The Wall Street Journal today covers the ins and outs of tax deferral, a critically important issue for businesses with an international presence, “Business Fends Off Tax Hit.” Under the U.S. global tax system, taxation of overseas earnings are deferred until those earnings are brought home to the United States. In May, President Obama detailed his plans to raise taxes on those earnings by using aggressively populist — and misleading — rhetoric about “companies that ship jobs overseas.”

As John Engler, president of the National Association of Manufacturers, said at the time:”President Obama’s proposal to impose more than $100 billion in new taxes on corporate foreign earnings will destroy jobs in the United States and make U.S. companies less competitive globally.” (NAM release; NAM Manufacts sheet on deferral.)

Today’s Journal piece details the response from the business world, taken aback that the Administration would propose such a tax increase during a recession and unhappy at the President’s repeated lumping together of “tax loopholes” and international tax policy. As Honeywell Chief Executive David Coate, an Obama supporter, said, “You can’t love jobs and hate those who create them.” Concern was especially high in the high-tech sector.

Companies ranging from Microsoft Corp. to General Electric Co. to International Business Machines Corp. put the topic at the top of their Washington agendas. Many CEOs and business lobbyists say the proposal — and the rhetoric used to push it — betrayed a tone-deafness on business issues among the president and his advisers. White House officials say the issue has often dominated discussions during meetings with CEOs.

And now?

Obama aides say the administration has set the idea aside for now, but may return to it as part of a broader tax overhaul sometime next year. The White House had billed the proposed change as an overdue fix to the tax code and potentially a key revenue-raiser.

“This has gone all of a sudden from red-hot to white-cold,” says Michael Klayko, chief executive of Brocade Communications Systems Inc., a large data-storage company. But he says he is concerned that if the proposed tax changes get entangled in the health-care overhaul, “it could go back to red-hot again.”

With federal deficit spending running at unprecedented (peace-time) levels, yes, the coals of revenue raising are probably only banked.

UPDATE (12:34 p.m.): JimPethokoukis of Reuters tweets, “Obama is dumping plan to hike corporate taxes by $20b a year. Why? 1) Dem-friendly techs screamed; 2) VAT ion its way so wait w/ big change”

More on the recurring theme, a Chicago Tribune story, “A rebalancing act,” with the subhed, “U.S. firms sharpen focus on overseas consumers.”

WASHINGTON - — With American consumers cutting back in response to the recession, many U.S. companies increasingly are looking outward, toward fast-developing countries like China, India and Brazil.

But instead of seeing those countries primarily as cheap producers of goods, both American manufacturing firms and giant multinational corporations see them as potential customers for U.S. products and services. And it reflects what may be the beginning of a shift in the global economy, a rebalancing in which the world relies less on U.S. consumers and more on consumer spending in places such as China.

General Electric’s Jeff Immelt is a leading advocate of making exports a larger part of the U.S. manufacturing economy, serving growing markets overseas. But it’s not just giants like GE that have a stake in the game.

Without their overseas customers, companies like Power Curbers Inc., a small construction-equipment maker in Salisbury, N.C., probably would have gone bankrupt in the recession.

“We’re fortunate that infrastructure development is going on in other countries,” said Dyke Messinger, Power Curbers’ president. He said 75 percent of his sales this year are international, compared with 25 percent two years ago.

Dyke is a director and member of the NAM’s Executive Committee.

And now, a word of praise for the labor unions…and G.E., of course.

From The New York Times, “G.E. to Add Two New U.S. Plants as Unions Agree on Cost Control,reporting on General Electric’s plans to expand domestic manufacturing operations:

G.E. is building a 350-employee plant in Schenectady, N.Y., to make high-density batteries that will turn many locomotives into diesel-electric hybrids. And in Louisville, Ky., it is adding a factory that will employ 420 workers to produce hybrid electric water heaters — heaters now made in China.

The two moves by G.E., often accused of being too quick to close plants and move operations overseas, came only after its unions agreed to keep costs down by swallowing painful concessions, including a two-tier wage structure.

Jeffrey R. Immelt, G.E.’s chief executive, said the two new operations are part of his campaign to get corporate America to strengthen and expand manufacturing in the United States.

Times reporter Steven Greenhouse interviews Immelt, who makes many compelling points, including: “Labor sees the need to be more competitive than in decades past. After everything that happened in Detroit, it points to more alignment between management and labor. My sense is this is a different day.”

Indeed, International Union of Electrical Workers-Communications Workers of America voted to accept a two-year wage freeze and a lower wage tier for new employees, with G.E. agreeing to not to move operations for two years.

More…
Albany Business-Review, “Union vote, incentives bring battery plant to Schenectady”
Albany Times-Union, “Schenectady wins battery battle”
WTEN-10 News, “GE’s new battery plant coming to Schenectady”
WTEN-10 News, “A salt-powered battery — what’s that?”

From The Street, “No Free Lunch at White House for CEOs“:

CEOs from Wal-Mart Stores, Starbucks, Verizon and Nucor were asked to fork over their credit cards so the White House could charge them for a lunch they had with President Barack Obama on Friday, according to reports.

Obama is being careful not to create a conflict of interest as he meets with these CEOs to figure out how to get the private sector back on solid footing.

Last month the CEOs from Xerox, Coca-Cola, AT&T and Honeywell were also asked to pay for their own lunches at the Big House, Politico originally reported.

These lunches use to be paid out of the taxpayer-funded entertainment budget.

From The Washington Post, “The Prez, The Press, The Pressure“:

In the days before President Obama’s last news conference, as the networks weighed whether to give up a chunk of their precious prime time, Rahm Emanuel went straight to the top.

Rather than calling ABC, the White House chief of staff phoned Bob Iger, chief executive of parent company Disney. Instead of contacting NBC, Emanuel went to Jeffrey Immelt, the chief executive of General Electric. He also spoke with Les Moonves, the chief executive of CBS, the company spun off from Viacom.

Whether this amounted to undue pressure or plain old Chicago arm-twisting, Emanuel got results: the fourth hour of lucrative network time for his boss in six months.

NPR’s “Morning Edition” program last week featured an informative interview with Jeff Immelt, CEO of General Electric, emphasizing GE’s support for trade as an engine of economic recovery and emphasizing the need for government policies that foster U.S. competitiveness.

From “GE Calls For More Exports To Aid Economy“:

Immelt tells host Renee Montagne that the U.S. consumer can’t be the “sole engine of economic growth” in the same way they’ve been over the past two decades. “And for this economy to recover fully, it’s got to be led by business investment, and it’s got to be led by exports,” he says.

Trade deficits and the erosion of the manufacturing base in the U.S. are among the things that have to be fixed, he says. Immelt says the government will also have to focus on improving exports. …[snip]

Immelt says: “In the places where you have relatively high labor costs, they’ve got to be more productive.” The labor in any facility, he says, has to be able to compete on a “global basis.”

Immelt says the government can take steps to help improve productivity. “My sense is that there should be a real definitive desire to make the country more competitive and to try to make sure that we can export more because that’s where the growth is going to be.”

So that’s the big policy picture. Then there’s what the company itself is doing, as described in a GE news release from Friday, “GE To Open Advanced Manufacturing Technology & Software Center in Michigan“:

FAIRFIELD, Conn.–26 June 2009– The General Electric Company (NYSE:GE) today announced that it will open an advanced manufacturing technology and software center in Michigan. The center is expected to grow to more than 1,100 GE employees over the next few years.

The Advanced Manufacturing and Software Technology Center will include a GE research and development facility that will be part of GE’s Global Research network. It will house scientists and engineers who will develop next generation manufacturing technologies for GE’s leading renewable energy, aircraft engine, gas turbine and other high-technology products. Such work will include development of composites, machining, inspection, casting and coating technologies for GE’s Aviation and Energy businesses.

GE is constructing the new, $100 million facility as Visteon Village site in Van Buren Township, Wayne County, about 25 miles from Detroit. News coverage…

• Reuters, “GE sets Michigan research site, calls for renewal“
• Detroit News, “GE to bring high-paying jobs“
• Bloomberg, “GE to Open Michigan Center, Add at Least 1100 Jobs“

Very good news and excellent corporate leadership.

A story in today’s D.C. Examiner, “‘Smart grid’ technology may soon hit the suburbs“:

An electricity use monitoring pilot program dubbed “smart grid” may be coming soon to the Maryland suburbs.

Local electric utility Pepco filed a proposal with state regulators last week to put between 2,500 and 3,500 “smart meters” in homes in Bethesda and Fort Washington. The meters record how much and when electricity is used each month and can communicate with Pepco to indicate power outages.

The pilot program would also include sensors on circuits at two substations that have a history of power outages. Pepco said the sensors would allow the utility to identify, isolate and fix the problems more quickly.

Good, but is that all “smart grid” is? Smarter home meters and sensors at substations?

Obviously there’s more. The Department of Energy has a publication, “The Smart Grid: An Introduction.” From page 10:

The electric industry is poised to make the transformation from a centralized, producer-controlled network to one that is less centralized and more consumer-interactive. The move to a smarter grid promises to change the industry’s entire business model and its relationship with all stakeholders, involving and affecting utilities, regulators, energy service providers, technology and automation vendors and all consumers of electric power.

A smarter grid makes this transformation possible by bringing the philosophies, concepts and technologies that enabled the internet to the utility and the electric grid. More importantly, it enables the industry’s best ideas for grid modernization to achieve their full potential.

It takes until page 10 to get to that? And Dr. Smith and the robot from Lost in Space is the illustration?

Clearly, we need some refining of defining. But for now, here’s the Department of Energy’s smart grid section at the Office of Electricity Delivery and Energy Reliability. Eneregy Secretary Chu delivered the keynote address this morning at the DOE-NARUC National Electricity Forum on the smart grid and stimulus bill. (We’ll link later.)

General Electric is prominent in smart grid technology and deployment, and has an animation-heavy website with lots of info, “Ecomagination.” GE’s Smart Grid Technology ad, which ran during the Super Bowl, is great.

President Obama creates the Economic Recovery Advisory Board, saying:

Put simply, I created this board to enlist voices to come from beyond the Washington echo chamber, to ensure that no stone is unturned as we work to put people back to work and get our economy moving.

Within this group, you’ve got leaders of manufacturing and leaders of finance. You’ve got labor and you’ve got management. You’ve got people who work in small businesses and people who work in large businesses. You’ve got some economists and some folks who think they’re economists. (Laughter.) By the way, these days everybody thinks they’re an economist. (Laughter.) We will meet regularly so that I can hear different ideas and sharpen my own, and seek counsel that is candid and informed by the wider world.

On the manufacturing side, Jeffrey R. Immelt, CEO of General Electric, and Jim Owens, Chairman and CEO, Caterpillar Inc.

A welcome announcement…

Given the great news coming from Areva and Northrop Grumman (see below), there’s a very timely story in The New York Times, “Nuclear Power May Be in Early Stages of a Revival“:

WASHINGTON — After three decades without starting a single new plant, the American nuclear power industry is getting ready to build again.

When the industry first said several years ago that it would resume building plants, deep skepticism greeted the claim. Not since 1973 had anybody in the United States ordered a nuclear plant that was actually built, and the obstacles to a new generation of plants seemed daunting.

But now, according to the Nuclear Regulatory Commission, 21 companies say they will seek permission to build 34 power plants, from New York to Texas. Factories are springing up in Indiana and Louisiana to build reactor parts. Workers are clearing a site in Georgia to put in reactors. Starting in January, millions of electric customers in Florida will be billed several dollars a month to finance four new reactors.

The Newport News Daily Press story we linked below has lots of detail, too.

As interest has grown in the United States to build more nuclear plants, which generate concerns about waste but do not emit pollutants, a new process has been put into place to make them easier to build. A key part of the process is approval for standardized designs that can be matched easily to plans for a specific site and utility operator.

AREVA has already spent $200 million on the design and certification of the EPR reactor.

The main players vying to get their designs approved are AREVA, General Electric, Westinghouse and Mitsubishi. Dominion Virginia Power, which runs a nuclear plant in Surry County, is far along toward building a new reactor at North Anna outside Richmond. Dominion has chosen the design and is buying parts for its reactor from GE Energy, which will be a major competitor for AREVA Newport News.

The AREVA plant in Lynchburg is one of four in the country that manufacture nuclear fuel rods, and AREVA operates another one in Richland, Wash.

The deal is a coup for Newport News, which finds itself in the enviable position of adding large numbers of engineering and advanced manufacturing jobs amid a troubled economy. Canon announced in May that it was investing in a $625 million expansion of its Newport News plant and adding over 1,000 high-paying jobs.

Consider the possibilities, Virginia as the nation’s leader in nuclear power. Perhaps the Areva/Northrop Grumman news will give a boost to uranium mining in the southwest part of the state, as visionaries recognize the big picture of American energy security.