It is becoming increasingly clear that Congress will not act to stop the sequester spending cuts from taking place. The cuts will take place between March 1 and September 30, the last day of the government’s fiscal year. Split evenly between defense spending and spending for other discretionary programs: $85 billion dollars.

I do not know if the”discretionary programs” have been identified. It would be nice to know what they plan on cutting or eliminating. There are plenty of wasted discretionary dollars to be saved. The $42.5 billion in defense cuts? To be sure, there is plenty of waste in the defense budget. That would be the place to start saving money. But new defense systems are an imperative in this world, a strong and modernized army; navy and air force are an imperative in this world. Look at the globe, how many places are on fire with war and unrest? You want to thin our defenses? Really?

From MSCI North American Manufacturing Advocacy News 02/11/13:

The Congressional Budget Office (CBO) released its budget and economic forecasts for 2013, their conclusion: the sequester spending cuts, along with tax increases Congress has already passed, will have a significant impact on the economy this year, estimating the economy will expand just 1.4% in 2013. The “slow growth”, the CBO says, reflects “fiscal tightening that has already begun or is scheduled to occur-including the expiration of the 2 percentage point cut in the Social Security payroll tax, an increase in tax rates on income above certain thresholds, and scheduled automatic deductions in federal spending.” In addition to lower growth, the spending cuts and tax increases are expected to keep the nation’s unemployment rate at or near 8% for the next year.

  • According to The Hill, top environmental groups believe President Obama’s choice of Senator John Kerry (D-MA) to head the US State Department signals the end of the Keystone XL Pipeline.
  • According to the US Commerce Department, factory orders increased 1.8 percent from November to December. Orders for durable goods were up 4.3 percent due mainly to increases in orders for civilian and military aircraft.
  • US auto sales expanded 14.2 percent from January 2012 to January 2013.
  • Per the US Labor Department, productivity declined at a 2 percent annual rate in the last quarter of 2012, down from a 3.2 percent increase in the third quarter.
  • Globally, the National Association of Manufacturers (NAM), economic news from the US’s most prominent trading partners is increasingly positive. NAM writes “7 of the top 10 export markets have economies that are expanding and there were signs that the pace of contraction in both Europe and Japan has eased.”
From Dr. Ken Mayland, reporting for the Precision Machined Products Association:

The international trade deficit of goods and services plummeted in December while imports contracted. This changes the economic picture for Q4, from one of a small contraction to one of a small advance. The December trade numbers were not known at the time of the original GDP estimate. An assumption for December was plugged in. Rule number 1: Assume nothing…..

From the Franklin Partnership, advocate for PMPA in Washington, an analysis of the president’s State of the Union Address (SOTU) to Congress:

The President had broad themes and proposals ranging from social issues to the budget and foreign policy. Manufacturing emerged as a dominant theme; at times cutting across several key policy areas including tax reform, education, jobs, energy and the economy.

The President said, “Our first priority is making America a magnet for new jobs and manufacturing.”
Manufacturers and manufacturing groups around the country have said for years that we have a major skills gap in the industry and surveys repeatedly show manufacturers struggle to find qualified employees. I have been involved in the metals industry for over 40 years. These were concerns then and remain as such today. The President said the Administration will reward schools that develop new partnerships with colleges and employers and create classes that focus on science, technology, engineering and math (STEM).

The President reaffirmed his commitment to what he described as creating a “tax code that lowers incentives to move jobs overseas, and lowers tax rates for businesses and manufacturers that create jobs right here in America.” While calling for comprehensive tax reform, he provided few details of what that would entail.

Additional issues raised during the SOTU:

  • Climate change: called on Congress to pass a climate change bill; if not, the Administration will executive actions and regulations on its own.
  • Vehicle Fuel: proposed to use some oil and gas revenues to fund and Energy Security Trust to drive new research and technology to “shift our cars and trucks off oil for good.”
  • Trade: announced the Administration is officially beginning TransAtlantic Partnership Agreement talks with the European Union.
  • Infrastructure: proposed a “Fix it First” program and a Partnership to Rebuild America to leverage private and public funding for infrastructure projects….but did not say how to pay for it.
  • Workplace: Called on Congress to pass the “Paycheck Fairness Act” this year. I must admit, I have no clue what that is.
  • Minimum Wage: Proposed increasing the federal minimum wage from $7.25/hour to $9/hour over the next three years and automatically adjust for inflation moving forward. Bad idea. Raising the minimum wage does NOT encourage anyone to accept personal responsibility for their well being, to lift themselves out of the pit and improve their position and ultimately it raises the cost of goods to all consumers.

God Bless America