Quality Magazine

From the Publisher: More of the Same

December 1, 2006

The 2006 elections are over and the new Democrat-lead Congress is getting ready to take power next month. What will this mean for manufacturing and quality? During the past six years, manufacturing has suffered both a tremendous blow (9/11) and a remarkable recovery.

A Republican-led Congress has increased trade opportunities, encouraged economic expansion, enacted favorable tax laws that allow rapid ROI on equipment purchases, addressed some worker shortage issues and provided tax incentives for corporate R&D, to name a few accomplishments.

What may change with the Democrats in charge? Probably not much. Despite the anxiousness of many conservatives who fear that Democrats will undo all the gains made during the past four years, a Democrat-led Congress will have a negligible effect on manufacturing. They will make some changes. For example, watch for easy passage of President Bush’s “guest worker” program that delivers amnesty to illegal immigrants. Businesses that rely on low-paying labor will benefit by this action. Minimum wage will get raised to about $7 per hour, which will increase labor costs to all but small companies, who President Bush has vowed to protect. The effect on larger manufacturing companies will be less severe because most of them already pay above the newly proposed minimum wage.

The National Association of Manufacturers (NAM), who lost many allies in Congress after the November 7 elections, is optimistic. According to a recent press release, NAM believes that incoming Democrats are interested in strengthening the economy and jobs. They believe most of the newly elected Democrats have centrist positions-not extremist positions-that will allow progress to continue.

Many of the tax breaks that have increased spending on capital equipment, business investment and encouraged consumer spending do not expire until well after the 2008 elections.

Wall-Street analysts believe that with a Democratic Congress and Republican White House, vetoes and gridlock could occur, allowing for little change from the present situation, which is a good manufacturing environment and a trend of growth. Indeed, that may be what both sides hope for, so as not to be blamed for any potential economic downturn resulting from a radical shift from the current economic path.

What does Quality Magazine predict for the coming year? Starting on page 42 you can read our 2007 Quality Spending Survey. The $3.4 billion in spending we are projecting for 2007 continues to build on an upward tick that started more than three years ago, and like the 2006 numbers, will be above pre-9/11 spending, which was on an upward trend before the attacks. The recent elections should not change these projections and the positive trends in manufacturing will continue to positively affect quality spending-regardless of who is controlling Congress.

Because politicians are essentially the same-all want to be re-elected and none want the blame for any bad news-there will be little that really changes when the Democrats take power. The fundamental engines that are driving manufacturing gains and positive news are still running, and no Democrat or Republican will change that during the next two years.

What do you think? Let me know at williamst@qualitymag.com.