Industry Insight

Industry Insight

September 2009

 Employers’ Health Care Reform Dilemma: Offer Coverage or Pay a Tax

Congress continues to debate the question of whether all employers should be required to provide health care coverage to their employees. Congress would make the option simple:  either buy coverage or pay a new tax. 

On the surface, it may appear that paying the tax would be cheaper than purchasing coverage. However, under this option, overall employer taxes may increase dramatically. Consider the following:

·         The new tax is in addition to all other taxes paid by the employer – no credits are given against other taxes.

·         Employers providing health care coverage receive a tax deduction that lowers overall taxes.

·         Employers do not get the same dollar value from paying a tax as they do receiving a tax deduction.

To help employers evaluate the tax ramifications of this proposal, we encourage you to use this simple tax calculator. In just a few minutes, the calculator can give you a rough estimate of how the options will affect your company’s bottom line.

Unfortunately, the work doesn’t end here. None of the reform efforts proposed in Congress will lower the overall cost of health care or reduce health insurance premiums, meaning employers who continue to provide coverage will be trapped in a system of ever-increasing costs. 

-back to top-

Card Check: Still a Big Issue

 

“That's why I support EFCA -- to level the playing field so it's easier for employees who want a union to form a union. Nothing -- nothing wrong with that.  Because when labor is strong, America is strong.”

-President Barack Obama in remarks at the AFL-CIO’s Labor Day Picnic in Cincinnati , Ohio on 9/7/09

“And make no mistake. We’re also going to pass the Employee Free Choice Act this year.”

-Sen. Tom Harkin (D-IA) newly appointed Chairman of the Senate HELP Committee in remarks to the AFL-CIO’s Convention in Pittsburgh , PA on 9/17/09

Although Congress is currently focused on health care reform, labor’s commitment to passing the Employee Free Choice Act (EFCA) remains strong. Reports indicate that some 18,000 union members attended more than 400 town halls throughout the August recess pushing for health care reform and card check legislation. Union groups are also increasing their grassroots advocacy with lawmakers. The group, American Rights at Work, dispatched 300 activists from 15 states to meet with Members of Congress on Capitol Hill to lobby in support of the Employee Free Choice Act.

Meanwhile in the Senate, Democrat Paul Kirk Jr. was sworn in last week to temporarily fill the late Sen. Ted Kennedy’s (D-MA) seat, giving Senate Democrats the 60 votes needed to pass EFCA if all Democrats voted to support it. However, Sen. Blanche Lincoln is on record stating her opposition to the bill and Arkansas News reported that when “The New York Times [on September 14th] quoted Sen. Arlen Specter, (D-PA., as saying Lincoln would vote to stop a filibuster of the bill,” Lincoln reiterated her opposition saying, “I don’t know where he got that, I certainly haven’t spoken with Sen. Specter, and I’ve made it clear that the Employee Free Choice Act, if it were to come up, that I could not support the procedural motion to move it forward.’”

The proponents of EFCA are pushing for a vote by the end of this year. We must remain active in fighting this misguided legislation. To find out how you can help please contact Coalition Coordinator Sarah Beth Turner at (501) 975-8344 or e-mail her at info@yoursecretballot.com.

-back to top-

 Senate Panel Votes Not to Include Public Option in Healthcare Reform Bill

 

In what media accounts are casting as a serious setback for the President and lawmakers who back the so-called "public option," the Senate Finance Committee on Tuesday voted against including the provision in the bill sponsored by Sen. Max Baucus. Reports also remark on GOP unity against the "public option," which they compare to the Democratic split apparent in recent committee votes. All three networks and major print outlets covered the development, with the CBS Evening News concluding that the "public insurance option seems all but dead in the Senate," and the AP reporting that "liberal Democrats twice failed on Tuesday to inject a government-run insurance option into sweeping health care legislation taking shape in the Senate." Those "two votes marked a victory for Montana Democrat Max Baucus."

 

ABC World News called the development "a setback...for the President and liberal Democrats," and NBC Nightly News said that the committee votes were "a significant test for a big piece of...Obama's health care reform plan." NBC added, "While the public option is not officially dead, today's vote is telling. Now, it goes to the full Senate to weigh in and next will be more pressure on the President to say whether he will sign a health care bill that doesn't have a public option."

 

The New York Times noted last night that the committee "voted, 15 to 8, to reject an amendment proposed by Senator John D. Rockefeller IV, Democrat of West Virginia, to add a public option called the Community Choice Health Plan, an outcome that underscored the lack of support for a government plan among many Democrats." Baucus "voted no, as did Senators Thomas R. Carper of Delaware , Kent Conrad of North Dakota , Blanche Lincoln of Arkansas ...and Bill Nelson of Florida , joining all 10 Republicans in opposition." The Times added that "a second amendment by Senator Charles E. Schumer, Democrat of New York, to create a different version of a public plan was also defeated, though by a closer margin, 13 to 10, with the added support of Mr. Carper and Mr. Nelson."

 

The Los Angeles Times similarly said the votes underscored "the depth of division among Democratic leaders pressing for healthcare legislation as well as the solid Republican opposition to an option that...Obama has promoted while conceding he is open to negotiation." Under the headline, "Senate Panel Votes Place 'Public Option' On Respirator," USA Today made an almost identical point: "Defeat of the public option underscored divisions among Democrats and bolstered predictions by" Baucus.

 

However, The Hill reported, "The Senate has the votes to pass a healthcare reform bill including a public option, a key Senate chairman said Tuesday." HELP Chairman Tom Harkin "said that the Senate 'comfortably' has a majority of votes to pass the public plan, and that he believes Democrats can muster 60 votes to break a filibuster."

 

In a separate story, The Hill reported a "group of Republican governors are working together in a coordinated attack on Sen. Max Baucus's (D-Mont.) healthcare reform legislation, according to GOP sources and documents obtained by The Hill." At least "14 of the nation's 22 Republican governors have sent, or will soon send, letters to their respective congressional delegations claiming the Democrats' healthcare bills would bankrupt their states." A GOP leadership source "said the eight Republican governors who have not committed to writing critical letters are Charlie Crist (Fla.), Jodi Rell (Conn.), Tim Pawlenty (Minn.), Bob Riley (Ala.), Bobby Jindal (La.), John Hoeven (N.D.) and Jim Douglas (Vt.)."

 

And in similar news, the AP reported Medicare is "looking like a big fat piggy bank for health care overhaul," as President Barack Obama and the Democrats "want to pay for much of their plan to cover the uninsured by cutting hundreds of billions from the Medicare budget over the next 10 years." Mark McClellan, former director of the Centers for Medicare and Medicaid Services, said, "Seniors should definitely be paying attention. There's some redesign, some improvements, but unquestionably there would be some adverse impacts. It's a mixed bag, but it's not like the sky is falling." The AP includes a Q&A on top Medicare issues.

-back to top-

Data Show First Manufacturing Growth in 19 Months

The Washington Post reported, "Manufacturers expanded in August for the first time in 19 months, according to a survey released [earlier this month], a strong sign that the nation's economy is now growing." The Institute for Supply Management's index "of business activity at manufacturing firms rose to 52.9, from 48.9." The nation's factories "are ramping up production, driven by demand for automobiles spurred by the 'Cash for Clunkers' program and a rebound in exports due to a stabilizing global economy." There were "even more positive signs in the details of the report." An index of "new orders rose to 64.9, indicating that expanded production is set to continue in the months ahead." According to a separate report, construction spending "was down 0.2 percent in July" but "home construction is starting to rise after a long decline." According to a third report, "pending home sales rose 3.2 percent in July, pointing to continued improvement in home sales in the coming months."

The New York Times reported, "After 18 months of layoffs, plant shutdowns and other declines, the country's manufacturing sector grew in August." Companies that "make textiles, paper products, computers and electronics, appliances and chemicals were among 11 industry groups that said their business had grown in August." The picture is "improving for manufacturers like Allied PhotoChemical, an eastern Michigan company that makes environmentally sensitive ink, paint and coatings." National Association of Manufacturers (NAM) member and Allied president Mike Kelly said the company "had gone after new customers and resisted the reflex to slash its work force." Kelly said Allied "was now running at about 65 percent capacity, compared with a low of 40 percent early this year." David Huether, chief economist of the NAM , said, "We're at a very early stage of the upturn, and I think it's going to gradually build steam." Manufacturing jobs "have been devastated by the recession, with some 2 million positions lost since the downturn's beginning in December 2007."

AFP reported, "The details of the ISM survey showed strong gains in orders even though employment continued to decline." The new orders sub-index "jumped to 64.9 percent in August from 55.3 percent, indicating faster growth, the ISM said." Similarly, the production index "increased to 61.9 percent from 57.9 percent." The employment index "rose to 46.4 percent from 45.6 percent, suggesting industries are still cutting jobs but at a slower pace."

The AP reported, "President Barack Obama says a promising report on the state of U.S. manufacturing is a sign that the hurting economy is moving in the right direction." The U.S. manufacturing sector "grew in August for the first time in 19 months, a new report out [earlier this month showed]." Obama said, "It is a sign that we're on the path to economic recovery. There is no doubt that we have a long way to go."

In an interview on Fox Business News, the NAM's Dave Huether commented on the ISM data, saying, "We stand at the very early stage...We saw some modest growth in July, mainly due to motor vehicle production coming on-line and the August number was better than expectations." Huether added, "I think, it is going to bode well for the manufacturing sector in the latter part of this year and into 2010." The one area Huether said "continues to be weak is employment, but at this point, it's pretty normal in the sense that employment tends to be the last indicator to measure up."

A Wall Street Journal report added that manufacturing has been on the road towards growth for the majority of this year.

Reuters noted in an analysis that in order for the U.S. manufacturing revival to continue, consumers must start purchasing the items being manufactured. The NAM 's Dave Huether said, "Recovery is going to be modest for the next half year. I don't think you will see an upturn in consumer spending until the labor market recovers, which will be sometime mid-next year. 

-back to top

 

Consumer Confidence Drop Drives Stocks Down

The AP reported, "Concerns that consumers won't help drive a speedy and strong economic recovery only escalated after an influential barometer of confidence fell unexpectedly in September." The AP added that "the Conference Board's Consumer Confidence survey showed worries about job security seem to be offsetting any enthusiasm about rising home values and stocks." The Board's "confidence index dipped to 53.1 in September, down from a revised 54.5 in August. Economists surveyed by Thomson Reuters had expected a reading of 57." Another AP dispatch said that the "surprise drop in consumer confidence tripped up investors Tuesday, a day after a round of corporate takeovers set off a steep market rally." The Dow "fell 47.16, or 0.5 percent, to 9,742.20," the S&P 500 index "slipped 2.38, or 0.2 percent, to 1,060.60, and the Nasdaq composite index fell 6.70, or 0.3 percent, to 2,124.04."

The New York Times reported, "The recovery in housing prices, which first took fragile hold in the spring, became more firmly rooted in the summer, according to data released Tuesday." The Standard & Poor's/Case-Shiller home price index "rose a seasonally adjusted 1.2 percent in July from the previous month," a reading that "was better than analysts had been anticipating." However, "any sense of relief...must be considered provisional. The strength of the housing recovery will be put to substantial tests this fall."

In other economic news, the AP reported, "To prevent inflation from taking off, the Federal Reserve will need to start boosting interest rates quickly and aggressively once the economy is back on firmer footing, Fed officials warned Tuesday."

-back to top-

Senate Unveils Draft Version of Climate Legislation

The New York Times  reported, "A draft of a climate bill that Senate Democrats [formally introduced] suggests that the legislation will include a more ambitious greenhouse gas emissions target than one passed by the House." The measure, "sponsored by Senators Barbara Boxer of California and John Kerry of Massachusetts, seeks to achieve by 2020 a 20 percent reduction from 2005 levels of carbon dioxide emissions, compared with 17 percent in the House bill." The Senate bill "will be the focus of a broad political and lobbying struggle, as industry groups, environmental lobbies, local government officials, universities and advocates for the poor all scramble for advantage in legislation that would rewrite the rules of the domestic energy economy." The Times added, "The battle has exposed rifts within the Chamber of Commerce, the NAM and other business lobbies."

The Los Angeles Times reports that the lack of key details in the Senate version of the bill indicates "that top Democrats are willing to negotiate to ensure a bill will pass," although not before "a long and complicated series of negotiations." However, these "unresolved issues" drew criticism from Sen. James M. Inhofe, the ranking Republican on the environmental committee, who said in a letter Tuesday "that until the details are set, 'farmers, families and workers have no way of gauging how acutely they will be affected from job losses, higher electricity, food, and gasoline prices.'" The proposed bill does, however, preserve "the Environmental Protection Agency's ability to regulate emissions unilaterally," and "offers new incentives for nuclear power plant construction," a key provision "that could be crucial to attracting bipartisan support for climate legislation."

Also covering Sen. Inhofe's response to the bill, USA Today reported that the Senator "predicted the bill won't even be debated on the Senate floor before the end of the year, let alone come up for a vote." He told reporters, "Why should Democrats bring up something that's going to further entrench them against the American people?"

Although Boxer has vowed "to begin hearings on her bill on Oct. 20," the New York Times noted there is no certainty that other committees will act as quickly. The Finance Committee, where the permit allocation issue and trade questions will be decided, is in the middle of the difficult health care debate and appears to be in no hurry to take on another hugely contentious matter. 

-back to top-

 EPA Finalizes Greenhouse Gas Reporting Rule

OMB Watch reported, "The EPA has finalized its mandatory greenhouse gas (GHG) reporting rule. This new rule will require thousands of facilities to monitor and report their annual emissions of several major GHG. " When the EPA "first proposed the mandatory registry, it estimated that '85-90 percent of total national U.S. GHG emissions, from approximately 13,000 facilities, would be covered by the proposed rule.'" Now, "following the changes that appear in the final rule, the agency claims 'an estimated 85 percent of the total U.S. GHG emissions, from approximately 10,000 facilities, are covered by this final rule."

The New York Times reported, "The EPA said [last week] that it would require the nation's biggest emitters of greenhouse gases to start tracking their emission levels on January 1 and report them to the government." The EPA said the reporting system "would provide vital data to businesses seeking to compare and control their emissions and better information to the government, which has been trying to forge a policy on how to combat climate change since President Obama took office." Yet the rules "remain controversial. ... Many businesses have asserted that the reporting requirement is a first step toward burdensome and needless government regulation." Senator Lisa Murkowski, Republican of Alaska, "has been circulating a draft amendment to a federal budget bill that would prevent the EPA from monitoring carbon dioxide being released from stationary sources like power plants."

In a press release, the National Association of Manufacturer's ( NAM ) Vice President for Energy and Resources Policy Keith McCoy, responded to the decision by the EPA to establish a mandatory registry for GHG emissions. The NAM said that "while manufacturers support the creation of an economy-wide GHG registry as part of a comprehensive federal climate policy, the NAM believes the EPA missed an opportunity to create a national registry that would provide the flexibility needed to reduce paperwork and lower costs for the nation's industrial base." The NAM is "encouraged, however, by some improvements in today's final rule." By "dropping the 'once-in, always-in' threshold provision in certain cases, the EPA is providing an important incentive for manufacturers to improve energy efficiency and reduce emissions." Manufacturers are also "optimistic that regulators will take into account issues surrounding disclosure of Confidential Business Information (CBI) in a future comment period."

The Murkowski (R-AK) amendment mentioned above would have, for one year, prevented the EPA from regulating carbon dioxide (CO2) emissions under the Clean Air Act from stationary sources, such as manufacturing facilities. However, during negotiations a last-minute agreement among Senators blocked consideration of the amendment to the FY2010 Interior-Environment spending bill, relegating discussion of the issue to a floor statement by Sen. Murkowski. Hence, no vote was permitted. The amendment's one-year ban sought to allow Congress to take the lead in setting climate change policy.

-back to top-

Some Take Aim at Obama's Pick for OSHA Chief

In the "Greenwire" blog on the New York Times (9/25) website, Sara Goodman wrote, "Conservative pundits and activists are taking aim at President Obama's pick to head the Occupational Safety and Health Administration for his writings about the dangers of various pollutants and hazardous materials." Obama nominated "David Michaels, an epidemiologist and former Energy Department official, to direct the Labor Department agency that enforces workplace safety and health legislation." Of particular concern are "some of Michaels' writings, including a 2008 book he wrote called 'Doubt is Their Product,' in which he describes how some corporations skew the scientific debate about the dangers of various pollutants and hazardous materials."

The Washington Times reported, Republican critics said "they considered Mr. Michaels to be too close to trial lawyers because of his aggressive advocacy on their behalf." Business and industry groups have also expressed concerns. Keith Smith, the director of employment and labor policy at the NAM , said, "We are definitely troubled by Michaels' nomination. ... We will be urging the Senate committee to carefully review his nomination." In Michaels' case, the "objections initially stemmed from his writings on tactics that corporations have used to fend of class-action lawsuits." Other objections have come “from Grover Norquist, founder of the conservative advocacy group Americans for Tax Reform."

-back to top- 

China Starts Investigation into Imports of U.S. Chicken

The AP reported, " China has started investigating complaints that American chicken products are being dumped in China and are unfairly benefiting from subsidies, adding to a string of trade disputes with Washington ." The investigation "comes at a time of mutual finger pointing by Washington and Beijing accusing the other of protectionism, which both say will hurt efforts to end the global economic crisis." The two governments also "are involved in disputes over access to each others' markets for steel pipes, music and movies."

Bloomberg News reported, " China has begun an investigation into alleged subsidies on imports of American broiler chicken products, two weeks after the U.S. imposed tariffs on tire shipments from the Asian nation." The National Chicken Council, a Washington-based trade group, said "that Chinese poultry-dumping claims were retaliation for U.S. tire import duties." China is the "biggest overseas market for U.S. poultry and purchased nearly 800,000 metric tons valued at $722 million last year, according to the USA Poultry & Egg Export Council."

-back to top-

Senate Votes Against Plan to Allow Offshore Drilling

The AP reported, "The Senate [last] Wednesday voted against an attempt by Republicans to keep in place a plan by the Bush administration to allow oil and gas drilling along the Atlantic and Pacific coasts." Last year, with "gasoline prices soaring, Republicans sought political momentum by advocating new offshore drilling." Interior Secretary Ken Salazar "disappointed pro-drilling advocates last week when he said that he's in no hurry to make a decision on whether to allow offshore drilling in federal waters off the Atlantic and Pacific coasts." Salazar said he's "uncertain whether the Interior Department will seek to put a new five-year drilling plan in place before the existing leasing program runs out in 2012." It remains "unclear whether the Obama administration will allow any expansion of Outer Continental Shelf drilling." The current plan "is in place until 2012, so legally the department has until 2012 to redo a plan on the Outer Continental Shelf."

-back to top-

NAM Labor Day Report Shows Prospects for Manufacturing Recovery

On September 3, the National Association of Manufacturers (NAM) released its 12th annual Labor Day report, which projects an upturn in manufacturing production gradually over the next year with more significant growth in the 2011-2014 period. It also projects that by 2014, U.S. manufacturing will regain more than 40 percent of the jobs lost during the current downturn. “There are grounds for optimism, but there is even greater reason for caution,” says NAM President John Engler. “A recovery could stall out or even shift into reverse if Congress and the Administration enact policies that increase the burden on businesses and make us less competitive in the global economy.”

Managing Automation Magazine reported, "The NAM issued a cautiously optimistic prognosis for the U.S. economy and the manufacturing sector on the eve of the Labor Day weekend, based on signs of stabilization in a number of key areas." Among the "positive indications that a recovery is starting to sprout are improvements in the housing market, increased activity in European markets, and new orders for capital goods, the group's 'Labor Day 2009' report states." For the overall economy, the NAM predicts, "the next few quarters will likely be marked by sluggish growth driven mainly by improvements in net exports, government spending, a slowdown in inventory sell-offs, and the effects of various stimulus measures to prop up consumer spending."

Industry Week reported, "The manufacturing sector lost nearly 2 million jobs over a 19-month period ending in July and isn't expected to add employment until 2011, according to the NAM 's annual Labor Day report." The industry "lost 1.96 million jobs between December 2007 and July 2009 primarily due to downturns in consumer durable purchases and housing." NAM "forecasts 65,000 additional job losses in 2010, down from the projected 1.6 million expected by the end of 2009." However, NAM "expects production will increase by 6.4 percent in 2011 and 2012, leading to an employment increase of 399,000 and 426,000, respectively." The industries "with the greatest prospects for growth include machinery, fabricated metals, aerospace and other transportation, food and beverage products and chemicals." NAM "points out in the report that the outlook doesn't take into consideration legislative issues, including health-care reform, energy, taxes and regulations."

Click here to view the Labor Day report.

In similar news, BusinessWeek reported a cover story entitled, "Can the Future Be Built in America?" in which it cites findings from the Public Viewpoint on Manufacturing's annual index, issued in June 2009 by The Manufacturing Institute and Deloitte LLP. The index was also featured in a Deloitte/Manufacturing Institute press release, which said, "Despite more than a year of bad news as the manufacturing sector continues to contract, an annual index released by Deloitte LLP and The Manufacturing Institute shows that Americans view manufacturing as the most important industry for a strong national economy." The BusinessWeek article cites the index as saying, "Some 60 percent of North American manufacturing execs surveyed by Deloitte Research and the Manufacturing Institute said they believe U.S. competitiveness will decline further by 2012, and 77 percent said the U.S. needs a strategic approach to developing a manufacturing base." The article states, "The manufacturing exodus from the U.S. is accelerating, but smarter tax policies, low-cost loans, and industrial zones may help keep factories at home."

-back to top-

Groups Support Permanent 35 Percent Estate Tax

Bloomberg News reported, "Forty-six business groups, including the National Federation of Independent Businesses and the U.S. Chamber of Commerce, want Congress to impose a permanent 35 percent tax on estates worth more than $10 million." With the estate tax "currently set to expire for a year in 2010, the groups, which also include trade organizations such as the American Farm Bureau Federation and the NAM , are seeking to avoid different sets of rules for this year, next year and 2011." The groups said in a letter to lawmakers, "Family businesses cannot afford mixed messages from Congress on this critical issue. ... A mere one-year extension of existing law will only add to the planning burdens on businesses that are already facing difficult economic times." The business groups' "call for a permanent estate tax marks a break from anti-tax groups such as Americans for Tax Reform that continue to push for repeal and argue that small businesses will be hurt by the levy."

-back to top-