds us that today’s manufacturing is high-tech and marshalls hundreds if not thousands of parts into the products that we use everyday to make life better and easier.

Be sure to take a look at the United Technologies ad and, in the future, we’ll highlight more ads that give a good insight into American industry.

Anyone reading this article and, indeed, every single person you see today, has used some kind of energy. If you work at home, you have probably boiled water for coffee or tea and have turned on your computer to read this blog. If you commute to work, your car, bus or subway uses energy and so does the elevator in your office building. Typing these words uses energy. Energy is what makes our modern economy tick.

So you’d think that everyone would know a lot about energy, wouldn’t you? In fact, most Americans are in the dark about it and a new study from The Manhattan Institute shows just how ignorant many are about this important part of everyday life and our hi-tech industrial economy.

Partnered with Zogby International, the Manhattan Institute polled 1,000 Americans on topics from the sources of U.S. energy supply to environmental impacts of energy use. The result is Energy and the Environment: Myths and Facts, authored by Max Schulz. One of the big myths, according to the report, is the belief that the U.S. economy is based on oil. In fact, the report points out that 60 percent of all U.S. energy comes from non-oil sources such as natural gas, coal and nuclear power. Here is a sampling from this fascinating report:

Myth: 55% say Saudi Arabia is the largest oil exporter to the U.S. when in FACT, Canada sells us more foreign oil than any other country.

80% said the accident at Three Mile Island was fatal while the FACT is that no one died from that nuclear power plant incident almost 30 years ago.

60% believe the Kyoto Protocol requires all countries to cut emissions, while in FACT, China and India and other large emitters are exempted and the cost to the US economy has been estimated between $13 billion and $397 billion in 2010.

The report’s author notes appropriately that we won’t have the right policies in place if the data underlying today’s energy use is misunderstood. Read the news story from The Examiner, by clicking here.

Glenn Harlan Reynolds, aka Instapundit, provides the first piece in a four-part series on technology in today’s Examiner with a column entitled, “Embrace the machine that works better than magic.” He offers a quick take on four technologies that hold the promise of quick advances, innovation “that might not be magical themselves, but that would work magic on our economy and well being.”

Better batteries, necessary to make electric vehicles more efficient.

Rapid Health Response, i.e., the ability to respond to disease outbreaks or bioterrorist attacks with alacrity.

Nanotechnology, taking the next step to “molecular manufacturing” — “making things by putting the individual atoms and molecules where you want them.”

Better nuclear power: Newer, cleaner, safer and cheaper nuclear power technologies, such as pebble-bed reactors.

We highlight Reynolds’ piece — and anticipate the next three days of the Examiner series — because manufacturing plays a key role in developing and using all these technologies, one essential element in ensuring America’s future prosperity.

Plus, Reynolds always displays an admirable joie de vivre about these things. Not enough joie de vivre in Washington these days.

The annual dinner of the American Enterprise Institute took place tonight at the Washington Hilton, with the AEI’s Irving Kristol Award being presented to the Bernard Lewis, the renowned historian of Islam’s interaction with the West. Lewis’ academic work and topical commentary have gained new value in the wake of the terrorist attacks of September 11, 2001; it was truly an honor to hear his address, “Islam and Europe,” not to mention edifying to have it come from a 90-year-old. [UPDATE (4:10 p.m., March Bernard Lewis' speech will be on C-SPAN Book TV this weekend.]

Viewing the evening with a NAM perspective, we were also impressed with the opening comments of Christopher DeMuth, AEI’s president. In a mild tone, DeMuth gave a full-throated defense of the corporation’s role in modern society, engaging an issue that some would deem beyond the political pale. After thanking the sponsors, he observed:

There is a movement afoot to treat the political views and interests of corporations as inherently suspect and in need of official supervision. Senators are warning firms not to advance incorrect views. Pension funds, the accounting profession, the plaintiff’s bar, are being deputized in various efforts to bring the corporation to political heel. This is a pernicious development.

The corporation is the transmission belt for much of our safety, prosperity and progress. It is the place where many Americans pursue their vocations and spend most of their lives. And, it is the locus point of tremendously valuable social intelligence, information about society, economy and technology that is, to a unique degree, generated by reality and analyzed with a view towards something other than politics.

The rest of his comments are in the extended entry below.

(continue reading…)

Everyone loves to talk about research and development, innovation and the next generation of products that will provide high-paying jobs to Americans. You won’t find a politician anywhere that says they don’t value these goals. In fact, too many people take it for granted that new products and processes will just gush out of manufacturing and business, regardless of what elected officials do otherwise.

It’s too bad that when push comes to shove, so many elected officials don’t have a clue about what it means to invest, innovate and deploy new technology and products. Maybe it’s because so many elected officials’ only work experience is in the law and they have limited hands-on knowledge about spurring new inventions.

The Examiner newspaper has done us all a service this week by running a column by Paul Howard at the Manhattan Institute, showing just what kind of costs go into some innovations. It’s why strong intellectual property laws are important–to help companies recoup expenses for products that never make it to market–and why a permanent R&D tax credit makes so much sense to an economy like ours.

Paul Howard’s article focuses on Pfizer’s work to develop a “good cholesterol” boosting drug, which they named “torcetrapib”. After 15 years of research and patient trials involving 15,000 people, they learned a lot about the downsides of this potential new drug and pulled it. That cost Pfizer $800 million in direct research costs and $20 billion in market capitalization. Pfizer’s case is not unique: it is said that it takes about an investment of about $1 billion and a decade of work to bring any single medicine to market these days. A nation that truly values innovation will want to encourage and promote that kind of risk-taking because of the benefits that flow from the new pharmaceuticals.

Howard says, “thanks to Pfizer’s woes, Congress has a bird’s-eye view of how difficult and expensive it is to develop new medicines, and why better science–and not more regulations–is what is really in the public’s best interest.” I also liked his wrap-up where he points out that, “innovation can only move as fast as science. If Congress is serious about promoting long-term drug safety, and not just scoring cheap headlines, the best thing it can do is fund the FDA’s Critical Path project. This project aims to develop scientific tools that can transform the hit-and-miss process of drug development into one defined by more empirical standards.”

Amen to that and if you want to read the complete article, click here.

If you keep money and valuables in a bank or bank vault, you have probably felt pretty secure in keeping them there. Of course, there are today’s hackers and phishers who try to gain access to electronic accounts, but today we are taking a look at would-be robbers who want to get their hands on real cash and jewelry socked away in a bank.

Today we take this kind of security for granted. Yet it wasn’t always the case that banks were so secure so we welcome a new book that describes how bank lock innovators, including the Diebold Co. in Canton, OH, invented and manufactured sophisticated, secure locks beginning in the late 1800s that made bank vaults truly secure. Aptly named, American Genius: Nineteenth Century Bank Locks and Time Locks, the authors (father and son team of John Erroll and David Erroll) chronicle the “clever design, intricate craftsmanship and fine-grooved machinery that goes into sealing up valuables behind thick walls and fiendishly difficult-to-open doors,” as one reviewer put it.

Linus Yale invented a Double Dial bank lock in 1863 which revolutionized the bank lock business with his innovation of using 100 million possible combinations. It was so unique that it won a silver medal at the Paris Exposition in 1867. Of course, banks weren’t the only customers for these locks. So were companies that stored a lot of cash and even the U.S. Treasury. The book is filled with beautiful photographs showing the ingenious inner workings of these locks and the handcrafted artistry of decorative motifs and even folk-life scenes.

The Wall Street Journal reviewer of this book concluded: “such artistry, minute and meant to be hidden, reminds one of the decorative carving high up on skyscraper ledges: beauty that few will see. Never have the nuts and bolts of capitalism looked so good.” One might say that never have the nuts and bolts of the manufacturing process looked so good, for it was the manufacturers who innovated and made these designs into working reality. That’s what manufacturers do, even today. And we wish every one of these indispensible innovators a Happy New Year!

For a full review of the book, check out Stuart Ferguson’s column on page P9 of the December 2, 2006 Wall Street Journal. Click on the book title above for a short description of the book and a picture of its cover on Amazon.