Local Emerson Electric CEO David Farr recently made headlines when he criticized the current Washington, DC environment saying, “Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing.” I commend Mr. Farr for speaking out and telling the truth. I am sure he is not making any friends in our nation’s capitol. Unlike other business leaders who are rolling over in the hope of future visibility versus the uncertainty that has paralyzed our nation’s businesses as government attempts to change the rules on them yet again, Mr. Farr realizes our nation is at an important crossroads and compromise is no answer.
Like I stated in my Gateway Renaissance economic platform, Mr. Farr realizes that manufacturing is key to any economic recovery. Due to its capital-intensive nature, it is estimated that marginal tax rates for manufacturing companies can reach nearly 52% compared to 43% for services companies. And as KPMG recently pointed out in their annual survey of corporate tax systems, the United States remains the country with the second-highest corporate tax rate. The average corporate tax dropped to 25.5% worldwide. The European Union has a 23.2% tax rate and China has a 25% rate. Meanwhile, back in the good old U.S. we remain stuck at about 40%. With the national unemployment rate at 10.2%, one would think that the federal government would be working to create an environment that fosters growth in the real economy. The path to economic recovery is less government, less bureaucratic intrusion and the promotion of a friendlier business environment. Instead we are getting the exact opposite from Washington. As Mr. Farr notes, “What do you think I’m going to do? I’m not going to hire anyone in the United States. I’m moving.” The unemployment rate continues to rise while our leaders in Washington are whistling past the graveyard.
After the health care debate is resolved one way or another, cap-and-trade legislation is next on the agenda. And if you think the prospect of government-run health care has businesses running for cover, you ain’t seen anything yet. On the global stage, American manufacturers compete on three main dimensions: quality of workmanship/innovation, labor costs, and our relatively low energy costs. American workers are the most productive on the planet and we score high on workmanship on most products. However, there is no way we can compete with China, India, and other emerging markets on labor costs. Nor should we–the U.S. should move up the value chain and allow American workers the opportunity to find good-paying manufacturing jobs. The third leg of the puzzle is our energy costs. Currently, America benefits from relatively low energy and electricity costs, the lifeblood of manufacturing goods. However, if Washington takes away this competitive advantage away with cap-and-trade and the mandated use of unacceptably expensive alternative energy sources instead of a gradual adoption over time, our international competitiveness will suffer and more jobs loses will ensue. Just ask Mr. Farr. Unlike the current crew in Washington, DC who create nothing, Mr. Farr and Emerson Electric employ 125,000 people worldwide and create world-class manufacturing goods. I know who I am listening to.
Mr. Farr vs. Washington, DC
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