At Finance Hearing, Portman Calls For Strengthening America’s Manufacturing Competitiveness
WASHINGTON, DC - During a Senate Finance Committee hearing today, U.S. Senator Rob Portman (R-OH) touted the importance of strengthening America’s manufacturing competitiveness. Specifically, Portman highlighted the need for the U.S. to maintain a healthy industrial commons, with strong supplier networks, well-funded investment in research and development, and skilled workers. In addition, Portman warned against the negative economic implications of raising taxes on businesses, particularly as the nation’s economy looks to rebound from the COVID-19 pandemic.
A transcript of the exchange can be found below and a video can be found here.
Portman: “I appreciate your holding a hearing, it’s very timely, and I thank you for inviting so many Ohioans to join us. Jay Timmons, Jonathan Jennings, thank you guys for being here. And Donnie Blatt, I appreciate your being on today and appreciate working with you and your team and all of your locals, including some good successes with Piketon, with Cooper Tire, most recently, with Cleveland Cliffs, saved a bunch of jobs, and your support for our Made in America bills, including some recent legislation we’ve introduced on Made in America, because I think you’re right, that’s an opportunity, and our Leveling The Playing Field Act as well. And then our new bill, we’re working on a Leveling the Playing Field Act 2.0.
“This is a really important issue. And I want to back up just for a second and talk about: how do we ensure that we can be competitive? There’s been a lot of good discussion about the tax laws, but I think there’s a new emerging consensus that we need to think about competitiveness in terms of what is called the ‘industrial commons,’ where you’ve got manufacturers, you’ve got suppliers, you’ve got inventors, and you’ve got skilled workers, kind of all together. And although as a Republican, I’m always hesitant to talk about the government being too involved in our market, which has ultimately been very successful in making us a strong economy that a lot of people envy, I think we’ve got to realize that those kinds of industrial commons of all those folks together really does matter. Think of Ohio and Michigan in terms of the auto industry, or think of Boston in terms of the pharmaceutical industry.
“Here’s an interesting statistic: U.S. R&D expenditures in China have grown 13.6 percent annually on average since 2003. In the United States, it’s been just 5 percent. So what that means is, the manufacturing is going on in China -- what happens? The R&D starts to go over to China. So this is all connected.
“I guess I just asked my three Ohioans about this notion of keeping Ohio manufacturing, innovation, skills, as was just said by Jay -- and I agree with Senator Menendez on this – skilled workers, that’s a critical part of this. And we’ve got some great legislation on that as well. But do you guys agree -- my Ohio friends here -- that our manufacturing industry and its workers are better off with a healthy industrial commons, with strong supplier networks, lots of R&D investment, and skilled workers?”
Mr. Jay Timmons, President and CEO of National Association of Manufacturers: “Well, this Ohioan from Chillicothe, Senator, does agree. All roads lead through Ohio, I realize. And thank you for that question. And I’ll also say, Senator Wyden, the Chairman, mentioned that our goal should be to outcompete China when it comes to research and development. Couldn’t agree more and I think that this is incredibly important and an incredibly important topic.”
Portman: “Great, thanks. Donnie, Jonathan, thoughts?”
Mr. Donnie Blatt, District Director for United Steelworkers: “Yeah. Senator Portman, thank you for that. And I appreciate your comments on that. I couldn’t agree more with what you said in that venue, and definitely this Ohioan as well as Jay, says yes to that.”
Portman: “Great. Jonathan, thoughts?”
Mr. Jonathan Jennings, Vice President, Global Commodity Purchasing And Supplier Technical Assistance for Ford Motor Company: “Yes, absolutely. This Ohioan from Steubenville is also fully aligned with the comments. And it’s not only for the workers, the consumers and for America. At the end of the day, we need to make it healthy. And to your point, this is one of the ways for us to get there. Thank you.”
Portman: “Let me ask a specific question. We talked a lot about the importance of the TCJA to investment and jobs, and I couldn’t agree more with that. With regard to amortization of R&D expenses, we had a good discussion about that. I think that’s a big mistake. It’s going to have a detrimental impact on innovation, of course. And so we’ve got to be sure that domestic R&D, not amortizing over five years, but being able to be fully expensed, stays in the law. And I’m not going to ask you that question because you all seem to agree with that.
“But there’s another one that’s similar. And that’s for the deduction of interest under 163(j). The legislation limited the deduction of business interest based on income before interest and taxes, depreciation and amortization or EBITDA. But at the end of the year, depreciation and amortization will be removed from further limiting the deduction. You all know about this.
“It’s interesting because right now a lot of these companies have taken on debt. So it makes it even more difficult to recover from the pandemic, increases taxes, basically, by limiting the deduction, the deductibility of interest. Can you comment on that briefly, Ms. Hanlon and Mr. Timmons?”
Ms. Michelle Hanlon, Ph.D.: “Sure, I’ll start. So you’re exactly right, this limitation that’s in section 163(j), now when it’s supposed to move to a limitation based on EBIT and not EBITA, will become more binding, meaning that more companies will be limited in their interest deductions. And, you know, I think the important thing about this is that that limitation can be more binding just by making another investment, not by taking on more debt. So if depreciation is not added back to that calculation, that makes the interest deduction limitation more binding. And again, that can happen with a strictly equity-financed investment. So I think you’re exactly right.”
Portman: “Yeah. Timmons?”
Mr. Timmons: “Yes, I think you’re correct as well, Senator. Look, we are a highly capital-intensive industry, part of the economy. And there are times where we need to borrow so that we can invest in new plants and equipment and ensure that, or base that, on what our expectations are for future success. Increasing the costs of anything as it relates to doing business here in the United States does harm our ability to compete and succeed in a global economy.”