Before I ran for Congress in 2008, I helped run a business in Western New York. We manufactured motion control components -- including motors, actuators, vibration isolators and industrial shock absorbers. Our products are used in the Tomahawk cruise missile, in medical equipment, on rail cars (including the subway system in the Capitol building) and in aircraft.
This gave me experience with the daily challenges U.S. manufacturers face to stay on the cutting edge, create jobs and compete successfully against global competitors. Research and development on innovative new products is critical. It's no surprise, then, that manufacturers perform half of all R&D in the U.S., according to the National Association of Manufacturers.
So our economic recovery and the future of U.S. manufacturing depend on firms having the right incentives to make vital investments in R&D.
For nearly 30 years, these incentives have taken the form of the R&D tax credit. Despite bipartisan support, this critical incentive for economic growth expired last December. Continued inaction is likely to further endanger our economic recovery, give an edge to global competitors and send jobs overseas.
How significant is the R&D credit to job growth? Roughly 70 percent of the tax credit's benefits are used to pay salaries, according to a 2008 Ernst & Young study.
I've seen the benefits this credit can have on a business's success and ability to grow and hire more workers in Western New York. I also understand the potential negative consequences if leaders in Washington allow the credit to further lapse.
Congress's failure to act places our nation at a grave competitive disadvantage. Our global competitors -- including those President Barack Obama recently met at the G-20 summit in Seoul, South Korea -- have already surpassed the U.S. in R&D incentives.
The U.S. finished dead last in R&D tax competitiveness among eight leading Western economies in a study by the accounting firm Mazars.
"Global competitors, such as Canada and China, have already surpassed the U.S. in terms of R&D incentives," notes James Brett, president of the New England Council. "The fruits of R&D spending are critical for competitiveness in today's world economy."
Even the French international trade group, the Invest in France Agency, brags that "since the reform of tax credits for research in 2008, France now offers the world's most advantageous fiscal regime for corporate research and development," according to IndustryWeek.
Without a long-term R&D credit, the U.S. falls further behind -- even as our global competitors plan years ahead. They have long-term proposals for 10, even 20 years out. We plan year to year, election to election.
This needs to change. It can -- if we make the R&D tax credit permanent and finally set our sights on long-term economic prosperity.
As part of an effort to look over the horizon, I laid out a five-point blueprint, "Manufacturing for Tomorrow," to strengthen U.S. businesses small and large. A permanent R&D credit is a key part, since it encourages U.S. companies to make significant long-term plans, create jobs here and boost our global competitiveness.
U.S. policymakers usually talk a good game about manufacturing and creating jobs in America. By extending the R&D tax credit before the end of this Congress we can show the American people we mean it.