Join Jim and Greg as they are glad to see a new poll showing the Ohio Senate race narrowly favoring the GOP. They also grimace as the Fed expects inflation to stay stubbornly high for awhile – even with persistent interest rate hikes. And they fire back at former NSA and CIA Director Gen. Michael Hayden for absurdly agreeing that Republicans in the U.S. are the most “nihilistic, dangerous, and contemptible group” recently seen anywhere in the world.
December manufacturing growth nearly quadrupled expectations as the sector enjoys a much-need revitalization, but what driving the growth and why might it start shrinking.
Experts predicted manufacturing to grow 0.3 percent in December. Instead, it rose 1.1 percent. Manufacturing growth stood at 2.3 percent in the fourth quarter and followed 3.7 percent growth in the third quarter.
“The manufacturing sector has just blossomed over the last year,” said Vance Ginn, chief economist at the Texas Public Policy Foundation.
According to Ginn, the catalyst for the resurgence is the tax reform passed in 2017.
“The cost to these manufacturing companies were often too high. The Trump tax cuts lowered the corporate income tax rate from 35 percent – the highest in the developed world – down to 21 percent and makes us more competitive, along with immediate expensing of depreciation.
“Those sort of things allow for a lowering of costs for manufacturing companies and what do they do? They start putting more money back into their business,” said Ginn.
But Ginn notes a couple of important twists. First, he points out that many these manufacturing jobs are vastly different than the ones in previous generations. He also says the jobs are not returning to the same parts of the country because businesses want a better tax deal and less regulation.
“The institutional framework you have for your economy – if it has too high of taxes, too many regulations, too many union rules and regulations associated with it – that’s going to force people out. It’s going to make a slower economy and a slower manufacturing sector.
“If you get rid of those, you see what can happen. Manufacturing is coming back,” said Ginn, noting that jobs once found in the industrial Midwest are now landing in less regulated places like Texas and Tennessee.
Listen to the full podcast as Ginn explains why the manufacturing sector might weaken in the coming months and what the reason could be.
The Republican tax cuts are already boosting local economies and more help may be on the way, but GOP House member says lawmakers must get serious about cutting spending and taming the debt.
Rep. Keith Rothfus, R-Pennsylvania, is a member of the House Financial Services Committee. He says the benefits of the tax legislation, passed solely on Republican votes in December, are already clear in his district east of Pittsburgh.
“We’re seeing a lot of positive feedback. We’re seeing a lot of folks who are getting more money in their weekly or bi-weekly paychecks. We’re hearing from people who have gotten bonuses.
“We’ve talked to small businesses that are going to be able to make new investments in their businesses to grow their businesses, hire workers, buy equipment, which means the person who supplies the equipment is going to have a job. We have gotten a lot of great feedback and this is just the thing that this economy needed,” said Rothfus.
Rothfus says the tax cuts, along with the GOP rollback of regulations, is triggering the kind of economic recovery we should have seen years ago.
“The Obama administration had a different model of recovery, one of more regulation, more control from Washington, higher taxes, more spending. We saw the slowest growth rate in a recovery since the Great Depression,” said Rothfus.
So what do Rothfus and other Republicans have in mind for stoke economic growth some more?
“It’s all about getting capital flowing again. We are losing a community bank or a credit union a day in this country because of all the over-regulation in the financial sector. We need to find right regulation. I talk about this all the time. We want regulation that is smart, prudent, responsible. That’s the focus we’re going to have on the Financial Services Committee,” said Rothfus.
But while Republicans made good on their promises to cut taxes for most Americans, Congress has not managed to restrain spending. In addition to maintaining Obama-era spending levels for over a year, lawmakers forged a budget agreement in February that will crank up both military and domestic spending and create trillion-dollar deficits for years to come.
Rothfus voted against that deal. He says it is unacceptable for lawmakers to look the other way on debt and deficits.
“That means we are borrowing two million dollars every minute, every day of the year. That’s what a trillion dollars is,” said Rothfus.
“We have to get serious about this spending problem that we have. We are collecting more tax revenue than ever. We have to get back to healthy economic growth, because that’s actually going to help generate revenues to pay for programs that people expect,” said Rothfus.
He says a double-digit growth in domestic spending is irresponsible given other pressing priorities.
“When you’re growing the defense budget the way we did, when you’re going to offer $89 billion to help people effected by disasters in Texas, Florida, and Puerto Rico, this was not the year to raise domestic, non-defense spending by 12 percent.
“A family that is going through issues in their budget at the kitchen table, if they had a fire there they know they’re going to have to put more money there and not buy other things,” said Rothfus.
When asked how to control spending, Rothfus pointed to two ideas, one of which Congress recently scrapped.
“The smart way is to have left in place the caps that we had under the prior budget agreement, except to make sure that we’re taking care of defense and our veterans,” said Rothfus.
He also wants to see much closer scrutiny of existing government programs, as Congress is now doing with funding for opioid addiction treatment.
“That means you have to take a hard look at other programs across the government and see what’s effective and what’s not. We passed a bill a couple years ago called the Comprehensive Addiction Recovery Act, a necessary piece of legislation to address the opioid epidemic. One of the provisions for that is for the first time we are going to measure the effectiveness of some of the treatment plans.
“Imagine that. We should be measuring the effectiveness of every government program. These are the hard-working taxpayers’ dollars that we want to be good stewards of,” said Rothfus.
Addressing the opioid crisis is a major priority for Rothfus, who believes government needs to play a key role in helping people end their addictions.
“The response has to come from everywhere. This is an all hands on deck situation. We have to have local partnership,” he said.
In addition to providing the money for programs proven to help addicts recover, Rothfus says the crisis makes real border security an even greater priority.
‘We have to be taking a hard look at our border. Most of the heroin that we have in our country is coming from the cartels in Mexico. If that’s not a reason to secure our border, I don’t know what is.
“So we’ve got to be doing a much better job and, where appropriate, have barriers along the border. We have to increase capacity at ports of entry so that we can be inspecting the vehicles that are smuggling this poison in,” said Rothfus.