David Farr at The Economic Club of New York



Good morning. It is an honor to address The Economic Club of New York, and also it is a pleasure to be with friends and colleagues. I did not know so many people liked talking tax policy so early in the day. It must be the donuts and coffee!

I want to thank Terry Lundgren for that kind introduction and everyone at The Economic Club for organizing this event. As Terry said, I am here in two capacities—as chairman and CEO of Emerson and as the chair of the board of the National Association of Manufacturers—NAM.

The NAM is the unified voice of manufacturers in the United States, from iconic global brands to family-owned small enterprises. Led by our president and CEO, Jay Timmons, who is here this morning, we are the advocates for the more than 12 million men and women who make things in America. And given the country’s focus on our industry, there is a lot on our plate these days.

I have been in manufacturing my whole life. I grew up going to the Corning Glass Works factory with my Dad when I was just a kid in upstate New York and later when we moved to the U.K.

The manufacturing shop floor was home for me even before I joined Emerson 36 years ago. And in the years since, I have seen this industry from every angle, as Emerson has grown into a $15 billion global manufacturing and technology company. We have more than 80,000 employees and operations in more than 150 countries with 80 percent of what we sell domestically manufactured right here in the United States—a real global manufacturing company!

Emerson primarily serves industrial and commercial customers in vital industries, such as oil and gas, chemical, food and beverage, power and water, life sciences, pharma … and heating, ventilating, air-conditioning, refrigeration, food monitoring, the cold chain and much more.

Nothing gives me more pride than seeing Emerson employees achieve and accomplish things that have never been done before to make the world safer, cleaner, more efficient. Our world has changed dramatically in my years in manufacturing, and the work we do has changed just as much. Manufacturing skills have moved from manual and pneumatic to automated and digital—a much more educated and skilled workforce is needed than 25 years ago. Combined with the new ways we gather and use information, we are rethinking new and exciting manufacturing careers for people from all walks of life—we need a different workforce to stay competitive and win on a global stage.

I know this manufacturing industry well, but in all my years working in manufacturing, I cannot remember a moment like this. We are standing at a real crossroads, with a narrow window to deliver some major change for this great country—significant reforms that will make life better for manufacturing workers, better for the manufacturing community and better for America as a whole—and our global competitiveness.

As the leader of a truly global American company, I can tell you the United States faces immense competition for our jobs and for our manufacturing businesses that grows fiercer and tougher every year. And there is no question that our Washington, D.C., policies put American companies like Emerson—and our employees and families in all 50 states—at a clear disadvantage—a competitive disadvantage.

In America, the top corporate tax rate can exceed 39 percent when you add up the federal and state rates—the highest corporate statutory rate among the 35 industrialized nations of the OECD and more than 50 percent higher than the average rate.

If you are like me, you look at those numbers and you ask: what are we doing to ourselves? And why? What are we doing to our people? Why is Washington, D.C., making it harder for America to win in the world? This is so stupid! So dumb from my perspective and so self-destructive!

While the tax code is not the only problem, it is one of the biggest and most impactful from the U.S. manufacturers’ perspective. But also important is excessive regulations on all manufacturing and industries!

America has some incredible advantages—unparalleled resources and an unbeatable, hard-working and dedicated workforce. But if we modernized our tax code for the modern economy—if we let our companies compete on a level playing field in the world—we could lift up more families, invest in more communities, unleash the power of this industry and improve the lives of all Americans and this great nation. Create more long-term economic wealth!

If we had a better, more modern tax code, companies like Emerson could expand and hire more workers and help them get ahead. That requires embracing and adapting to the increasingly global economy. We are all in the same big economic game. But the U.S. gets to write its own rules, and we need new ones—now!

So why are we writing rules and regulations that give other global competitors a leg up?

If you are defending the current tax code, then you have to defend a manufacturing worker in Ohio losing his or her job to a worker overseas.

If you are defending the current tax code, you have to defend years and years of mediocre economic growth, stagnant wages and entire communities losing hope for future prosperity.

If you are defending the current tax code, you are defending less innovation, fewer technological breakthroughs, less R&D and fewer lifesaving medical discoveries.

In a country with so much incredible potential, it is indefensible to not have a current, competitive tax policy. But the good news is we can do something about it. And here is what we need to do!

First, we must cut the federal corporate tax rate to 15 percent and lower the tax rate for the two-thirds of manufacturers that pay taxes at individual tax rates as pass-through entities. It is backward and unfair to saddle them with marginal tax rates of up to 44 percent on these small business owners! 

Small manufacturers are the backbone of our industry, and small businesses drive our economy. So, it is time for the tax code to stop treating them like an afterthought—a huge negative on the U.S. economy.

Second, we have to stop punishing global U.S. companies when they reinvest overseas earnings back into the United States. At Emerson, for example, more than 50 percent of our sales in 2016 were outside the United States, and most of our competitors are based abroad. Since Emerson is headquartered in St. Louis, we pay taxes on overseas earnings brought back home while our foreign competitors do not—another negative competitive issue for global U.S. companies.

That kind of tax structure puts Emerson—and other global companies headquartered across America—at a structural cost disadvantage. We can earn the same dollar as a foreign competitor, but if we want to reinvest it in our American facilities, in our American workers and in our American communities, we keep less of that dollar solely because of the U.S. tax system. The U.S. needs to catch up with the rest of the world and implement a territorial tax system so we can create more jobs here while selling to overseas markets and growing our business, our economy—the U.S. economy! 

Third, we need a robust capital cost-recovery system. As I explained to Congress a few months ago, a firm’s capital cost includes the price of capital equipment, the cost of financing the equipment and the tax treatment of the investment. Faster capital expensing lowers the after-tax cost and increases the number of profitable projects a firm can undertake—more U.S.A. investment normally translates into more jobs.

Finally, manufacturers will be looking for strong research and development incentives in any tax package—both R&D deductions and a strengthened R&D credit.

So, that is the straightforward and smart tax and pro-growth reform manufacturers want and that America deserves: a fair corporate tax rate, fair rates for small business, a territorial tax system, a robust capital cost-recovery system and consistent long-term-focused R&D incentives.

 

This is certainly not an easy lift. But it is possible. It is necessary. And it is the right thing to do for a stronger, long-term growth-driven U.S. economy.

A 2015 NAM study concluded that a reform package like this could add more than $12 trillion in GDP over 10 years, deliver more than 6.5 million jobs to the U.S. economy and increase investment by more than $3.3 trillion. As an actual global manufacturing CEO of 17 years who makes decisions based on tax policy almost every day, I believe that assessment and see it every day of my U.S. manufacturing life.

Now, the good news is that we have the best chance in decades to get this done. The president wants to get this done. The vice president came to the NAM and told hundreds of manufacturers in person that tax reform would get done this year. And U.S. businesses believe this and have increased business investments already in anticipation of it being done!

The Speaker of the House told the same gathering, in his first major address on tax reform, that Congress is going to get this done. He is doing an event tomorrow with The New York Times on tax reform, so we will be watching. And leaders from the House, Senate and White House have all come together to say they agree on the basic principles of tax reform. We now need real action and results in 2017—not later, but now!

This can happen. The time is right. And we cannot let this critical moment pass. Manufacturers are all in for tax and regulation reform. I am here today to personally challenge you, each and everyone one of you, to do everything in your power to make the case for tax reform—our great country needs it to win globally and grow faster and create more jobs! 

Talk to your congressional representatives. Write opinion pieces to news outlets and letters to the editor. And engage with the NAM, who will continue to drive this effort and bring all our influence to bear on behalf of our industry, on behalf of our communities and on behalf of America’s working families. We need real reform, real action now—not just talk!

Ultimately, this is a question of values—because the tax code is a reflection of what we value as a country. Do we value the American manufacturing worker—and workers in all industries? I believe in manufacturing, and I have lived it every day for over 50 years. I believe American manufacturing, innovation and drive to win are the best in the world!

Do we want to secure their jobs here? Do we want to raise their standards of living? Do we want to give workers the best possible shot at making a good living and a good life? Do we want plentiful jobs for the next generation?

The current tax code says we do not, but I believe we do! So now is the time for action and not just lip service and hot air from Washington, D.C., politicians!

I believe we want to grow manufacturing here in the United States. I believe we want America to be the leader in 21st-century innovation, in medicine, in technology, in energy. I believe we want to reinvest in the promise of this country. Because when American companies do well, they do good things and the country does well as a whole!

The most obvious way is through the jobs we create, pulling people in off the sidelines into productive jobs, lifting up communities that have been left behind in the past and offering a ladder to people who want to move up in their careers and truly make something! Creating real wealth!

American companies improve lives in other ways, too. A stronger manufacturing sector would also mean more of the lifesaving, life-changing innovation and products that define our world and the companies we lead and the customers we serve.

There are children alive today because of the breakthroughs delivered by U.S. pharmaceutical manufacturers.

There are families who are safer today because of the work of great auto manufacturers to make their cars more protective and efficient.

There are communities that are thriving today because of innovations that manufacturers have developed to improve some of the most basic areas of our lives.

And yes, we are helping the environment with innovations and technologies!

This is one of my favorite parts because this is where I get to talk about Emerson-produced InSinkErator garbage disposals.

I know New Yorkers came a little later to the garbage disposals’ use than the rest of the country, but I hope you will still appreciate this.

Emerson manufactures the InSinkErator garbage disposer (we made over 7 million of them last year), which, by the way, is the only product of its kind whose final assembly occurs right here in the United States. For cities across the country, trash is a serious problem. And so much of that trash is food waste, which rots in landfills and releases greenhouse gas—methane gas.  

So, Emerson had an idea. We started working with major cities like Boston, Philadelphia and Milwaukee to encourage InSinkErator use, so they could cut down on food waste in landfills but—and this is the cool part—also recapture the methane biogas from the food you send down the sink and use it to power their municipal facilities and also make excellent fertilizer.

It is really an amazing solution, and it is just one small example of the creativity of American manufacturing. Emerson has recently invested significantly in our InSinkErator facilities in Wisconsin—over $30 million. And you should know also that we have invested in recent years in important upgrades and in innovation in other parts of our business in Ohio, in Texas, in Minnesota and in other states—as we believe in American innovation and drive to win!

But like other companies, Emerson and our employees know we also have an obligation to give back to our communities in more direct ways.

In our hometown of Ferguson, Missouri, there is tremendous need—as the whole world saw so clearly a few years ago. And so, since 2014, we have dedicated more than $15.4 million to programs that support the community and our families. We’re connecting people to jobs by promoting STEM-focused scholarships to Ranken Technical College, the University of Missouri and many other academic programs. In fact, the U.S. Department of Commerce just announced an investment of $2.4 million to increase manufacturing skills and entrepreneurship through Ranken in St. Louis, Missouri.

Our commitment in Ferguson extends beyond workforce development as well, to early childhood development programs, a Fathers’ Support Center, libraries and local and national nonprofits doing transformative work. And we are looking for even more ways to be part of a revival in Ferguson. I am very proud of Emerson’s contributions. But I also know that we are not alone. Companies of all sizes, big and small, all across this country know we have a responsibility to support the communities that support us. And now to the terrible destruction we recently experienced in Texas and Louisiana—and the huge rebuilding effort—Emerson is and will be there to help with the rebuilding efforts!

Also, our commitment to education and training and STEM goes well beyond Ferguson, to many millions of dollars to building strong relationships and programs all across the country.

In doing so, we are addressing the urgent need for manufacturing talent in the United States—the kind of work I talked about earlier. Research from Deloitte and the NAM’s Manufacturing Institute found that the U.S. will have about 3.5 million manufacturing job openings over the next decade. But about 2 million could go unfilled because we don’t have enough skilled workers to fill them. American manufacturing cannot reach its full potential until our people can reach theirs. We need to invest in the next generation of manufacturing leaders, innovators and workers!

And I believe this, too, is at stake in tax reform. Our ability to do more good for America is tied to our ability to succeed in America.

This is what our country is all about: people helping each other. We are seeing this live in Houston and across the Gulf Coast. Companies that are part of the fabric of their towns and cities. Families who are confident in their futures. This is what made America grow, prosper and be economically so strong.

Our elected leaders have the chance to give them that confidence and to do good for our country by empowering all of us to do well—and support ourselves! We don’t want government handouts; we want to create real wealth! 

We know not all problems are solved in Washington. But if our leaders can improve the tax code for American business and American workers, we, the business community, will be able to tackle so many more of the challenges our country faces, from job creation, to community development, to health care, to education, to a stronger, more prosperous country for all.

We will be able to promote innovation and opportunity, security and growth—and uphold our American values of diversity, inclusion and respect. We will be able to invest in the fabric of our nation and help build the future that all Americans deserve and want. We all want a chance to succeed by ourselves.

Securing the future of modern manufacturing means having a tax code that lives up to the realities of the modern world. And I hope you are willing to speak out and take a stand—and show America that this is about far more than just more money for business; it is about increased economic prosperity.

It is about what we value as a nation. It is about helping all Americans have a better shot at a better life and a brighter future.

So, let’s get to work.

Thank you so much for listening to my passion for manufacturing and this great country! Again, thanks to The Economic Club of New York. And I am happy to take some questions and have some fun! Thanks.

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