Obama touts manufacturing plan to factory workers in Ariz., Iowa
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CHANDLER, Ariz. -- President Barack Obama tried to give new hope to factory workers Wednesday as he promoted his plan to revive U.S. manufacturing, an anchor of the economic blueprint he sketched in his State of the Union address Tuesday night.
At a conveyer belt factory in Iowa and a high-tech computer chip plant near Phoenix, the president pointed to tax policies that he blamed for driving U.S. companies overseas and outlined his strategy to lure them back.
Mr. Obama becomes the latest president to promise to breathe new life into a sector of the U.S. economy that has been declining for decades. Thirty years ago, nearly 20 percent of all U.S. jobs were in manufacturing. Today, it's less than 10 percent, according to the Bureau of Labor Statistics. Like his predecessors, Mr. Obama will find that challenge formidable and complex, with little consensus on how to reverse the trend.
The political incentive is clear. Mr. Obama has lost considerable support in the one-time industrial hubs of the Rust Belt and will need to woo more blue-collar voters to win re-election in November. With a slow economic recovery and stubbornly high unemployment rate, the president's ability to project a vision of an employed working class could determine his success.
"There's no reason why we can't restore that basic American promise that if you work hard, you can do well," Mr. Obama told employees at the Cedar Rapids plant, his first stop on a five-state tour to promote the economic plan he unveiled in his speech to Congress the night before. "America's not about handouts. America's about earning everything you've got."
The president's plan relies largely on changing the tax code to discourage U.S. companies from moving operations overseas in search of cheaper costs. He proposed doing away with deductions for companies that close plants in the United States, and called for a new 20 percent income tax credit for companies that return.
He proposed tailoring a deduction for domestic production to apply more narrowly to manufacturing, leaving out the oil industry. The idea is to provide temporary tax credits to boost domestic manufacturing in clean energy.
Critics expressed skepticism about the president's commitment to the effort and blasted his other tax proposals as counterproductive to job growth. His call for a minimum 30 percent effective tax rate on income of more than $1 million would hit small- and medium-size manufacturers who file tax returns as individuals, said Jay Timmons, president of the National Association of Manufacturers.
The major factor pushing companies overseas is the lower cost of doing business abroad, which includes not only the tax burden but also labor and health care costs, he said. "[I]f you really want to show you're serious, there would be focus on lowering that differential. You do that by lowering the corporate tax rate."
Mark Zandi, chief economist at Moody's Analytics, noted that the tax policy changes could be useful for encouraging multinational corporations to expand U.S. operations. But tweaking the tax code as Mr. Obama proposes will further complicate an already confusing and lopsided system, he said, urging comprehensive tax reform instead.
Although Democrats and Republicans in Congress swear support for comprehensive tax reform, it is unlikely that the parties will make the necessary compromises to accomplish it in an election year. But the president's proposals, to be included in his upcoming budget plan, were as much aimed at the campaign trail as Congress.
The focus on manufacturing dovetails with the president's pledge to seek economic equality -- providing a vision of employment and retraining for the jobless. Whereas in the 1990s, President Bill Clinton imagined a "knowledge economy" of college-educated workers, Mr. Obama positioned himself as the savior of the auto industry and said the future should include a new manufacturing base of high-skilled, high-tech workers.
In Arizona, Mr. Obama highlighted the Intel plant near Phoenix, a new chip manufacturing facility that company officials say soon will be the most advanced high-volume semiconductor plant in the world. The majority of Intel's employees are engineers trained at four-year colleges.
As long as Mr. Obama is promoting high-tech manufacturing, he is focused on a sector in which U.S. workers can be competitive, said economist Dennis Hoffman at Arizona State University's W.P. Carey School of Business.
"Economically, we would face some clear, unrelenting headwinds to try and bring low- or medium-tech manufacturing back to the states," Mr. Hoffman said. "We need to do research and development here, and high-tech manufacturing, and in that way seize the pockets of competitive advantage."
First Published January 26, 2012 12:00 am