Roadblocks at Home:
It’s suddenly fashionable in Washington, D.C. to lament the hemorrhaging of U.S. manufacturing jobs. On Capitol Hill, this translates into lots of congressional hearings and “listening sessions” to uncover what is already known about the quandary. American manufacturing has the potential to thrive, but only if politicians come to the same conclusion about one cause of the problem: the cost of government is putting American business at a competitive disadvantage.
There is no turning back. Global competition is here to stay. The U.S. cannot demand that our competitors construct similar tax and regulatory structures to “promote a level playing field” in the global marketplace. Therefore, U.S. government policy must be rapidly transformed to match a modern era where technology and mobility have incentivized business to take advantage of low cost environments in emerging economies.
Indeed, not all is down and out on the manufacturing front. While countries may be able to more easily compete for “cheap” mass production requiring a lower-skilled workforce, U.S.-based niche manufacturers are producing higher-end products and holding their own. Those surviving (and thriving) in the current environment quickly turned to technology to improve productivity, to boost business opportunities and set aside precious time and resources for innovative thinking and partnerships.
America’s innovative power is our definitive response to global competition. No country can match us in this regard.
Still, as manufacturing restructures with respect to what may ultimately be produced domestically and what is outsourced abroad, it is critical that government not hasten the overseas trend. Politicians at all levels of government need to help our manufacturers through this transition, and quickly. They must give them more freedom, more flexibility and more of their own resources to adequately compete in the global marketplace. They also must aggressively protect our intellectual property abroad while making every effort to keep government procurement opportunities at home. Easing the tax and regulatory burden is most essential to a healthy and vibrant manufacturing sector.
The cost of government regulation is simply staggering. Now reaching $860 billion, U.S. regulatory costs exceed the GDP of Canada. The U.S. Small Business Administration (SBA) estimates per-employee regulatory costs amount to $7,000 for small firms. Throw taxes and spiking health insurance costs into the mix and it’s easy to understand the acceleration overseas, or why some manufacturers choose to toss in the towel altogether.
At the same time official Washington is wringing it’s hands over the loss of manufacturing jobs, the pace of legislation and regulation that would impose new costs on business is relentless. According to the Competitive Enterprise Institute (CEI), there were 4,187 new regulations in the pipeline at their various stages of completion as of July 2003.
The federal agencies are a regulatory machine and the stop button rests in the hands of the U.S. Congress. If Congress were serious about helping U.S. manufacturers they would call for an immediate “time out” to reign in the regulatory chaos. They would pass a “sunset rule” for current regulations and develop a structured process for reviewing everything currently on the books. The system is out of control and we must demand that Congress stop blaming the agencies, or faceless bureaucrats, when they have the power to do something about it.
There is simply no excuse for inaction on health insurance reform. For two congressional sessions the U.S. Senate has sat on House-passed measures that would give manufacturers some relief from the unremitting increases in health coverage costs. While a comprehensive review of the entire system is in order, President Bush would quickly sign legislation that expands and improves Medical Savings Accounts (MSAs), and provide small firms the opportunity to band as a group to negotiate lower priced insurance premiums. The President also wants to put reasonable limits on lawsuits that are driving costs upward. If you want something done this congressional session, call your two Senators and demand action on these three items.
It is so politically incorrect in both Republican and Democrat circles right now to push for more tax relief for all business, including manufacturers. Still, it must be done. First and foremost, the tax cuts signed by President Bush must be made permanent. Second, the issue of fundamental tax reform has been analyzed, studied and restudied and, quite amazingly, most politicians believe they should reform the system. Let’s get down to it. I believe a pro-entrepreneur system would be the outcome of what is seemingly a massive undertaking. A modern and fair tax system – one that does not unduly punish risk taking and entrepreneurship -- will help the U.S. maintain its competitive edge in the global economy.
U.S. business and its workforce have proven we can compete in the global arena. As our government continues to open U.S. markets to trading partners abroad, it must simultaneously review the conditions it imposes upon its citizens so we can effectively compete on the playing field. In particular, the U.S. manufacturing sector is carrying heavy baggage with respect to government-imposed costs. One key step towards sustaining U.S. manufacturing is government treating these businesses fairly at home.
Karen Kerrigan founded the Small Business Survival Committee (SBSC) in 1994. She is chairwoman of the organization which as become a prominent and respected small business advocacy organization with more than 70,00 members nationwide. She also founded Women Entrepreneurs Inc. (www.we-inc.org) a nonprofit association helping women business owners succeed through education, networking and advocacy.
