We

cannot have a strong economy without a strong manufacturing sector

WHY MANUFACTURING?
In the short time that Ive served as New Yorks 26th District representative in Congress, I can tell you that Washington does more talking than listening. It does more spending than saving, and often in the name of creating jobs that never seem to come. National unemployment continues to hover near 10 percent, and when it comes to action, Washington politicians seem to be looking in the rear-view mirror. My background is not in professional politics but in the private sector, and manufacturing in particular. I helped grow a manufacturing business before I ran for Congress. So I have an understanding of manufacturings potential to help put our economy on a long-term track for recovery as well as the challenges faced by this sector and its workers. It is no secret to Western New Yorkers and Americans across the country that manufacturing faces difficult times, and has for a while. New York State has lost 272,000 manufacturing jobs in the last decade, a decline of 36 percent, according the Public Policy Institute of New York State. Western New York has borne the brunt of this trend, with the Buffalo and Rochester areas each shedding 39 percent of its manufacturing jobs since 2000. Nationwide, nearly six million manufacturing jobs, or 33 percent, have been lost in that same time period. President Obama was right to single out for praise the risk- takers, the doers, the makers of things in his Inaugural Address, and I believe we should be providing incentives for our manufacturers and small businesses to grow and create jobs, rather than grow the federal government. We must if we are to be more than a service-only economy and stay strong in the 21st century. Why do manufacturing jobs matter? Because despite all the talk that manufacturing is in an irrevocable decline, manufacturing is still a strategic economic advantage for the United States. We cannot have a strong economy without a strong manufacturing sector. According to the National Association of Manufacturers, U.S. manufacturing: Is the largest in the world, producing 21 percent of all global manufacturing products; Supports 18.6 million U.S. jobs, about one in six private sector jobs; Produces $1.6 trillion in value each year, or 11 percent of our gross domestic product; Performs half of all R&D in the nation; and Outworks every other country in the world; U.S. manufacturers are twice as productive as workers in the next 10 leading manufacturing economies. 2

And one more big reason why manufacturing matters: U.S. manufacturing jobs pay well. In 2009, the average U.S. manufacturing worker earned $70,666 annually, including pay and benefits. The average non-manufacturing worker earned $57,993 annually. It takes more than a DSL and a telephone to create value, and the skills and innovation that U.S. manufacturing workers offer cannot be easily exported.

Despite all the talk that manufacturing is in an irrevocable decline, manufacturing is still a strategic economic advantage for the United States.

But still, we cannot expect to compete with economies where labor is cheaper if we tax ourselves more. We cannot expect to create jobs here when manufacturers are swamped by bureaucratic red-tape and lawsuit abuse that seeks profits, not justice. We cannot expect U.S. manufacturers to continue to lead the world in innovation if we do not produce the finest engineers in the world. And in order to grow jobs here at home and export products around the world, we must ensure a level playing field so our manufacturers can trade and compete to win in a global economy.

Accomplishing this will require Washington policymakers to be as innovative and forward-thinking as U.S. manufacturers already are. Our foreign competitors plan for economic growth over the next generation. We plan year-to-year and election-to-election. We must look over the horizon and set out a forward-looking economic plan if we are to create jobs for the long-term. To that end, I have coupled my many years of experience in the manufacturing sector with two years of discussions with entrepreneurs and manufacturers across Western New York to produce a 5-point jobs plan titled Manufacturing for Tomorrow. It focuses on five key areas of economic reform that need to be addressed: Tax relief and fairness for U.S. workers and manufacturers. Education and workforce training and preparedness for the 21st century. Tort reform to address job-killing lawsuit abuse. Customs reform to stop intellectual property violations. Opening new markets to create U.S. jobs and grow our domestic manufacturing base.

To enact this Manufacturing for Tomorrow agenda, it will take a change in attitude in Washington. Congress must recognize that we cannot tax and spend our way to prosperity, that sustained recovery means liberating American manufacturers from higher taxes and onerous mandates. It means empowering the risk-takers, the doers, the makers of things to do what they do best: create value, economic prosperity and job opportunities for all. Please take a look. I invite you to join with me to pass Manufacturing for Tomorrow today.

Sincerely,

Christopher J. Lee MEMBER OF CONGRESS

 U.S. companies cannot succeed globally unless we have a competitive tax structure domestically. Other industrialized nations have learned this lesson, and as the chart below shows, the worlds major economies have reduced their corporate rate over the last decade and a half, so that the average rate is now 26.3 percent, compared to Americas 39.21 percent. America now has the second-highest corporate tax rate in the world next to Japan. But that will not be for long, as Bloomberg News reports that Japans government pledged to cut the nations tax on businesses as part of a plan to defeat deflation and end two decades of economic stagnation. The trend is clear: Americas manufacturing competitors have sought to attract manufacturing though lower tax rates. As Scott Hodge, president of The Tax Foundation, notes, By keeping our corporate tax rate so high, were creating an economic Berlin Wall around the United States. We need to reverse this economically destructive trend so that American manufacturers are not competing with one hand tied behind their backs. To ensure that we are competing to win and growing jobs here at home, Chris Lees Manufacturing for Tomorrow agenda will: Lower the Corporate Tax Rate Studies suggest that every 1% that the corporate tax rate is lower than the competition results in 3% additional capital investment. Lowering the corporate rate to 25% will increase productivity domestically and stimulate significant economic growth.

TAX RELIEF

Chart prepared by the CATO Institute

Strengthen R&D In a study of the R&D incentives of eight leading Western economies by the British accounting firm Mazars, the United States finished dead-last in a measure of tax competitiveness. James Brett, President and CEO of the New England Council, notes that, Global competitors such as Canada and China have already surpassed the U.S. in terms of R&D incentives. The fruits of R&D spending are critical for competitiveness in todays world economy. Even the French international trade agency IIFA brags that since the reform of tax credits for research in 2008, France now offers the world's most advantageous fiscal regime for corporate research and development. 4

 Manufacturers need certainty in order to make long-term investments. Ensuring the Alternative Simplified Credit (ASC) is made permanent, as well as creating an additional incentive up to 10% credit for resulting domestic manufacturing, encourages U.S. companies to make significant long- term investments here at home and boost our global competitiveness.

Enhance Bonus Depreciation Since deductions taken immediately are worth more than in the future, bonus depreciation incentivizes growth. Making the 50% depreciation permanent and shortening the depreciation schedule means that investment will become more attractive to U.S. companies resulting in the creation of new jobs.

In a study of the R&D incentives of eight leading Western economies by the British accounting firm Mazars, the U.S. finished dead last.

Corporate Tax Rates

Japan United States India Canada Mexico United Kingdom China Ireland
Source: OECD, KPMG

39.54 39.21 33.99 29.52 28.00 28.00 25.00 12.50

Extend Net Operating Loss (NOL) Carryback If a business is facing a loss, it is important to provide assistance so that they may recover and grow in the future. Making the five-year NOL carryback permanent, and allowing firms to choose the amount to take in order to protect other credits, ensures that viable businesses are able to weather downturns and protects U.S. jobs. Keep Capital Gains / Dividend Rates Low Keeping rates low permanently boosts individual savings and provides incentives for Americans and small businesses to make investments that create jobs.

Reform Corporate Alternative Minimum Tax Allowing manufacturers to use their existing credits, and then ending the AMT altogether, preserves jobs and provides for significant capital reinvestment to create new ones. Expand Start-Up Deduction Start-up deductions incentivize innovative Americans to start their own businesses. Increasing the deduction from $5,000 to $20,000 and making it permanent encourages the entrepreneurs of tomorrow to start creating jobs today.

EDUCATION & WORKFORCE TRAINING

A strong education system that can produce a high-skilled workforce is critical to our long-term economic future. In order to remain competitive in todays global economy, it is imperative to invest in Science, Technology, Engineering and Mathematics (STEM) educational programs. As the chart below demonstrates, our leading trade partners produce a far higher proportion of STEM graduates than the United States. To ensure that U.S. workers are equipped with the knowledge to sustain our countrys evolving and innovative manufacturing base, Chris Lees Manufacturing for Tomorrow agenda will: Create the U.S. STEM Undergraduate degrees, 2004 (or most recent year available) Manufacturing Student Loan Forgiveness Program Country/Region All Fields STEM Fields Percent STEM Encourages students to enter Japan 551,016 349,015 63.3 STEM and manufacturing fields. China 1,196,290 672,463 56.2 Graduates with STEM degrees South Korea 261,754 119,338 45.6 (associates, bachelors, graduate) United Kingdom 292,090 109,940 37.6 who are employed in a France 321,438 118,954 37.0 manufacturing-related career Middle East 623,780 212,555 34.1 could be eligible to receive Mexico 276,690 93,858 33.9 $5,000 per year in loan United States 1,407,009 455,848 32.4 forgiveness for up to four years. Source: National Science Foundation, Science and Engineering Indicators, 2008 Support the National STEM Education Tax Incentive for Teachers Act of 2009 Allows certain full- time elementary and secondary school teachers of math, science, engineering, or technology courses a refundable tax credit for 10 percent of their undergraduate tuition up to $1,000 in any taxable year. (H.R. 705) Support the America COMPETES Act Improves the United States' competitiveness in STEM areas. Provides new authorities for federal STEM education programs, policies, and activities, encourages collaboration between existing federal STEM education programs and improves STEM teaching and learning in higher education. Promote Private Sector Partnerships and Academic Institutions Strengthens and expands scientific and technical education and training in advanced manufacturing. Support the American Manufacturing Efficiency and Retraining Investment Collaboration Act (AMERICA Works) Prioritizes funds designated for Carl D. Perkins Vocational-Technical Education Act, Trade Adjustment Assistance, and Workforce Investment Act to ensure programs result in nationally portable, industry-recognized credentials. Creating industry-recognized credentials will strengthen the pathway for students and transitioning workers to acquire the skills and education necessary for employment in the manufacturing sector. (H.R. 4072) Extend Employer-Provided Educational Assistance (Section 127) Allows individuals $5,250 in tax- free education benefits provided by an employer each year. This benefit is set to expire December 31, 2010. By making it permanent, it would offer certainty and encourage participation. 6

TORT REFORM
Product liability judgments are often excessive, and lawsuit abuse costs jobs and drives up prices for all. In the United States, 7,800 tort cases are filed in state courts each day, according to the Pacific Institute, and the United States has the highest tort costs in the world. To ensure that our legal system does not work against U.S. companies to the advantage of foreign competitors, and so that our tort system produces justice, not profits, Chris Lees Manufacturing for Tomorrow agenda will establish national uniformity in product liability law that: Makes the Loser Pay for Costs of Litigation According to the Manhattan Institute for Policy Research, the direct costs of tort litigation was $247 billion in 2006, or about $825 per person in the United States. Businesses are regularly overwhelmed with frivolous lawsuits that they must settle if they hope to avoid crippling legal costs. Almost every economist who has studied loser pays predicts that it would, if adopted, reduce the number of low-merit lawsuits.

Establishes a Reasonable Statute of Limitations Statutes of limitations can vary widely based upon the seriousness of the perceived offense, and could range anywhere from one to 10 years or more. Establishing a reasonable statute of limitations ensures that businesses will not have to endure expensive legal costs for years before a suit is actually filed and can put those resources towards product development and job creation. Caps Punitive Damages Awards for punitive damages must be more in line with compensatory damages to put an end to the out-of-control, punitive damages awards we have seen in recent years. Skyrocketing punitive damages have driven up costs for consumers and put companies and workers out of business. Placing a reasonable limit on punitive damages ensures our long-term economic prosperity and helps keep jobs in America.

Source: Tillinghast-Towers Perrin, U.S. Tort Costs and Cross Border Perspectives

EXPORT TRADE & NEW MARKETS

With 36 percent of the total jobs supported by U.S. exports coming from the manufacturing sector, it is imperative that U.S. companies have the resources necessary to grow in the global marketplace. This is especially so given our continued trade deficit with the world: Each month, America imports $50 billion more in goods and services than it exports to the world. To ensure that we grow U.S. jobs and expand U.S. exports into new markets, Chris Lees Manufacturing for Tomorrow agenda will: Support Pending, Obama-Backed Free Trade Agreements Calls for enactment of FTAs with Colombia, Panama, and South Korea, which are supported by President Barack Obama. The International Trade Commission estimates that implementation of these agreements would increase U.S. exports by more than 1 percent, resulting in more than 250,000 jobs.

Increase the Manufacturing Extension Partnership MEP is an essential program of regional centers that assist smaller, U.S.-based manufacturing companies in identifying and adopting new technologies aimed at increasing productivity, improving their economic competitiveness, and enhancing their technological capabilities. Increases the authorization level from $131.8 million to $250 million. Expand the Market Development Cooperator Program MDCP provides important financial and technical assistance from the International Trade Administration to support projects that enhance the global competitiveness of small- and medium-sized U.S. manufacturers. Increase the authorization from $2 million to $50 million. Increase for U.S. Trade Development Agency With a mission to promote economic growth in developing and middle income countries, the USTDA helps U.S. businesses export their products, which in turn creates U.S.-based jobs. Increases its budget from $50 billion to $100 billion. 8

Double Export-Import Bank Financing As the official export credit agency of the United States, Ex- Im assists in financing the export of U.S. goods and services to international markets, primarily for U.S. small businesses. Doubling the financing will enhance its ability to turn export opportunities into real sales that result in more U.S. jobs. Simplify Duty Drawback Ensure that U.S. manufacturers are not charged U.S. import duties for merchandise, which is ultimately resold to and consumed in another nation. Duty drawback allows the refund of duties paid on imports that are subsequently exported by a manufacturer, which improves international competitiveness. New Markets Explore new programs or grants that will promote U.S.-made exports to promising new markets such as China and Korea.

The International Trade Commission estimates that implementation of these agreements would increase U.S. exports by more than 1 percent, resulting in more than 250,000 jobs.

Source: National Association of Manufacturers

CUSTOMS REFORM

U.S. manufacturers face the growing problem of counterfeiting and piracy of their intellectual property (IP). To ensure that we are adequately protecting manufacturers and consumers alike, Chris Lees Manufacturing for Tomorrow agenda will: Border Seizures of Counterfeit and Pirated Goods Promote Coordination Between Customs and Border Patrol (CBP) and Rights Holders Allow CBP to share identifying information with trademark owners in order to assist in making a determination about whether a product is counterfeit or genuine. Authorize CBP to disclose to trademark owners a detailed description and photographs of the goods being detained, and explicitly state that such authorizations do not violate the Trade Source: CBP, ICE and Congressional Research Service Secrets Act.

Enhance Enforcement Capabilities of CBP Streamline the development of an IP database and study the creation of a trusted partners list to expedite customs processes and ensure resources are spent on enforcement against lawbreakers.

Estimated U.S. Trade Losses Due to Copyright Piracy, 2006-2008

(Millions of Dollars) Copyright Industry Business Software Records and music Entertainment software Books Totals 2006 10,721 2,228 1,951 529 15,469 2007 13,318 2,180 1,913 465 17,876 2008 14,709 1,965 Not available Not available 16,674

Source: Congressional Research Service

Streamline Complaints Ensure that the U.S. International Trade Commission (ITC) has the resources necessary to adjudicate intellectual property infringements in a timely manner. Lengthy ITC adjudications tie up resources that can more productively be used for R&D, job creation, and other job-creating activities.

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