Posted on 04/21/2003 11:18:33 AM PDT by Willie Green
For education and discussion only. Not for commercial use.
The Black & Decker Corp. once was a $4 million-per-year account for M.S. Willett Inc., a Cockeysville, Md.-based metal-stamping company only five miles from the power tool giant's Towson, Md., headquarters.
"Today it's a fraction of that," says David Sandy, Willett vice president.
All of the production stamping his 120-employee company did for Black & Decker "will be gone within the next few months," he says.
"We had a mutually successful relationship with Black & Decker for over 30 years," Sandy adds. "This is coming to an end because the work is going to be done in other countries."
His company's plight isn't unusual. Large U.S. manufacturers are turning to overseas suppliers or moving plants to foreign countries to take advantage of cheaper labor, lower taxes and less regulation.
To Sandy, that suggests many of the 2.2 million manufacturing jobs that have been lost in the United States since July 2000 aren't coming back.
"Unlike typical business downturns of the past, when manufacturers simply cut back and waited for recovery, in the current downturn manufacturers are rapidly relocating outside the U.S., and large numbers of small and midsized U.S. manufacturers are closing down permanently due to foreign competition," Sandy says.
The trend disturbs Rep. Don Manzullo, chairman of the House Small Business Committee, whose hometown of Rockford, Ill., is the machine tool and die capital of the United States.
"Our domestic manufacturing base is being hollowed out right before our very eyes," says Manzullo, a Republican. "And it's other American companies that are doing it. We are fast becoming a nation of assemblers, and even that may disappear soon."
Weakness in the manufacturing sector also hurts the service sector, which counts on manufacturers as clients. The loss of high-paying manufacturing jobs also translates into lower sales for businesses of all types, says Eric Anderberg, general manager of Dial Machine Inc. in Rockford.
Anderberg cites the case of an employee Dial Machine was forced to lay off two years ago. Instead of making $15 per hour, as he did with Dial, that individual now makes $7 an hour, with no benefits, working at a home-improvement store.
"How many vacations will this man and his wife take?" Anderberg asks. "How many airline tickets will they buy? How many hotel rooms will they stay in?
"The trickle-down effect on the American economy is clear," he adds. "I believe that the American economy will not recover without having a successful, sound manufacturing base."
The Bush administration says its proposed tax cuts, particularly ending double taxation on dividends, would help manufacturers by reducing the cost of capital. But the Senate appears determined to give the president only half of his $726 billion package.
The administration's manufacturing agenda, unveiled last month, also calls for opening new markets for U.S. manufacturers by eliminating all industrial tariffs for World Trade Organization members within 10 years and by negotiating additional bilateral free-trade agreements.
The agenda also includes reducing health-care costs, while also improving workers' skills through retraining and better math and science education.
The U.S. Department of Commerce will hold five hearings across the country this spring and summer to gather suggestions on what else needs to be done to revitalize manufacturing.
The House Small Business Committee recently held its first hearing on manufacturing, Manzullo's top priority for the committee this year.
Trade policy dominated the conversation. Even the National Association of Manufacturers, a supporter of trade agreements, acknowledged that unfair trade practices are hurting manufacturers.
"Enforcement is very weak," says NAM President Jerry Jasinowski.
"Many of our trading partners routinely exacerbate their natural advantages with unfair trade barriers, including manipulation of currency values," he says. "China is the most conspicuous offender in this regard and is emerging as the primary threat to many of our core industries."
China quickly is moving beyond its traditional manufacturing base of textiles, toys and footwear, Jasinowski says. Machinery imports from China are up nearly 50% in the past year, and furniture imports are up 40%, he says.
"We cannot afford to keep hiding our heads in the sand to avoid facing up to this challenge," Jasinowski says.
Richard Trumka, AFL-CIO secretary-treasurer, says America's experience with China demonstrates why the United States should reconsider a half-dozen trade agreements now being negotiated.
Since permanent normal trade relations were granted to China in 2000 -- "which we were told would help us sell American goods in China" -- the U.S. trade deficit with China has increased by nearly 25%, Trumka says.
"America's trade policy has failed," he says.
A relatively low revenue tariff of 10~15% placed on all imported goods would be offset by a corresponding reduction in the corporate income tax.
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Fundamentally, we believe that the U.S. government needs to devote more resources and put in place new programs to build wider expertise about China and to protect our industrial base from eroding as a result of our economic relations with China.
-- C. Richard D’Amato, chairman
U.S.-China Security Review Commission
(How to improve U.S.-China relations )
A much better approach is the consumption tax currently in the House, along with elimination of virtually all other federal taxes. It would create an immediate drop in prices of American goods and an immediate increase in the prices of foreign goods.
Result - those smaller American businesses (which create most of the jobs) get a tax break. They have a lower operating cost. So they can afford to pay their workers more, or hire more workers, or invest in capital equipment -- any of which are net positives.
Any corporation, regardless of where incorporated, with fewer than 60% American workers would be classified as non-American for tax purposes and would be taxed at a higher rate. Thus the inflow of taxes to the federal government remains the same. I am sure the "all taxes are evil" crowd will knock this idea, but does anyone have any comments?
The NRST is an inherently regressive form of taxation that is truly despotic.
Long term, it would result in a two-tiered socio-economic stratification of our society.
It is not disimilar to a 21st Century eco-feudal system where the corporate aristocracy invest and expand their property holdings completely tax-free, while the serfs are overburdened with the excessive taxation on consumption and persuaded that it's supposedly "fair" because the consumption taxes are redistributed through the formal social welfare system.
"Free Trade" is for the elites, not us.
Jobs! I thought we were all just going to buy a computer, stay at home and have our computer pay us. What happened? (/sarcasm)
Exactly. We agree on something. The lure of sales tax, consumption tax, etc, to solve what amount to non-tax related problems is call to the disaster you describe.
We were clearly reassured way back in the '80's when they first began selling us this %#@&, "We're gonna be a SERVICE ECONOMY."
So bend over and start serving a'ready ... and be happy you any kind of job (or don't have ...whatever)
... be happy you have any kind of job.
Long term, it would result in a two-tiered socio-economic stratification of our society.
It is not disimilar to a 21st Century eco-feudal system where the corporate aristocracy invest and expand their property holdings completely tax-free, while the serfs are overburdened with the excessive taxation on consumption and persuaded that it's supposedly "fair" because the consumption taxes are redistributed through the formal social welfare system.
Willie, as you're a guy who favors every "public transportation" boondoggle that comes along, I'm not sure I have great faith in your economic analyses.
Both NRSTs being proposed would give a 100% rebate to poverty level folks, and certain necessity items would be excluded. How is that "regressive"?
You got that right. ...;^)
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