Mr. KERRY. Mr. President, I come to the floor today to introduce three bills to address the growing needs of small manufacturers, to stimulate the manufacturing sector of our economy, and to put back to work the millions of American workers in the manufacturing sector that have lost their jobs in the past 3 years. The three comprehensive bills are: the Manufacturing Assistance, Development and Education (MADE) in America Act, the Enhance Domestic Manufacturing and Worker Assistance Act, and the Manufacturing Jobs Production Act.
It's no secret that during the past 3 years, manufacturing employment in the United States has declined from 17.3 million to 14.6 million jobs. This loss of manufacturing jobs represents a loss of more than one in every seven such jobs. Over the past 3 years, the United States has lost an average of 80,000 manufacturing jobs a month. The States that rely the most on their manufacturing sector have suffered the most during the past 3 years. Indiana has lost 67,000 manufacturing jobs, California--297,000, Ohio--152,000, Illinois--126,000, Michigan--127,000, Pennsylvania--133,000, South Carolina--55,200, and North Carolina--145,300. Even in my home State of Massachusetts, we have lost approximately 80,000 manufacturing jobs since January 2001.
The loss of manufacturing jobs is of great concern because the manufacturing sector is more important than any other sector in supporting overall economic growth, technological innovation, and a high standard of living for Americans. Over the past 10 years, manufacturers have performed nearly 60 percent of research and development in the United States and have paid over one-third of all corporate tax payments to State and local governments.
Further, replacing manufacturing jobs with service sector jobs will not help stabilize the American economy. According to a University of Michigan study, 6.5 spin-off jobs are created as a result of every new job created in manufacturing. Service sector jobs simply cannot generate that type of economic activity. The benefits of manufacturing can also be found in national salary averages. In 2001, salaries and benefits averaged $54,000 in the manufacturing sector, while the average salary and benefits package in the private sector overall was only $45,600.
In 1955, manufacturing jobs were 30.5 percent of all U.S. employment, today they make up just 14 percent. The manufacturing decline has been marked by a relocation of factories abroad along with reduced exports and increased imports of manufactured goods. Both large and small companies have been affected and a continued shrinking of the manufacturing base may shift the manufacturing innovation process to other global centers and most certainly result in a decline in U.S. living standards.
As a member of the Finance and Commerce committees and ranking member of the Senate Committee on Small Business and Entrepreneurship, I have been fighting for the creation of new manufacturing jobs during debate over the President's tax cuts, and I will continue to do so in the months ahead. President Bush has done nothing to address the loss of manufacturing jobs, and many communities across the country are suffering because of it, as more and more plants close and more and more jobs move overseas. This administration is indifferent to these changes, and the pain being felt in million of American households, and that's unacceptable.
In fact, indifferent may be too kind a word. The Bush administration has been downright cruel to working Americans, pursuing billions of tax cuts for the most well-off in our society as their only economic policy, while millions of hard-working Americans have lost their jobs and will be left with the bill from this administration's reckless fiscal policies. In fact, you could argue that the manufacturing jobs picture is actually worse than the hard numbers tell us. While many estimates show that 2.5 million manufacturing jobs have been lost since President Bush took office, in previous postwar recoveries, manufacturing employment had recovered by this point in the business cycle and risen by more than 5 percent. Under the Bush presidency, manufacturing employment has continued to deteriorate steadily, falling so far by 8 percent. Morgan Stanley's respected economists tell us that the difference represents 2.1 million additional manufacturing jobs. More supply-side, trickle-down, ideologically driven tax cuts are not going to turn this around. Congress needs to take action and pass some policies that are meaningful to people, and will actually create jobs, and soon.
The President and his followers insist that his tax cuts are starting to work, basing their claims on a couple of months where the overall job creation numbers were positive. But the truth is that the meager job gains of the last three months have done little to lift most parts of the economy because nearly 80 percent of those small gains have come in just three sectors: government, temporary staffing, and education and health services. Manufacturing is not yet on the mend, and people who are finding new jobs are finding jobs at lower pay. We need to take action.
Small-business owners have made it clear to me, to Congress, and to the administration what actions are needed to reinvigorate the manufacturing sector. Unlike the Bush administration, which has ignored these requests for help, Congress must have the courage to make the tough decisions and not simply pander to wealthy Americans and giant corporations with unbalanced tax cuts. The Nation's gross domestic product may be temporarily up, but manufacturing jobs are still way down. To get those jobs back, and to continue competing on the international stage, our manufacturers, particularly our small manufacturers, need adequate representation and leadership at all levels of government, here and abroad. They need a well-educated, highly skilled, productive labor force; Federal contracting and subcontracting opportunities; greater access to capital; foreign patent protection; trade adjustment, global marketing, and entrepreneurial development assistance; and responsible, targeted tax credits. This legislation addresses those needs, while the President's tax cuts continue to undercut them.
Mr. President, we often receive complaints that the Federal and State small business programs duplicate, rather than complement, each other. While the SBA has stated that it has sufficient systems and programs in place to address the concerns of manufacturers, statistics on small manufacturers, as well as the business owners themselves, prove otherwise. Many state that accessing these programs is often confusing and difficult because they are fragmented, spread out and not tailored to bridge gaps found between State and Federal assistance programs. To address these problems, my bill will create the National Office for the Development of Small Manufacturers at the Small Business Administration, led by an associate administrator. This new office will be responsible for coordinating and strengthening existing programs, as well as establishing new SBA programs to address the needs of small manufacturers and to promote programs throughout the Federal Government that assist small- and medium-size manufacturers. While the President has established a "new" manufacturing czar at the Department of Commerce, this action is seen as lateral movement and does nothing to assist those manufacturers that are suffering the most, the Nation's small business manufacturers.
Once established, the National Office for the Development of Small Manufacturers will be responsible for implementing a Manufacturing Corps through block grants to each State that will address the skilled worker crisis in this country by promoting technical education pertinent to the manufacturing sector. First, the Manufacturing Corps would help current manufacturing workers improve their skill set and advance their technical abilities. Each State's grant would ultimately provide small manufacturers with more highly skilled workers--something that the industry has posed as a global competitive disadvantage--and allow the unemployed and those in declining industries to make the pivotal move back to work or to other manufacturing sectors, respectively. Second, the Manufacturing Corps would help small manufacturers fill their skilled labor needs by encouraging college and university students studying engineering, computers, and other high-tech fields to work in the small manufacturing sector by offering to repay a portion of their student loans if they do so for a specified period of time. Similar to incentives for students going into the nonprofit or government work, the government would repay the loans of those who commit to working for a small manufacturer for 4 years following graduation if their annual employment compensation does not exceed $60,000.
Third, the Manufacturing Corps would establish a vocational and technology training for students at the high school level to prepare students who are not planning to attend college directly after graduation to enter the manufacturing sector. As in woodshop or auto shop courses, high school students will learn the technical skills to become effective, skilled manufacturing employees, such as machinists or metal workers. Additionally, schools providing such assistance would partner with community manufacturers to address their skilled worker needs and to provide employment opportunities for students after graduation.
Another duty charged to the National Office for the Development of Small Manufacturers is to create a government-wide "One Stop Small Manufacturing Shop" for small manufacturers. This online web portal will serve as the single point of contact for information on entrepreneurial development assistance, access to capital, specific outreach programs, contracting opportunities, and R&D projects. We already have successful programs that can be used as a prototype for the web page such as the National Industrial Manufacturing Assistance Program's Web site at the Office of Industrial Technologies at the Department of Energy.
The greatest challenge to small businesses, as with all businesses, is the ability to obtain contracts. The BusinessLINC program within the SBA has been proven, since its inception, to successfully match small businesses with potential clients. The teaming model has created thousands of jobs and millions of dollars in contracts. The BusinessLINC-M program will also team small businesses with non-governmental organizations that can have a direct impact on their bottom-line through contracting or mentoring. There is a great potential for the BusinessLINC-M program to match suppliers with distributors, offer contracting and subcontracting opportunities, which directly benefits the local economy while allowing access to vendors in the distributors' backyards. The National Office for the Development of Small Manufacturers will create a similar program to foster symbiotic partnerships between small and large businesses to spur contracting opportunities. This BusinessLINC-M program would instead match up small manufacturers with larger firms that could utilize their products, creating subcontracting opportunities and a stronger supply chain.
Finally, the National Office for the Development of Small Manufacturers will develop a manufacturing mentor-protégé program to focus on improving the management practices, domestic and foreign marketing abilities, efficiency, and product development of small manufacturers by pairing them with larger, more experienced manufacturers that would provide such guidance.
One of the first things we can do to help small manufacturers is to tailor the SBA's loan and venture capital programs so that they offer small manufacturers affordable, long-term financing in amounts that are truly appropriate for them. This legislation will assist small businesses with fixed-asset costs, working capital, loan dollars to help them export what they have produced in the United States, and venture capital investments to spur expansion and growth.
To provide that capital, we have increased the loan amounts available to small manufacturers, increased venture leverage, and allowed refinancing of certain existing business debt. The maximum 504 loan, for equipment and property, will be raised from $1 million to $4 million, the maximum microloan will be raised from $35,000 to $50,000, and the gross loan amount for 7(a) working capital loans will increase from $1 million to $4 million for small manufacturers.
Investors should be encouraged to devote more of their money to the fastest growing small manufacturers. The SBIC program can provide that venture capital money. Under this bill, if SBICs invest 50 percent in small manufacturers, then a single fund can leverage $150 million instead of $115 million and a manager with several SBICs can leverage $185 million from the SBA. The legislation also restores and increases funding to establish additional New Markets Venture Capital firms and increases the SBA's leverage against private funds raised in the New Markets Venture Capital program from 150 percent to 200 percent so these venture capital firms can invest more in small manufacturers.
For growing small businesses using the loans from the 504 program to buy new equipment or buildings, we raise the limit for lenders so that they must create or retain one job for every $100,000 loaned to manufacturers. This is in place of the $35,000 that is currently in place. For non-manufacturers, it will be raised to $50,000. For manufacturers, the costs of retaining jobs are higher, and we want these jobs to be good living wages and not the $3 per hour or lower that exists in some countries.
After a natural disaster, the already slumping manufacturing industry faces an even greater challenge in returning business to normal and affording the costs of repair. Recognizing that they face these problems, the MADE in America Act changes several provisions to the SBA's disaster loan program. It increases the maximum loan size from $1.5 million to $5 million; allows small manufacturers to consolidate debt by refinancing not just existing disaster loans but any outstanding business loan; waives the principal and interest payments for 6 months; authorizes the administration to waive unreasonable size limitations; and prohibits the SBA from selling all disaster loans to other creditors. Disaster loans, at the most, have an interest rate of 4 percent and terms of up to 30 years. This low rate and long term keeps manufacturers' payments down as well as their debt, particularly when they refinance their more expensive business loans.
To help small manufacturers and small R&D firms, we need to reduce trade barriers, so that they are able to sell their products and technologies in other countries. Small-business owners commonly cited the expense required to secure foreign patent protection as a significant barrier to their ability to operate in international markets. Part of encouraging the spread of their innovations into other countries is decreasing their vulnerability to big foreign corporations that can take their ideas when they try to sell their products around the world. Our small businesses need patent protection. However, the costs associated with filing such patents are often prohibitively expensive.
For example, Mr. Clifford Hoyt, who is vice president and chief technology officer of Cambridge Research and Instrumentation, testified on June 21, 2001, as part of the Committee's hearing on reauthorization of the STTR program that cost of ``patent protection in Europe is $20,000.'' Information from the American Intellectual Property Law Association's meeting shows that the costs of foreign patents range from $7,200 in Canada to $27,200 in Japan. Those costs include fees for filing, examination, translation and attorneys.
With this legislation, to address the intellectual property problem for small exporters, I propose enacting a variation of a bill I introduced 2 years ago. The MADE in America Act would establish a self-sustaining grant fund to help small manufacturers and R&D firms pay for the cost associated with foreign patent protection. Each company would be limited to one grant and, in order to be eligible for the grant, it must have already filed for patent protection in the United States. Both of these provisions are designed to ensure, to the extent possible, that companies apply for assistance for their most promising technology and therefore are in the best position to return money to the grant fund when their patented technology becomes profitable. By giving the companies only one shot at a grant to protect and make money from their technologies, it forces them to select the one most likely to succeed and have sales. At the same time, requiring companies to have already filed for patent protection in the United States prior to seeking a foreign patent grant is a gauge of the company's confidence in the commercial potential of its technology.
Ultimately, the goal is to create a self-sustaining grant fund. To do so, in return for the grants, each recipient would be obligated to pay 5 percent of its related export sales or licensing fees to the fund, to be known as the ``Small Business Foreign Patent Protection Grant Fund.'' To maintain a reasonable incentive for the small businesses, the total amount recipients would be required to pay would be capped at four times the amount of the grant, which for a $25,000 grant would be $100,000.
When I first introduced this bill a couple of years ago, the grants were limited to companies that participate in the SBA's SBIR and STTR programs. However, this bill opens the grant funding to all small firms, while reserving 50 percent of the money for SBIR and STTR firms through the first three quarters to each year. Intellectual property protection is critical to these small firms that have a great product or invention, and keeping these innovations in the hands of American firms is important to the U.S. economy.
Mr. President, today I am also introducing the Enhance Domestic Manufacturing and Worker Assistance Act. America's manufacturing decline and the associated loss of good, stable manufacturing jobs has been marked by a relocation of factories abroad along with reduced exports and increased imports of manufactured goods. This legislation will respond to the manufacturing crisis in two ways. The proposal recognizes the harmful impact that trade has on small manufacturers and provides assistance to those workers, companies and communities that have suffered through Trade Adjustment Assistance programs. The proposal also provides critical assistance to U.S. domestic manufacturers to ensure that they adjust to the global economy and remain competitive in the 21st century.
First of all, for those workers, businesses and communities that have been harmed by trade, my bill assists them by reauthorizing our Trade Adjustment Assistance programs for workers and business firms. The bill includes elements of an innovative program to assist similarly situated communities. Recognizing that entire communities experience economic displacement, this proposal will assist harmed communities in exploring new avenues of economic development and job creation. Combined, these programs will assist hundreds of mostly small- and medium-sized manufacturing and agricultural companies that experience loss of jobs and sales due to import competition and other adverse consequences of trade. For example, TAA for workers provides income support, job search and worker relation assistance for affected workers.
Next, my legislation will enhance two programs that have proven effective in assisting domestic manufacturing firms. For example, the bill will strengthen the very effective Manufacturing Extension Partnership program. This program assists struggling small- and medium-size manufacturers to modernize, increase productivity, cut waste, achieve higher profits, and compete in the demanding global market. With increased funding, the MEP program can expand its program reach and decrease the fees paid by small manufacturers to access the assistance. It is exactly this type of program that will make American manufacturers competitive again, allowing them to maintain existing jobs and create additional high-skilled and high-paying jobs in the United States.
In addition, my legislation increases funding for the Advanced Technology Partnership program. This very important program fosters public-private partnerships to accelerate the development of innovative technologies and bridges the gap between the research lab and the market place. The program has been very effective in accelerating the development of innovative technologies that promise significant commercial payoffs and widespread benefits for the Nation. Unfortunately, the Bush administration has sought to eliminate this program, at a time when technological change is faster than ever before and small manufacturers must be technologically competitive.
Strengthening the MEP and ATP programs will go a long way in assisting small domestic manufacturers as they attempt to regain market share lost to international competition and recover from the resulting devastating job losses.
Finally, this bill will also create an "Office of Small Business" within the Office of the United States Trade Representative that will focus on the issues affecting small- and medium-size manufacturers as they relate to our international trade policy. This proposal is very similar to a proposal that I offered with Senator Olympia Snowe in the 107th Congress. Small manufacturers are directly impacted by our trade policies--often adversely--yet they do not have a seat at the table and lack the ability to effectively express their concerns. The establishment of this office will ensure that issues important to small manufacturers are taken into consideration as our Nation's trade policy is carried out in the future and will assist small businesses in export promotion and trade compliance.
The final piece of my legislation plan to enhance U.S. manufacturing is my bill titled the "Manufacturing Job Production Act." The bill has four components, all of which are fiscally responsible. None of them will by themselves completely make up for the jobs lost during this administration, but they will each do their part in stimulating new job creation and new investment in manufacturing firms.
The first component of my plan is a Temporary Manufacturing Job Creation Tax Credit. It is a similar proposal to one I introduced earlier this year, when we were debating the President's third major tax cut in 3 years. My idea is straightforward: Any domestic manufacturer would receive an income tax credit based on a percentage of the net increase in taxable Social Security payroll linked to new manufacturing/production jobs, comparing total applicable payroll for one year to the previous year, adjusted for inflation. The credit would apply only to domestic production/manufacturing jobs created in 2004 and 2005, and it would include jobs created in U.S. territories, and those created by foreign-owned companies in the United States or its territories.
Unlike many of the administration's tax cuts, which carry huge costs at the vague promise of a positive economic result, my idea is outcome-based because it only costs money if it actually works. Plus, it has a built-in safety valve to prevent abuse, because it prevents firms from receiving tax credits if they create new manufacturing jobs while simultaneously laying off other workers, and it stops companies from tilting the benefits to high-salary workers because these salaries are already above the Social Security payroll tax cap. By comparing payroll taxes paid over a whole year, it also provides an incentive for firms to hire new workers and keep them on payroll and makes the calculation simple for businesses. It also provides an employment stimulus for U.S. companies with subsidiaries or manufacturing facilities on U.S. possessions, such as Puerto Rico.
My proposal would be in place for 2 years, and the Joint Committee on Taxation estimates that it would cost less than $4 billion. Surely we could pass this proposal and offset its modest cost by finally closing some of the Enron tax loopholes or passing the corporate inversion proposals that have previously passed this body unanimously, only to be opposed by the House. I think the percentage of Americans that would support that tradeoff would be upwards of 80 percent. Paying for this proposal by closing tax loopholes for wealthy corporation makes perfect sense. It will help our economy grow and help slow the flow of manufacturing jobs overseas.
The second element of may plan expands upon a capital gains provision that I have included in other legislation. Section 4 of S. 842, my small business tax stimulus bill, provides that there shall be no capital gains tax applied to new equity investments in small businesses with gross sales under $100 million, if the investments are held for at least 4 years. The zero capital gains tax applies to businesses involved in certain "critical technologies" as well as specialized Small Business Investment Companies, or SSBICs. For the Manufacturing Job Production Act, this capital gains proposal is expanded to include new equity investments in small manufacturing firms. Such a proposal should generate new investments in manufacturing, particularly small manufacturing companies that have been so damaged by recent economic trends. And like the job creation credit, it only costs significant money if it has the desired effect. That factor alone makes it far preferable to the Republican "throw it and see if it sticks" tax cut strategy.
The third part of my manufacturing plan is a revised BRIDGE Act, designed to give a little extra boost to small manufacturers. The BRIDGE Act stands for Business Retained Income During Growth and Expansion. It will help ensure that rapidly expanding, entrepreneurial businesses have access to the capital they need to continue creating jobs and stimulating the economy.
Each year, the United States economy generates 600,000 to 800,000 new businesses. Most new business start small and stay small--but some evolve into fast-growth companies with the capacity to propel the economy forward. These fast-growing companies create the most new jobs, yet access to financing--particularly in the current economic environment, but also when the economy is strong--presents a pivotal challenge to them. A typical startup may open its doors with a combination of personal savings, credit card borrowing, and family lending. Once a business has grown past a certain size--say, when sales reach $10 million or more--the company is better able to attract external financing at a reasonable cost. However, there are many companies in a middle range, including many small manufacturers, which desperately need additional financing in the range of $250,000 to $1 million. These companies face a severe credit crunch that limits their growth and the number of new jobs they can create.
I believe that if congress does anything to assist small manufacturers, it should take steps to ease the credit crunch for those climbing the economic ladder from small- to medium-size enterprise, thereby generating new ones. The BRIDGE Act addresses this financing gap. As ranking member of the Committee on Small Business and Entrepreneurship, I have been the leading voice for this idea in the Senate, and it is something worth trying. Like my other proposals for tax relief for small manufacturers, it only generates cost to taxpayers if it actually works.
The BRIDGE Act is simple. It would allow a fast-growing business with less than $10 million in sales to temporarily defer up to $250,000 of its Federal income tax liability, but only if the money is reinvested in the company. The 2-year deferral would be repayable wit interest over a 4-year period. For small manufacturers, the maximum tax deferral would be $400,000, and the payback period would be extended to a maximum of 6 years. Thus, the act will free up new investment capital for growing companies by allowing them to use a portion of their Federal tax liability for self-financing. Its revenue cost is minimal--in fact, if the program is implemented temporarily, as in my bill, it actually raises a small amount in the 10-year budget window--since the deferred taxes are paid back with interest.
The fourth and final component of my tax relief plan for small manufacturers is to make permanent the increase in Section 179 small business expensing that was passed earlier this year as part of the President's third tax cut. However, this increase is set to expire at the end of 2005. While the recent increase does not help the smallest of small businesses, it can be helpful to small manufacturers who purchase more expensive equipment. It is one element of the various Bush tax cuts that deserves to be made permanent. My proposal would permanently increase the annual expensing limit to $100,000.
Mr. President, we may not have all the answers here in the Congress. Some of these trends in manufacturing employment have taken a long time to develop, and we won't be able to turn them around overnight. But at least we shouldn't ignore the changes and act as if more tax cuts will solve the problem. My manufacturing tax plan contains four reasonable, responsible components--and most will cost money only if they are actually effective. It's time for this administration to get its head out of the sand and start proposing job-creating strategies that will actually work.
Mr. President, nearly 3 million Americans, all across this Nation, have lost their jobs since 2000. We need to act now, with a comprehensive strategy that not only incorporates tax cuts but also includes real job training, business development, capital access, and levels the playing field for U.S. manufacturers. I believe this legislation addresses many of the concerns of the small business community and will take a significant step towards reversing the current trend of economic decline and job loss in the manufacturing sector.
I ask unanimous consent that the text of the MADE in America Act, the Enhance Domestic Manufacturing and Worker Assistance Act, and the Manufacturing Jobs Production Act be printed in the record, and I urge all of my colleagues to support these bills.
It's no secret that during the past 3 years, manufacturing employment in the United States has declined from 17.3 million to 14.6 million jobs. This loss of manufacturing jobs represents a loss of more than one in every seven such jobs. Over the past 3 years, the United States has lost an average of 80,000 manufacturing jobs a month. The States that rely the most on their manufacturing sector have suffered the most during the past 3 years. Indiana has lost 67,000 manufacturing jobs, California--297,000, Ohio--152,000, Illinois--126,000, Michigan--127,000, Pennsylvania--133,000, South Carolina--55,200, and North Carolina--145,300. Even in my home State of Massachusetts, we have lost approximately 80,000 manufacturing jobs since January 2001.
The loss of manufacturing jobs is of great concern because the manufacturing sector is more important than any other sector in supporting overall economic growth, technological innovation, and a high standard of living for Americans. Over the past 10 years, manufacturers have performed nearly 60 percent of research and development in the United States and have paid over one-third of all corporate tax payments to State and local governments.
Further, replacing manufacturing jobs with service sector jobs will not help stabilize the American economy. According to a University of Michigan study, 6.5 spin-off jobs are created as a result of every new job created in manufacturing. Service sector jobs simply cannot generate that type of economic activity. The benefits of manufacturing can also be found in national salary averages. In 2001, salaries and benefits averaged $54,000 in the manufacturing sector, while the average salary and benefits package in the private sector overall was only $45,600.
In 1955, manufacturing jobs were 30.5 percent of all U.S. employment, today they make up just 14 percent. The manufacturing decline has been marked by a relocation of factories abroad along with reduced exports and increased imports of manufactured goods. Both large and small companies have been affected and a continued shrinking of the manufacturing base may shift the manufacturing innovation process to other global centers and most certainly result in a decline in U.S. living standards.
As a member of the Finance and Commerce committees and ranking member of the Senate Committee on Small Business and Entrepreneurship, I have been fighting for the creation of new manufacturing jobs during debate over the President's tax cuts, and I will continue to do so in the months ahead. President Bush has done nothing to address the loss of manufacturing jobs, and many communities across the country are suffering because of it, as more and more plants close and more and more jobs move overseas. This administration is indifferent to these changes, and the pain being felt in million of American households, and that's unacceptable.
In fact, indifferent may be too kind a word. The Bush administration has been downright cruel to working Americans, pursuing billions of tax cuts for the most well-off in our society as their only economic policy, while millions of hard-working Americans have lost their jobs and will be left with the bill from this administration's reckless fiscal policies. In fact, you could argue that the manufacturing jobs picture is actually worse than the hard numbers tell us. While many estimates show that 2.5 million manufacturing jobs have been lost since President Bush took office, in previous postwar recoveries, manufacturing employment had recovered by this point in the business cycle and risen by more than 5 percent. Under the Bush presidency, manufacturing employment has continued to deteriorate steadily, falling so far by 8 percent. Morgan Stanley's respected economists tell us that the difference represents 2.1 million additional manufacturing jobs. More supply-side, trickle-down, ideologically driven tax cuts are not going to turn this around. Congress needs to take action and pass some policies that are meaningful to people, and will actually create jobs, and soon.
The President and his followers insist that his tax cuts are starting to work, basing their claims on a couple of months where the overall job creation numbers were positive. But the truth is that the meager job gains of the last three months have done little to lift most parts of the economy because nearly 80 percent of those small gains have come in just three sectors: government, temporary staffing, and education and health services. Manufacturing is not yet on the mend, and people who are finding new jobs are finding jobs at lower pay. We need to take action.
Small-business owners have made it clear to me, to Congress, and to the administration what actions are needed to reinvigorate the manufacturing sector. Unlike the Bush administration, which has ignored these requests for help, Congress must have the courage to make the tough decisions and not simply pander to wealthy Americans and giant corporations with unbalanced tax cuts. The Nation's gross domestic product may be temporarily up, but manufacturing jobs are still way down. To get those jobs back, and to continue competing on the international stage, our manufacturers, particularly our small manufacturers, need adequate representation and leadership at all levels of government, here and abroad. They need a well-educated, highly skilled, productive labor force; Federal contracting and subcontracting opportunities; greater access to capital; foreign patent protection; trade adjustment, global marketing, and entrepreneurial development assistance; and responsible, targeted tax credits. This legislation addresses those needs, while the President's tax cuts continue to undercut them.
Mr. President, we often receive complaints that the Federal and State small business programs duplicate, rather than complement, each other. While the SBA has stated that it has sufficient systems and programs in place to address the concerns of manufacturers, statistics on small manufacturers, as well as the business owners themselves, prove otherwise. Many state that accessing these programs is often confusing and difficult because they are fragmented, spread out and not tailored to bridge gaps found between State and Federal assistance programs. To address these problems, my bill will create the National Office for the Development of Small Manufacturers at the Small Business Administration, led by an associate administrator. This new office will be responsible for coordinating and strengthening existing programs, as well as establishing new SBA programs to address the needs of small manufacturers and to promote programs throughout the Federal Government that assist small- and medium-size manufacturers. While the President has established a "new" manufacturing czar at the Department of Commerce, this action is seen as lateral movement and does nothing to assist those manufacturers that are suffering the most, the Nation's small business manufacturers.
Once established, the National Office for the Development of Small Manufacturers will be responsible for implementing a Manufacturing Corps through block grants to each State that will address the skilled worker crisis in this country by promoting technical education pertinent to the manufacturing sector. First, the Manufacturing Corps would help current manufacturing workers improve their skill set and advance their technical abilities. Each State's grant would ultimately provide small manufacturers with more highly skilled workers--something that the industry has posed as a global competitive disadvantage--and allow the unemployed and those in declining industries to make the pivotal move back to work or to other manufacturing sectors, respectively. Second, the Manufacturing Corps would help small manufacturers fill their skilled labor needs by encouraging college and university students studying engineering, computers, and other high-tech fields to work in the small manufacturing sector by offering to repay a portion of their student loans if they do so for a specified period of time. Similar to incentives for students going into the nonprofit or government work, the government would repay the loans of those who commit to working for a small manufacturer for 4 years following graduation if their annual employment compensation does not exceed $60,000.
Third, the Manufacturing Corps would establish a vocational and technology training for students at the high school level to prepare students who are not planning to attend college directly after graduation to enter the manufacturing sector. As in woodshop or auto shop courses, high school students will learn the technical skills to become effective, skilled manufacturing employees, such as machinists or metal workers. Additionally, schools providing such assistance would partner with community manufacturers to address their skilled worker needs and to provide employment opportunities for students after graduation.
Another duty charged to the National Office for the Development of Small Manufacturers is to create a government-wide "One Stop Small Manufacturing Shop" for small manufacturers. This online web portal will serve as the single point of contact for information on entrepreneurial development assistance, access to capital, specific outreach programs, contracting opportunities, and R&D projects. We already have successful programs that can be used as a prototype for the web page such as the National Industrial Manufacturing Assistance Program's Web site at the Office of Industrial Technologies at the Department of Energy.
The greatest challenge to small businesses, as with all businesses, is the ability to obtain contracts. The BusinessLINC program within the SBA has been proven, since its inception, to successfully match small businesses with potential clients. The teaming model has created thousands of jobs and millions of dollars in contracts. The BusinessLINC-M program will also team small businesses with non-governmental organizations that can have a direct impact on their bottom-line through contracting or mentoring. There is a great potential for the BusinessLINC-M program to match suppliers with distributors, offer contracting and subcontracting opportunities, which directly benefits the local economy while allowing access to vendors in the distributors' backyards. The National Office for the Development of Small Manufacturers will create a similar program to foster symbiotic partnerships between small and large businesses to spur contracting opportunities. This BusinessLINC-M program would instead match up small manufacturers with larger firms that could utilize their products, creating subcontracting opportunities and a stronger supply chain.
Finally, the National Office for the Development of Small Manufacturers will develop a manufacturing mentor-protégé program to focus on improving the management practices, domestic and foreign marketing abilities, efficiency, and product development of small manufacturers by pairing them with larger, more experienced manufacturers that would provide such guidance.
One of the first things we can do to help small manufacturers is to tailor the SBA's loan and venture capital programs so that they offer small manufacturers affordable, long-term financing in amounts that are truly appropriate for them. This legislation will assist small businesses with fixed-asset costs, working capital, loan dollars to help them export what they have produced in the United States, and venture capital investments to spur expansion and growth.
To provide that capital, we have increased the loan amounts available to small manufacturers, increased venture leverage, and allowed refinancing of certain existing business debt. The maximum 504 loan, for equipment and property, will be raised from $1 million to $4 million, the maximum microloan will be raised from $35,000 to $50,000, and the gross loan amount for 7(a) working capital loans will increase from $1 million to $4 million for small manufacturers.
Investors should be encouraged to devote more of their money to the fastest growing small manufacturers. The SBIC program can provide that venture capital money. Under this bill, if SBICs invest 50 percent in small manufacturers, then a single fund can leverage $150 million instead of $115 million and a manager with several SBICs can leverage $185 million from the SBA. The legislation also restores and increases funding to establish additional New Markets Venture Capital firms and increases the SBA's leverage against private funds raised in the New Markets Venture Capital program from 150 percent to 200 percent so these venture capital firms can invest more in small manufacturers.
For growing small businesses using the loans from the 504 program to buy new equipment or buildings, we raise the limit for lenders so that they must create or retain one job for every $100,000 loaned to manufacturers. This is in place of the $35,000 that is currently in place. For non-manufacturers, it will be raised to $50,000. For manufacturers, the costs of retaining jobs are higher, and we want these jobs to be good living wages and not the $3 per hour or lower that exists in some countries.
After a natural disaster, the already slumping manufacturing industry faces an even greater challenge in returning business to normal and affording the costs of repair. Recognizing that they face these problems, the MADE in America Act changes several provisions to the SBA's disaster loan program. It increases the maximum loan size from $1.5 million to $5 million; allows small manufacturers to consolidate debt by refinancing not just existing disaster loans but any outstanding business loan; waives the principal and interest payments for 6 months; authorizes the administration to waive unreasonable size limitations; and prohibits the SBA from selling all disaster loans to other creditors. Disaster loans, at the most, have an interest rate of 4 percent and terms of up to 30 years. This low rate and long term keeps manufacturers' payments down as well as their debt, particularly when they refinance their more expensive business loans.
To help small manufacturers and small R&D firms, we need to reduce trade barriers, so that they are able to sell their products and technologies in other countries. Small-business owners commonly cited the expense required to secure foreign patent protection as a significant barrier to their ability to operate in international markets. Part of encouraging the spread of their innovations into other countries is decreasing their vulnerability to big foreign corporations that can take their ideas when they try to sell their products around the world. Our small businesses need patent protection. However, the costs associated with filing such patents are often prohibitively expensive.
For example, Mr. Clifford Hoyt, who is vice president and chief technology officer of Cambridge Research and Instrumentation, testified on June 21, 2001, as part of the Committee's hearing on reauthorization of the STTR program that cost of ``patent protection in Europe is $20,000.'' Information from the American Intellectual Property Law Association's meeting shows that the costs of foreign patents range from $7,200 in Canada to $27,200 in Japan. Those costs include fees for filing, examination, translation and attorneys.
With this legislation, to address the intellectual property problem for small exporters, I propose enacting a variation of a bill I introduced 2 years ago. The MADE in America Act would establish a self-sustaining grant fund to help small manufacturers and R&D firms pay for the cost associated with foreign patent protection. Each company would be limited to one grant and, in order to be eligible for the grant, it must have already filed for patent protection in the United States. Both of these provisions are designed to ensure, to the extent possible, that companies apply for assistance for their most promising technology and therefore are in the best position to return money to the grant fund when their patented technology becomes profitable. By giving the companies only one shot at a grant to protect and make money from their technologies, it forces them to select the one most likely to succeed and have sales. At the same time, requiring companies to have already filed for patent protection in the United States prior to seeking a foreign patent grant is a gauge of the company's confidence in the commercial potential of its technology.
Ultimately, the goal is to create a self-sustaining grant fund. To do so, in return for the grants, each recipient would be obligated to pay 5 percent of its related export sales or licensing fees to the fund, to be known as the ``Small Business Foreign Patent Protection Grant Fund.'' To maintain a reasonable incentive for the small businesses, the total amount recipients would be required to pay would be capped at four times the amount of the grant, which for a $25,000 grant would be $100,000.
When I first introduced this bill a couple of years ago, the grants were limited to companies that participate in the SBA's SBIR and STTR programs. However, this bill opens the grant funding to all small firms, while reserving 50 percent of the money for SBIR and STTR firms through the first three quarters to each year. Intellectual property protection is critical to these small firms that have a great product or invention, and keeping these innovations in the hands of American firms is important to the U.S. economy.
Mr. President, today I am also introducing the Enhance Domestic Manufacturing and Worker Assistance Act. America's manufacturing decline and the associated loss of good, stable manufacturing jobs has been marked by a relocation of factories abroad along with reduced exports and increased imports of manufactured goods. This legislation will respond to the manufacturing crisis in two ways. The proposal recognizes the harmful impact that trade has on small manufacturers and provides assistance to those workers, companies and communities that have suffered through Trade Adjustment Assistance programs. The proposal also provides critical assistance to U.S. domestic manufacturers to ensure that they adjust to the global economy and remain competitive in the 21st century.
First of all, for those workers, businesses and communities that have been harmed by trade, my bill assists them by reauthorizing our Trade Adjustment Assistance programs for workers and business firms. The bill includes elements of an innovative program to assist similarly situated communities. Recognizing that entire communities experience economic displacement, this proposal will assist harmed communities in exploring new avenues of economic development and job creation. Combined, these programs will assist hundreds of mostly small- and medium-sized manufacturing and agricultural companies that experience loss of jobs and sales due to import competition and other adverse consequences of trade. For example, TAA for workers provides income support, job search and worker relation assistance for affected workers.
Next, my legislation will enhance two programs that have proven effective in assisting domestic manufacturing firms. For example, the bill will strengthen the very effective Manufacturing Extension Partnership program. This program assists struggling small- and medium-size manufacturers to modernize, increase productivity, cut waste, achieve higher profits, and compete in the demanding global market. With increased funding, the MEP program can expand its program reach and decrease the fees paid by small manufacturers to access the assistance. It is exactly this type of program that will make American manufacturers competitive again, allowing them to maintain existing jobs and create additional high-skilled and high-paying jobs in the United States.
In addition, my legislation increases funding for the Advanced Technology Partnership program. This very important program fosters public-private partnerships to accelerate the development of innovative technologies and bridges the gap between the research lab and the market place. The program has been very effective in accelerating the development of innovative technologies that promise significant commercial payoffs and widespread benefits for the Nation. Unfortunately, the Bush administration has sought to eliminate this program, at a time when technological change is faster than ever before and small manufacturers must be technologically competitive.
Strengthening the MEP and ATP programs will go a long way in assisting small domestic manufacturers as they attempt to regain market share lost to international competition and recover from the resulting devastating job losses.
Finally, this bill will also create an "Office of Small Business" within the Office of the United States Trade Representative that will focus on the issues affecting small- and medium-size manufacturers as they relate to our international trade policy. This proposal is very similar to a proposal that I offered with Senator Olympia Snowe in the 107th Congress. Small manufacturers are directly impacted by our trade policies--often adversely--yet they do not have a seat at the table and lack the ability to effectively express their concerns. The establishment of this office will ensure that issues important to small manufacturers are taken into consideration as our Nation's trade policy is carried out in the future and will assist small businesses in export promotion and trade compliance.
The final piece of my legislation plan to enhance U.S. manufacturing is my bill titled the "Manufacturing Job Production Act." The bill has four components, all of which are fiscally responsible. None of them will by themselves completely make up for the jobs lost during this administration, but they will each do their part in stimulating new job creation and new investment in manufacturing firms.
The first component of my plan is a Temporary Manufacturing Job Creation Tax Credit. It is a similar proposal to one I introduced earlier this year, when we were debating the President's third major tax cut in 3 years. My idea is straightforward: Any domestic manufacturer would receive an income tax credit based on a percentage of the net increase in taxable Social Security payroll linked to new manufacturing/production jobs, comparing total applicable payroll for one year to the previous year, adjusted for inflation. The credit would apply only to domestic production/manufacturing jobs created in 2004 and 2005, and it would include jobs created in U.S. territories, and those created by foreign-owned companies in the United States or its territories.
Unlike many of the administration's tax cuts, which carry huge costs at the vague promise of a positive economic result, my idea is outcome-based because it only costs money if it actually works. Plus, it has a built-in safety valve to prevent abuse, because it prevents firms from receiving tax credits if they create new manufacturing jobs while simultaneously laying off other workers, and it stops companies from tilting the benefits to high-salary workers because these salaries are already above the Social Security payroll tax cap. By comparing payroll taxes paid over a whole year, it also provides an incentive for firms to hire new workers and keep them on payroll and makes the calculation simple for businesses. It also provides an employment stimulus for U.S. companies with subsidiaries or manufacturing facilities on U.S. possessions, such as Puerto Rico.
My proposal would be in place for 2 years, and the Joint Committee on Taxation estimates that it would cost less than $4 billion. Surely we could pass this proposal and offset its modest cost by finally closing some of the Enron tax loopholes or passing the corporate inversion proposals that have previously passed this body unanimously, only to be opposed by the House. I think the percentage of Americans that would support that tradeoff would be upwards of 80 percent. Paying for this proposal by closing tax loopholes for wealthy corporation makes perfect sense. It will help our economy grow and help slow the flow of manufacturing jobs overseas.
The second element of may plan expands upon a capital gains provision that I have included in other legislation. Section 4 of S. 842, my small business tax stimulus bill, provides that there shall be no capital gains tax applied to new equity investments in small businesses with gross sales under $100 million, if the investments are held for at least 4 years. The zero capital gains tax applies to businesses involved in certain "critical technologies" as well as specialized Small Business Investment Companies, or SSBICs. For the Manufacturing Job Production Act, this capital gains proposal is expanded to include new equity investments in small manufacturing firms. Such a proposal should generate new investments in manufacturing, particularly small manufacturing companies that have been so damaged by recent economic trends. And like the job creation credit, it only costs significant money if it has the desired effect. That factor alone makes it far preferable to the Republican "throw it and see if it sticks" tax cut strategy.
The third part of my manufacturing plan is a revised BRIDGE Act, designed to give a little extra boost to small manufacturers. The BRIDGE Act stands for Business Retained Income During Growth and Expansion. It will help ensure that rapidly expanding, entrepreneurial businesses have access to the capital they need to continue creating jobs and stimulating the economy.
Each year, the United States economy generates 600,000 to 800,000 new businesses. Most new business start small and stay small--but some evolve into fast-growth companies with the capacity to propel the economy forward. These fast-growing companies create the most new jobs, yet access to financing--particularly in the current economic environment, but also when the economy is strong--presents a pivotal challenge to them. A typical startup may open its doors with a combination of personal savings, credit card borrowing, and family lending. Once a business has grown past a certain size--say, when sales reach $10 million or more--the company is better able to attract external financing at a reasonable cost. However, there are many companies in a middle range, including many small manufacturers, which desperately need additional financing in the range of $250,000 to $1 million. These companies face a severe credit crunch that limits their growth and the number of new jobs they can create.
I believe that if congress does anything to assist small manufacturers, it should take steps to ease the credit crunch for those climbing the economic ladder from small- to medium-size enterprise, thereby generating new ones. The BRIDGE Act addresses this financing gap. As ranking member of the Committee on Small Business and Entrepreneurship, I have been the leading voice for this idea in the Senate, and it is something worth trying. Like my other proposals for tax relief for small manufacturers, it only generates cost to taxpayers if it actually works.
The BRIDGE Act is simple. It would allow a fast-growing business with less than $10 million in sales to temporarily defer up to $250,000 of its Federal income tax liability, but only if the money is reinvested in the company. The 2-year deferral would be repayable wit interest over a 4-year period. For small manufacturers, the maximum tax deferral would be $400,000, and the payback period would be extended to a maximum of 6 years. Thus, the act will free up new investment capital for growing companies by allowing them to use a portion of their Federal tax liability for self-financing. Its revenue cost is minimal--in fact, if the program is implemented temporarily, as in my bill, it actually raises a small amount in the 10-year budget window--since the deferred taxes are paid back with interest.
The fourth and final component of my tax relief plan for small manufacturers is to make permanent the increase in Section 179 small business expensing that was passed earlier this year as part of the President's third tax cut. However, this increase is set to expire at the end of 2005. While the recent increase does not help the smallest of small businesses, it can be helpful to small manufacturers who purchase more expensive equipment. It is one element of the various Bush tax cuts that deserves to be made permanent. My proposal would permanently increase the annual expensing limit to $100,000.
Mr. President, we may not have all the answers here in the Congress. Some of these trends in manufacturing employment have taken a long time to develop, and we won't be able to turn them around overnight. But at least we shouldn't ignore the changes and act as if more tax cuts will solve the problem. My manufacturing tax plan contains four reasonable, responsible components--and most will cost money only if they are actually effective. It's time for this administration to get its head out of the sand and start proposing job-creating strategies that will actually work.
Mr. President, nearly 3 million Americans, all across this Nation, have lost their jobs since 2000. We need to act now, with a comprehensive strategy that not only incorporates tax cuts but also includes real job training, business development, capital access, and levels the playing field for U.S. manufacturers. I believe this legislation addresses many of the concerns of the small business community and will take a significant step towards reversing the current trend of economic decline and job loss in the manufacturing sector.
I ask unanimous consent that the text of the MADE in America Act, the Enhance Domestic Manufacturing and Worker Assistance Act, and the Manufacturing Jobs Production Act be printed in the record, and I urge all of my colleagues to support these bills.
