Will This Budget Help Manufacturing?

In his State of the Union address, President Obama said a "blueprint for an economy that's built to last" begins with American manufacturing.

So when the proposed 2013 federal budget was released on February 13, the U.S. manufacturing community quickly looked for provisions that would affect the $1.8 trillion sector.

Among the measures aimed at bolstering manufacturing in the new budget are:

- $141 billion for overall R&D, including doubling the budgets for the National Science Foundation, Department of Energy's Office of Science, and National Institute of Standards and Technology Laboratories.
- $2.2 billion for advanced manufacturing R&D, a 19% increase over 2012.
- Tax incentives for manufacturers who create jobs in the United States and doubles the deduction for advanced manufacturing.
- A Manufacturing Communities Tax Credit to encourage investment in communities affected by job loss.
- $290 million, double the amount in 2012, for the Advanced Manufacturing Office at the DOE Office of Energy Efficiency and Renewable Energy.
- $26 million to fund a new Trade Enforcement Center in the Department of Commerce.
- Continue to allow businesses to write off the full amount of new investments.

But the budget also calls for the end to the Bush tax cuts and to 12 tax breaks for the oil, gas and coal industries that the administration estimates would raise $41 billion over 10 years.

Reaction to the budget was swift and sharply divided - no surprise to anyone even remotely aware of Washington politics.

The National Association of Manufacturers called the president's budget "inconsistent" with his calls to strengthen manufacturing. NAM SVP Aric Newhosue complained, "While manufacturers still face a 20% cost disadvantage with our major trading partners, today's budget would make this hill even steeper with one job-killing tax increase after another." Newhouse said "raising taxes on energy producers, small businesses and other job creators will have a negative ripple effect across our economy."

But Scott Paul, executive director of the Alliance for American Manufacturing, praised the budget's "strong focus on American manufacturing." Paul said: "Tax incentives for insourcing, domestic hiring, production and innovation will create good jobs...." He also voiced support for trade enforcement initiatives as "crucial for reducing our record $295 billion trade deficit with China and guaranteeing a level playing field for American workers and businesses."

Rob Atkinson, president of the Information Technology & Innovation Foundation, supported the general thrust of the budget, praising Obama for choosing to "invest in today for a better future," but urged him to "set a more urgent pace because the future has already caught up with us and we need to make up for lost time."

He said ITIF was "encouraged by the President's determination to expand investments in clean energy innovation" and also welcomed the proposal for $5 billion funding for the 48(c) manufacturing tax credit.

Branding the trade enforcement proposals as "modest," Atkinson said, "We need a more stern approach to cracking down on non-tariff barriers, rampant IP theft and a host of dubious trade practices and innovation mercantilism than the president appears to be proposing."