The annual State of the Union (SOTU) address by any president has become something to be endured rather than cherished. No president ever says the state of the union is dire. The problems that must be overcome are never the fault of the incumbent. The ritual always revolves around throwing red meat to the base of the president’s party and cramming in comments extolling the pet initiatives of the cabinet secretaries.
The 2012 SOTU message delivered by President Obama was more of the same. What caught my attention most was his central theme of American manufacturing. It was a logical topic for the president to feature. Jobs are the top issue right now. Manufacturing jobs have wages and benefits higher than most other employment sectors. Key parts of the nation—most prominently the upper Midwest—have been decimated by the loss of manufacturing jobs over the last 40 years. Usually housing is the economic sector that leads the nation out of a recession. Currently housing remains an anchor on the recovery while manufacturing is the brightest spot in job growth.
In a bit of a sneaky fashion, President Obama appeared to be attempting to take back-door credit for manufacturing expansion in the last 18 months. He should be careful about going down that path.
The President of the National Association of Manufacturers (full disclosure: I am a board member of NAM), Jay Timmons, recently gave a response to President Obama’s focus on manufacturing in the SOTU. While welcoming the focus on manufacturing, Timmons noted that most of the specifics the president cited were only tinkering around the edges and not initiatives that would hasten a manufacturing renaissance.
Timmons praised Obama’s support of an “all of the above” energy policy that would lower costs and lessen our dependence on volatile foreign energy sources. But he was quick to note the omission of the Keystone XL pipeline in the president’s remarks. Likewise, NAM strongly believes that the development of shale oil and gas from horizontal drilling can continue to provide the U.S. with affordable, secure energy sources. The explosion of shale gas production is already significantly reducing the cost of natural gas, which is lowering production costs, increasing the profits of manufacturers, and driving companies to invest in new and expanded facilities. The shale drilling boom is also creating expanded markets for the manufacturers supplying the steel and technology for exploration and production. But NAM and Timmons are wary of excessive regulations by the Obama administration that could hamper this booming sector of the economy.
Speaking of regulations, Timmons noted that the president praised his administration’s “regulatory relief” initiatives that allegedly reduced the regulatory burden on businesses by $10 billion. Unfortunately, according to NAM, the Maximum Achievable Control Technology (MACT) regulations and others being pushed by the Environmental Protection Agency will impose costs on manufacturers and other industries that will dwarf the comparatively puny savings President Obama was bragging about.
The Obama administration’s harassment of industry through its pro-union regulations emanating from the National Labor Relations Board is another drag on expanded manufacturing. At a time when Indiana, the state that has lost the most manufacturing jobs, is in the final stages of passing a Right to Work law to bring manufacturing back, the president continues to push for unfair advantages for labor unions in their dealings with employers.
Finally, there is the tax issue. President Obama conceded in his remarks that taxes on businesses are too high. (Our corporate tax rate is the highest on the planet outside of third-world nations.) Unfortunately the president wants to pick winners and losers with tax policy instead of leveling the playing field with lower taxes for everyone.
Manufacturing is too important to be a prop in the presidential election campaign. It needs to be nourished, not exploited. President Obama has a lot of work to do to make that happen.