Revive economy through tax policy, trade and technology

September 06, 2010|By Drew Greenblatt

This Labor Day finds almost 17 percent of Americans unemployed or no longer looking for work. We must get them into the economy. They are prevented from working by government policies, and that is just not fair. Plus, we need them to help us handle our global competitors. Our country needs to create an economic and educational culture that welcomes our unemployed back in the fold and makes it easy for companies to invest in equipment that will lead to growth.

What is the problem? Today, job-creating companies are at a massive disadvantage. Now is the time to alter bad government policies, so we can make the U.S. a job-creating powerhouse again. Specifically, our tax rates are too high; students graduating from our schools are not prepared well for the work force; outdated trade policies are cutting us off from big markets overseas; and uncertainty persists over tax rates and regulations. Let's look at each these issues.

•Taxes: We face major headwinds building a factory in the U.S. Paul Otellini, CEO of Intel, declared the U.S. is falling behind foreign competitors in innovation, observing "ultimately we will face an inevitable erosion and shift of wealth." He says our nation is losing its "culture of investment" because our "tax rate (38 percent) is the second highest in the industrial world."

Instead, we need the most competitive tax structure to encourage investors to invest in our country and take a chance here, not overseas. If investors feel they will make and keep a good profit on their U.S. investments, there will be more investment here. We need a tax policy that makes it a no-brainer to build factories in Baltimore and not Shanghai.

•Education: We also need to improve our schools, by getting our students to study more STEM subjects (Science, Technology, Engineering and Math). Our high schools pump out kids who cannot do high-level math and science. Schools overseas are doing a better job than ours, and we cannot tolerate our schools dropping the ball on another generation of students.

•Trade agreements. Negotiators for the U.S. have signed deals with Colombia, South Korea and Panama to open up their markets so American manufacturers can sell U.S.-built products to their approximately 100 million consumers.

•Uncertainty. Job creators are worried about the rules of the game changing. Tax rates for 2011 are going to change — or will they? Estate taxes are zero — or is it 55 percent? In addition, regulations, from environmental laws to labor laws to a whole host of parts of the economy, are all big unknowns. Our economic policies should instead embrace these job creators and make them comfortable that the rules are not changing.

What should happen?

America should encourage manufacturing jobs because they provide better benefits and pay better than alternative jobs (restaurants, retail, hospitals). We need more factories in our region because the positive ripple effects will lift our economy.

Take my sheet metal fabrication and wire basket factory in Baltimore. We invest in the city. In the last three months, we bought the two most expensive robots in company history and are hiring locals. Hiring two recent mechanical engineering graduates from the University of Maryland will help us run these robots and design new products that we anticipate our clients needing soon. This plan is contrarian — we are getting ready for more growth, not hunkering down. We hope to exploit opportunities as the economy turns positive. However, most job creators are hesitating.

What is the job growth action plan?

•Instant expensing of investments in the U.S. so that if you commit to buy a $300,000 robot and are on the hook now for the expense, you can deduct it now, not over seven years;

•Making the R&D tax cuts permanent so businesses can deduct the expense of developing new products;

•Extending the Bush tax cuts permanently;

•Bringing the corporate income tax rate down to the average of our competitors in Europe and China, 25 percent, so we are not at a disadvantage.

•Ratifying trade agreements with Panama, South Korea and Colombia,

•Making a stronger commitment to the math and sciences in our schools at all levels, K-12.

Improving our local schools and making the U.S. a more worthy place to invest will attract investments. It will allow us to strengthen manufacturing employment in our city. These activities will send the signal to job creators: Now is the time to invest and grow jobs.

Drew Greenblatt owner of Baltimore-based Marlin Steel Wire, is executive board member of the National Association of Manufacturers and chairman of the Regional Manufacturing Institute. His e-mail is dgreenblatt@marlinwire.com.

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