Industry Insights

2012 National Association of Manufacturers Board Meeting

October 2012
Author:  John Mather

John Mather

Partner

Audit

Manufacturing & Distribution

One Metropolitan Square
211 N. Broadway Suite 600
St. Louis, MO 63102-2733

St. Louis
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The National Association of Manufacturers (NAM) Board of Directors met in Washington, D.C., October 24 - 26, covering a variety of manufacturing-specific topics.

The meetings began with the small and midsize member board meeting. As anticipated, manufacturers expressed significant concerns about the current economic conditions, upcoming elections and potential outcomes, depending on which party wins the presidency and controls Congress.

As part of the meetings, group members took turns discussing current results and projections for the near term. Those who spoke generally expressed cautious optimism, but indicated their plans depend largely on what policies government enacts in the near term. 

An October 26 Washington Post article noted the “fiscal cliff” is still two months off, but the scheduled tax hikes and spending cuts already have been showing their effects on the U.S. economy by hampering growth and, according to a new study, wiping out nearly 1 million jobs this year alone.

NAM economists have predicted the economic effects will be worse if Congress does not act. NAM has estimated a potential loss of nearly 6 million jobs through 2014, sending the unemployment rate to near 12 percent.

The article also reported companies are bracing for potential inaction by Congress by laying off workers, not hiring new employees where demand may indicate the need to do so and delaying capital investments. An October 25 report released by the Commerce Department showed orders for core capital goods, such as machinery and equipment, stalled in September.

Manufacturers also face several other challenges. The NAM board meetings covered several other topics:

  • NAM studies have shown it is approximately 20 percent more expensive to manufacture in the U.S. versus most of our direct foreign competitors.
  • The majority of U.S. small businesses are flow-through entities; if the current administration's pending tax rate increases occur, most such companies will face an approximate effective tax rate of 50 percent.
  • Defense spending cuts will have a ripple effect on several small to midsize manufacturers.
  • North America still faces challenges related to energy independence.
  • There continues to be a gap in the ability to find adequate skilled labor.

As a result of the above challenges, manufacturers and their CEOs continue to testify in front of Congress about the importance of the policies affecting their businesses. On October 25, more than 80 CEOs signed a letter presented to the president and Congress urging legislators to take action on the aforementioned “fiscal cliff.”

Manufacturing businesses employ approximately 12 million Americans. As jobs and growth continue to be a focal point of the upcoming elections, the manufacturing industry has been identified by both presidential candidates as an important segment of the U.S. economy. Both candidates have made a personal commitment to help manufacturing continue to expand so that it can assist in leading the economy back to prosperity. With the elections looming, NAM has put together a comprehensive segment of its website devoted to the upcoming elections. The site provides summary information for both presidential candidates and for legislators currently seeking congressional office.

If you have any questions about how your company may be affected by any of these issues, contact your BKD advisor.