Manufacturing is Essential for Economic Growth and Prosperity but Faces Big Challenges, According to New Report

January 26, 2010 – Philadelphia, PA – – As U.S. manufacturers struggle to recover from the brutal recession, a new report finds that manufacturing fuels economic prosperity but requires pro-growth policies to create jobs and remain globally competitive. The report released by the National Association of Manufacturers (NAM) and the Council of Manufacturing Associations (CMA) was written by economists Joel Popkin and Kathryn Kobe. The Wood Machinery Manufacturers of America® (WMMA®), a trade association of U.S. manufacturers of woodworking machinery, cutting tools, and supplies, is a member of the NAM’s Council of Manufacturing Associations. WMMA is a sponsor of the report and two previous reports in the series that feature data and analysis about the importance of U.S. manufacturing to the nation’s economy.

The report offers a number of specific recommendations to create jobs and enhance U.S. manufacturing innovation, productivity and competitiveness including the following:

• Reduce the corporate income tax rate on profits earned from production in the United States to match those of our major trading partners.

• Make the R&D tax credit permanent to eliminate one important uncertainty in private decisions to undertake R&D.

• Make the commitments now that will guide private decisions on R&D investment for cleaner energy technologies and more varied energy sources. Findings from that research will help mitigate energy price spikes and make domestic manufacturing production more attractive to both U.S. firms and foreign investors.

• Continue to improve our education quality and accessibility to enhance the pool of science, technology, engineering and math (STEM) graduates and support programs of technical training and certification.

• Assure the health of small businesses. They are niche suppliers of components and parts for finished goods manufacturers. And they are also important investors in and initiators of high-risk, ground-breaking innovative endeavors.

• Invest in all levels of infrastructure – transportation, communication channels and the energy grid.

“Policymakers must recognize that a vibrant manufacturing sector is important to our nation’s economic recovery and long-term growth and prosperity,” said Kenneth R. Hutton, executive vice president of WMMA. “Manufacturing generates more economic activity per dollar of production than any other business sector in the country. Manufacturing industries perform almost two-thirds of the private sector research and development (R&D) that contributes to America’s leading edge in innovation and break-through technologies. And U.S. manufacturers lead the world in productivity, a key driver of low inflation, higher wages and living standards. But manufacturers in America face serious challenges that threaten to undermine their contributions to U.S. prosperity.”

“The large U.S. trade deficit is one of the starkest reminders of why a strong, productive and innovative U.S. manufacturing base is essential to our country’s economic future,” added economist Dr. Joel Popkin. “In 2008, U.S. manufacturers produced and exported $918 billion worth of goods to other countries. Those exports helped pay for more than half of our manufactured imports, but indebtedness to foreign countries continues to rise.”

Dr. Popkin cited the erosion of America’s leadership in R&D as another major challenge facing U.S. manufacturers. “The United States is still the leader in the absolute number of dollars spent. Its strong R&D position, however, is being eroded by the impact of the economic downturn and the rapidly expanding R&D programs in other countries. When the data is available, we expect to see the U.S. share of world R&D fell in 2009,” he said.

“America’s future prosperity depends on policies that accelerate and strengthen manufacturing production here in the United States,” noted Ken Hutton. “To remain strong players in a competitive world, U.S. manufacturers need government policies that encourage continued innovation and productivity gains. In particular, we need policies that encourage public and private investments to enhance productivity, such as those in R&D, capital goods, worker training and early education that nurtures math and science proficiency,” he said.

“If manufacturing and the innovation process are allowed to decline without these policies, America will lose much of its capacity to generate wealth and a slowing of long-term economic growth is assured,” Dr. Popkin concluded.

The new report, “Manufacturing Resurgence — A Must for U.S. Prosperity,” is available at www.nam.org/popkinreport. It is the third in a series of reports by Dr. Popkin featuring data and analysis about the importance of U.S. manufacturing to the nation’s economy.