Manufacturers blame unemployment woes on uncertainty over ‘fiscal cliff’

U.S. manufacturers say uncertainty about the “fiscal cliff” of impending tax increases and spending cuts is standing in the way of the robust job growth that is needed to lower the unemployment rate.

On the heels of June’s disappointing jobs report, the leading trade group for manufacturers is arguing the lack of a firm plan from Democrats, Republicans or the White House to address the fiscal cliff is putting the brakes on economic growth.  

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"Congress and the administration’s inaction has led us to a fiscal cliff, and any further delay in forcefully dealing with the problem will only worsen the economic fallout that the United States is facing," said Jay Timmons, chief executive and president of the National Association of Manufacturers (NAM).

"It’s time for Washington to provide the leadership necessary to ensure our economy does not fall off the impending fiscal cliff.”

Congress and President Obama are facing a year-end deadline to act on a number of big-ticket issues, including the first installment of $1.2 trillion in automatic spending cuts and the expiration of the George W. Bush-era tax rates. The nonpartisan Congressional Budget Office has warned that the array of tax increases and spending reductions set to hit on Jan. 1, 2013, could drag the economy back into recession.

But with campaign politics dominating Washington, few expect action to be taken on the fiscal issues until the lame-duck session after the election.

That uncertainty was reflected in a June survey from NAM where 64 percent of manufacturers listed tax issues and regulations as their primary challenges. 

Since the recession ended in 2009, manufacturers have added 500,000 jobs and helped propel modest growth in the economy. But an Institute for Supply Management report this week showed that the sector contracted for the first time in three years. 

The survey also found that only 83.1 percent of respondents were positive about their business outlook, down from 88.7 percent in March, driven by the political stalemate in Washington and global financial pressures. 

Still, one in five manufacturers say that they are very positive about their current outlook, which is essentially the same proportion as three months ago, and the sector is poised to expand and add jobs in the coming months.

There is increasing chatter on Capitol Hill about a multi-pronged bill that would tackle the major tax and spending policy issues by funding the government through next spring, delaying the $109 billion in spending cuts slated for 2013 and extending the Bush tax rates for a year. 

House Republicans aren’t waiting until the election to pass legislation extending the Bush tax rates. House Ways and Means Chairman Dave Camp (R-Mich.) criticized Democrats for refusing to "join Republicans to stop the tax hike.”

"That tax increase will turn the fiscal cliff into a jobs cliff," Camp said Friday. 

"That is why House Republicans will act this month to extend low-tax policies originally enacted in 2001 and 2003 and extended with bipartisan support in 2010, while laying the groundwork for comprehensive job-creating tax reform," he said. 

On the spending cuts front, lawmakers are searching for ways to replace the $109 billion reduction from sequestration that was set in motion by last summer’s debt-ceiling deal. They are especially concerned about the $55 billion that would be chopped at the Defense Department. 

Reports abound from the defense industry and independent analysts that the spending cuts will risk the loss of hundreds of thousands of jobs across the economy.

Jared Bernstein, a former economist for Vice President Joe Biden and now a senior fellow at the Center on Budget and Policy Priorities, said on MSNBC that there is downward pressure on economic growth, in part because of "lots of squabbling in Congress."  

“Let’s hope that when Congress returns from its July 4th recess, it will put politicking and pyrrhic votes aside and focus on meaningful steps to restart growth and create jobs," agreed Christine Owens, executive director of the National Employment Law Project, which is pushing for more spending on infrastructure, fiscal relief to states and renewal of federal unemployment benefits. 

"There’s too much at stake for Congress to spend the next four months campaigning, instead of getting serious about putting America back to work.”