Tag: investment

Toyota Will Boost Production in U.S. and Create More Jobs

Today Toyota Motor Manufacturing announced that the company plans to begin manufacturing the Lexus ES 350 in Kentucky. Production will take place at the company’s Georgetown plant and will create 750 new jobs. The company is investing $360 million in the facility and will start producing vehicles in 2015. This will be the first time Toyota has manufactured Lexus vehicles in the United States.

This is positive news for manufacturing in the United States and also shows the benefits of direct foreign investment for job creation. One of the top goals of the NAM which is laid out in our Growth Agenda is to make the United States the best place in the world to manufacture and attract direct foreign investment.

Just yesterday the NAM’s Vice President of International Economic Affairs Linda Dempsey testified before the House Energy & Commerce Subcommittee on Commerce, Manufacturing and Trade hearing about global investment in America. She discussed the economic impact of foreign investment on manufacturing in the United States.

“Foreign Direct Investment (FDI) plays a critical role in manufacturing. Based on data from the Commerce Department’s Bureau of Economic Analysis, FDI inflows in manufacturing equaled nearly $83.4 billion in 2012, accounting for almost 50 percent of total FDI inflows. FDI in manufacturing has shown substantial growth since 2003 and is showing a rebound from the weakness in 2008 and 2009. About 95 percent of all FDI in the United States comes from developed countries, starting with the United Kingdom. While the share fluctuates yearly, a substantial portion of such investment since 2005 has been in the manufacturing sector. The most recent data from 2012, which are still preliminary, show that FDI in manufacturing accounts for nearly 50 percent of total FDI that year.”

With the global competition growing there is clearly more room for growth in FDI. It currently remains 20 percent more expensive to manufacture in the United States compared to our largest trading partners.  To make America the best place for foreign direct investment policymakers must move forward with pro-growth policies laid out in the NAM’s Growth Agenda.

 

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Manufacturing Construction Spending Was Lower in November

The Census Bureau said that construction spending decreased 0.3 percent in November, its first decline since March. The decrease was largely due to lower levels of activity in the nonresidential sector, which decreased 0.7 percent and was negative four of the past six months. With businesses anxious about the impending fiscal cliff and tighter government budgets dampening public sector spending, nonresidential activity has been soft at best for much of the second half of 2012.

This has definitely been true in the manufacturing sector, which had seen its construction spending levels fall 2.0 percent since September. With at least some of the uncertainties surrounding the fiscal cliff over, I would expect for these figures to improve moving into 2013 if sales improve and the global economic environment stabilizes.  As a sign that manufacturers have been willing to invest for the future, increased construction spending earlier in the year helped to push up year-over-year activity by 5.1 percent.

Looking specifically at the November numbers, the one bright spot was the residential sector, with construction spending up 0.4 percent for the month and private sector housing activity up 19.0 percent since November 2011. On the private sector nonresidential side, construction was down across-the-board, with only transportation and communications sector activity higher.

Public sector nonresidential spending was off 0.5 percent, but it was more mixed. Sectors with increased public sector activity included commercial, power, sewage and waste disposal, highway and street, and transportation projects. The largest monthly declines were in conservation and development, amusement and recreation, office, water supply, and public safety projects.

Chad Moutray is the chief economist, National Association of Manufacturers.

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More Evidence in Favor of Keeping Tax Rates Low on Investment

As each day goes by, manufacturers across the country are eyeing ever more warily the “perfect storm” of tax increases that will take effect at the end of this year if Congress doesn’t act to stop them. The need to extend one particular tax benefit – which reduced and paired the tax rate on savings and investment – in current law is highlighted in a new study released today by the Alliance for Savings and Investment. This coalition of dividend paying companies, investor organizations and trade associations – including the NAM – fights for a continuation of these policies that promote economic growth and job creation by fostering private savings and investment. In a nutshell the study finds that:

Taking into account both the corporate and investor level taxes on corporate profits and state level taxes, the United States has among the highest integrated tax rates among developed countries and these integrated tax rates will rise sharply in 2013:

  • The current top US integrated dividend tax rate of 50.8 percent will rise to 68.6 percent in 2013, significantly higher than in all other OECD and BRIC countries.
  • The current top US integrated capital gains tax rate of 50.8 percent will rise to 56.7 percent in 2013, the second highest among OECD and BRIC countries.

The reduced tax rate on capital gains and dividends was enacted in 2003 as part of an effort to reduce the burden of double taxation on corporate profits while also synchronizing the tax rates on dividends and capital gains in an effort to eliminate any bias for one type of investment over another.

Although obvious to the astute observer, it is essential that in this debate – and in any debate about corporate tax policy – one remember that capital is more mobile in today’s world than ever before and tax policy can go a long way to influence decision making of investors both on the individual and the institutional level.

The NAM has long held that an important objective of long-term tax policy is to maintain competitive tax rates that are low enough to attract the capital formation and investment necessary to ensure durable economic growth – making permanent the synchronized, lower rates on capital gains and dividends is essential to that task.

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Circumnetting Manufacturing and the Economy

John Engler, president of the National Association of Manufacturers, explains how important passage of the Miscellaneous Tariff Bill was to manufacturers in the United States and urges President Obama to sign the bill quickly. From The Pittsburgh Post-Gazette, “Manufacturing needs law suspending tariffs“: “Studies show that if enacted, these provisions would increase production by $4.6 billion and support almost 90,000 jobs. Without these tariff reductions, the cost of manufacturers’ products will inevitably increase, forcing them to pass higher costs on to consumers and making their products less competitive.”

Donald Lambro of Human Events, interviews business leaders including Engler about what policies are necessary to revive the U.S. economy. The main piece is “Obama’s Economic Faux Pas Finally Recognized,” and Lambro’s blog post, “Business Leaders Explain How to Create Jobs” reviews the policies recommended by Engler, Frederick W. Smith, chairman and chief executive of Fedex Corp., the National Association of Wholesalers and Distributors, U.S. Chamber Of Commerce, National Federation of Independent Business, Lawrence Kudlow, Wall Street economist and CNBC business analyst, and Arthur B. Laffer, chairman of Laffer Associates.

Larry Kudlow, National Review Online
, “The Washington War on Investment“: “Geithner tries to make a deficit-reduction argument, saying that extending tax cuts for the wealthy will cost $700 billion over the next ten years. But the real debate in advance of the Erskine Bowles deficit commission, which will restructure budget and tax reform, is about a one-year extension of the Bush tax cuts. That’s priced at $30 billion by the White House, about the same as the new bill to aid state and local governments. Which policy would help growth more?”

Thomas F. Siems, senior economist at the Federal Reserve Bank of Dallas, Wall Street Journal, “Government and the Uncertainty Trap“: “Consumers, investors and business leaders are nervous and uncertain regarding the economic outlook, the legislation newly passed and proposed, and how federal, state and local governments will manage public finances. This uncertainty is inhibiting spending and investment and leading to slower economic growth. In short, there is a crisis of confidence in America.”

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