By Representative Hansen Clarke
U.S. Rep. Hansen Clarke: Focus fiscal reforms on improving U.S. manufacturing
There's an old saying: "One should never let a crisis go to waste."
While an urgent fiscal crisis in Washington is threatening economic recovery, it also presents a rare opportunity for desperately needed bipartisan reform to boost U.S. competitiveness in manufacturing. I'm calling on Congress to seize this opportunity immediately after the election, regardless of which candidate wins.
To understand the need for reform, consider our current predicament. In the first decade of the 21st Century, America reduced its share of global exports in every sector except for oil and gas and finance. This includes a nearly 36% loss of world market share in aerospace, 8% in communications, 9% in IT, and 3% in automotive.
The bottom line is clear. We've been losing ground in the industries that create valuable products and sustain good livelihoods for workers and their families. This loss of competitiveness has cost jobs and, in turn, worsened government deficits by hitting the tax base hard.
To turn the tide, we need to make serious investments in research and workers. We need to acquire world class skills, facilities, and technologies rather than trying to compete with China and India on the basis of low wages. This means combating the crippling rates of illiteracy in Detroit, initiating large-scale apprenticeship training in advanced manufacturing, and ensuring that high education institutions remain excellent yet affordable.
We also need to reform our tax code to reward meaningful investments in America and, in particular, in economic engines like Metro Detroit. Our tax code too often rewards corporations for shipping jobs overseas rather than relocating in America or investing in workers' skills.
Congress could do the following in terms of tax reform:
Cut corporate taxes for manufacturers that create quality jobs in the United States, rather than extending the full 2001 and 2003 tax cuts
Reduce taxes on capital gains from equity investments made specifically in U.S. manufacturing, while raising revenue through changes to other
capital gains rates;
Eliminate taxes on capital gains and dividends from long-term equity investments in businesses based in struggling industrial cities with extremely high unemployment like Detroit;
Empower our workers by offering tax incentives to encourage US manufacturers to partner with vocational schools and community colleges for the purpose of matching apprenticeships with formal education;
Close the loophole that allows companies to deduct moving expenses incurred while shifting operations overseas;
Create tax credits to make up for some of the relocation costs of firms moving jobs back to the US.
In spite of all the gridlock on Capitol Hill, such sweeping change is possible. The biggest reason is timing: The looming fiscal crisis will force lawmakers to arrive at a big-time compromise on taxes. If Congress fails to produce a major deal to reduce the deficit by this January, a broad range of tax cuts affecting Americans in nearly all brackets will expire, unemployment insurance will lapse, and reckless across-the-board cuts to programs including education, border security, public health, and the military will take effect. Here in Southeast Michigan, this so called "fiscal cliff" would result in the loss of tens of millions of dollars of military contacts and federal grants, costing thousands of local jobs. No one wants to see such a catastrophe unfold.
Making US manufacturing the centerpiece of a deficit deal makes sense for both parties: it would benefit workers, firms, and our nation's overall fiscal situation. In addition to eliminating many unproductive tax expenditures, this approach would foster desperately needed economic growth, reducing the deficit by expanding the tax base.
It's true: In every crisis, there's an opportunity. In this crisis, there's the chance of a lifetime.