Thursday, January 30, 2014

President Obama’s January 28, 2014 State of the Union Address sets a nationalistic agenda for American jobs.  There are some ideas that even business people (including business lawyers like me) can warm up to in the January Polar chill.

If you have been following the changes in the law, you might find his remarks a bit hypocritical and bombastic.  At least it was an occasion to be selectively optimistic to anticipate future legislation (or executive orders, i.e., Presidential fiat).

Insourcing.  Manufacturing has been outsourced and offshored in global supply chains for a long time due to wage arbitrage, efficient global logistics, factory automation and computerized design.   Obama notes: “over half of big manufacturers say they’re thinking of insourcing jobs from abroad.”  Any reshoring of manufacturing production jobs would unlikely bring back the number of jobs lost during the offshoring years.   Re-localization of these jobs would probably require new skills as manufacturing processes have become more highly efficient. 

Tax Reform.  Obama wants to reform “our tax code [that is] is riddled with wasteful, complicated loopholes that punish businesses investing here, and [that] rewards companies that keep profits abroad.”  He wants to “close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs here at home.”  What’s missing is that any tax reform should be used to raise revenue on a permanent basis for both personal and corporate income taxes.  Current proposals will only result in a temporary revenue increase, which Obama would allocate to infrastructure investment.

Small Business and Entrepreneurship.  Recognizing the role of SMB’s in job creation, economic growth and foreign trade revenue, Obama exhorted Congress to “do more” for them.   He claims that “Over the past five years, my administration has made more loans to small business owners than any other.”    How about reducing government regulations which impose onerous costs on SMBs?

International Trade.  Obama wants trade, “new trade partnerships with Europe and the Asia-Pacific” to help SMB’s create more jobs.  “We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment, and open new markets to new goods stamped “Made in the USA.”  China and Europe aren’t standing on the sidelines.” This is a plug to get trade negotiating authority for the Trans-Pacific Trade Partnership and the Trans-Atlantic Trade and Investment Partnership diplomatic deals. 

Innovation.    Obama claims the US is the global leader in innovation, giving us “an edge America cannot surrender.”   He wants to restore R&D tax credits, which lapsed due to the failure of his Administration and the Congress to enact a general tax law for three or four years due to dogmatic positioning.
Patent Trolls.  Obama wants to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation.”  Of course, he fails to mention that business process method patents, judicially approved in the mid 1990’s, helped create new industries in Silicon Valley.  The America Invents Act of 2010 was supposed to have protected businesses from unwarranted litigation through reforms in the processes for evaluating the patentability of pending patent applications.

Immigration.   Immigration reform offers significant economic benefits, which Obama focused on.  Pending reform legislation would open the doors to foreign entrepreneurs, investors and retirees, making the U.S. more competitive with other immigrant – favorable jurisdictions. It will also eliminate abuses of H1-B visas by foreign service companies and promote a more balanced global workforce with significant U.S. consultancies.