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D.C. gridlock stymies Minnesota manufacturers

Manufacturers are being cautious about their own spending, and that affects the state’s economy.

us capitol
Gamesmanship at the capitol tops Minnesota manufacturers’ list of concerns.

Two out of three Minnesota manufacturers are having a tough time making business decisions because of the uncertainty created by Washington’s politicians who’ve failed to reach deals on the federal budget and tax policy.

That’s one of the key findings in “The State of Manufacturing” survey of 400 manufacturing executives that was released Thursday by Enterprise Minnesota, a nonprofit organization that supports growth in the manufacturing sector.

When asked to rate their major concerns, gamesmanship in Washington, D.C., and the costs of health-care coverage were each cited as the top two concerns by 67 percent of the business people surveyed in March.

Prominent theme

That pessimism about federal politicians didn’t surprise me. The inability of President Obama and Congress to come to grips with tough national issues was a prominent theme of a national conference I attended earlier this month in Washington, D.C.

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The Society of American Business Editors and Writers (SABEW) convened blocks from the White House, and one panelist after another shared their skepticism that any comprehensive tax reform could be achieved.

One business journalist described the long-term fiscal challenges facing the United States as “beyond daunting.”  But one tax expert indicated that the lobbyists on K Street are even more powerful and plentiful than they were in 1986, when Republican President Ronald Reagan achieved major tax reform with a Republican-controlled Senate and a House led by Democrats.

In 2013, can a Democratic president reach a budget agreement with a GOP House majority and a Democratic Senate or will political paralysis ensue?

“This town that we’re in is badly broken,” David Walker, CEO of the Comeback America Initiative, told the business journalists.

Walker was comptroller general of the United States and head of the U.S. Government Accountability Office from 1998 to 2008. He’s now engaged in an effort to promote fiscal responsibility and sustainability.

When citizens take a look at the spending projections for Medicare, Social Security and other federal programs, Walker said, they recognize that hard tax and spending choices must be made. “The people are way ahead of the politicians,” Walker maintains, in understanding that steps should be taken now to address fiscal problems.

As the United States slowly recovers from the worst recession since the Great Depression, Walker is advocating an approach that will reduce the portion of federal government debt when compared with the gross domestic product.

He knows that responsible solutions will be implemented over several years, but he also recognizes that it’s difficult to hold Congress responsible for its actions. That’s because the majority of Democrats and Republicans in the House are serving in safe seats and many of those district lines were drawn to avoid real competition for congressional seats.

On the U.S. Senate side, the cost of waging a competitive race against an incumbent is staggering, which makes it problematic to attract the best challengers against Republican and Democratic senators.

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Walker, who criticized the way former President George W. Bush and Obama have handled fiscal issues, said it’s now time for the president to use his bully pulpit to move toward a budget compromise.

Lack of confidence

When Minnesota manufacturers were surveyed in March, it appears their lack of confidence in Washington politicians was based on watching the partisans employ a kick-the-can approach to budget challenges.

Unfortunately, for the Minnesota manufacturers, the political gridlock is having real-world consequences for executives and employees. With the uncertainty over federal spending and tax policies, the manufacturers are being cautious about their own spending, and that affects the state’s economy.

chart of manufacturer concerns
Manufacturers responding to a survey cited health-care costs and uncertainty about Washington as top concerns.

The survey, conducted by Public Opinion Strategies of Alexandria, Va., showed that 42 percent of the executives said the federal policy uncertainty is having a “great deal” or “a lot” of impact on their ability to plan ahead for their businesses.

Only 28 percent of the companies surveyed expect to increase their capital expenditures this year, which indicates a reluctance to invest when the federal budget is up in the air and the strength of the economic recovery is modest.

Only 25 percent of the companies told the polling firm that they plan to hire more employees in the next year, while 69 percent anticipate their workforce sizes will stay the same.

The automatic sequestration cuts, which are a result of political gridlock in Washington, are rolling across the United States. A failure to lead and to make sound decisions produced sequestration.

In business, a failure to make the tough decisions and craft a coherent strategy can easily lead to a company’s extinction. The manufacturers’ survey shows that the dysfunction in Washington is hurting Minnesota business people who simply want to make good decisions and grow their companies.

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Instead of restraining economic recovery with a cloud of fiscal uncertainty, it’s time for Washington’s politicians to lead.     

Fedor can be reached at She is on Twitter @LizFedor.