Remarks of David Farr, Chairman and CEO, Emerson before the Economic Club of Minnesota

Good afternoon. It is an honor to be back in Minneapolis and to address the Economic Club of Minnesota. It’s great to see friends and colleagues.

Many of you know me as the chairman and CEO of Emerson, which proudly employs about 2,100 people here in Minnesota. Emerson Automation Solutions, our largest business platform, has significant operations here in the Twin Cities area producing technologies and products key to the industrial automation world. 

If any of you were near the Minneapolis Convention Center the week before last, you would have noted the annual gathering of 2,500 customers, vendors and Emerson employees from around the world to attend what we call “Exchange,” a showcase of the very best examples of how our technologies improve operational performance, reliability and safety.

I am also here as the chair of the board of the National Association of Manufacturers—or NAM.

The NAM is the unified voice of manufacturers in the United States, from iconic global brands to family-owned small and medium-sized enterprises. We are the advocates for the more than 12 million men and women who manufacture products in America. You can imagine, there is a lot on our plate these days. The country is focused on our industry, and we are focused on making America stronger for all citizens.

Now, I have been in manufacturing my whole life. I grew up going to the Corning Glass Works factories with my dad when I was just a kid in upstate New York and later when we moved to North Carolina and then England.

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. We are a real global manufacturing company—an American-based 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. But as I mentioned, here in Minnesota, our focus is on automation technologies and consulting services for the process industries, which are anything that flows through a pipe: oil and gas, chemical, petrochemical, refining, life sciences, food and beverage, power generation, etc.

Over the past seven years, Emerson has invested more than $115 million in our Chanhassen-Shakopee-Eden Prairie manufacturing operations and general office renovations, and we more recently announced another $14 million renovation for Chanhassen that will add 80 new jobs.

Of course, we do this so we can do an even better job of serving our customers and have a more productive workforce. And we, and all the other members of the NAM, here in Minnesota, and across this great country could do even more—if we could reshape government policy to encourage growth and investment in the U.S. and not encourage companies to leave the USA! That is, of course, what I am here to talk about today.

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 36 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 36 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.

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. We have 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 Washington, D.C.’s, policies put American companies like Emerson—and our employees and families in all 50 states—at a clear disadvantage, a competitive disadvantage.

Finally, though, for the first time in more than three decades, leaders in Washington are ready to do something about it; for all of our sakes, I hope they are! And we have a once-in-a-generation chance to enact tax reform that will help our workers, our manufacturers, our whole country.

Leaders in the House, Senate and the Trump administration put out a framework for reform late last month. It was a bold step in the right direction. Manufacturers I talk with are enthusiastic about it. They are excited about getting their competitive edge back. They are excited to expand their operations, right here in America, hire new people and see their workers go home with bigger paychecks.

We have to get this done. We can’t waste this opportunity to do good for the people of this great country.

Today 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. Emerson’s federal tax rate averaged 37.5 percent over the past 10 years!

A lot of people ask, okay, so what? I’ll tell you what: other countries are winning, and our workers and families are paying the price.

Other countries have figured it out. They have lowered their rates. They have simplified their systems. They have given themselves a big advantage, a huge advantage, in the competition for jobs and business.

If you are like me, you look at all this and you ask: what are we doing to ourselves? 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! It is self-destructive. It is not the way to live up to our potential!

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. We would 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! Like yesterday!

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 Minnesota 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 not to 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 significantly to a more competitive rate. Manufacturers have advocated 15 percent; the latest official proposal is 20 percent. We also have to 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 these small and medium-sized business owners with marginal tax rates of up to 44 percent!  

Small and medium-sized manufacturers are the backbone of our industry, and small and medium-sized businesses drive our economy. So, it is time for the tax code to stop treating them like an afterthought. The proposed 25 percent rate for pass-through income is a giant step in the right direction.

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. I was pleased to see the tax reform framework call for a territorial tax system. Adopting this change will allow us to 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 USA 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. While the R&D credit appears to be safe for now, manufacturers are closely watching.

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/medium-sized businesses … a territorial tax system … a robust capital cost-recovery system … and consistent long-term-focused R&D incentives.

As you know, the White House and congressional leaders put out a framework for reform a couple weeks ago. It was a solid, bold approach. A lot of details still need to be worked out. But it is a strong start. At the NAM, we are already hearing from small/medium-sized manufacturers estimating, for example, that they would increase hiring 10 percent or capital spending 40 percent.

It is the sort of thing we should all be able to rally around. Because it is good for manufacturing workers. It is good for all workers. We need our voices to be heard by our senators and congressmen to support significant U.S. tax reform, now in 2017! We need action now!

But, certain groups have already chosen to take sides, before they even know all the facts.

That is so Washington. It is so frustrating. It is why we have not gotten tax reform done in more than three decades. There are too many people who want to oppose change more than they want to find a way to help our workers and truly support U.S. manufacturing.

I understand people may have differences. I happen to think we are moving in the right direction so far. But if you do have disagreements, talk them out before you run to partisan battle lines or ideological corners.

If someone in D.C. wants to raise an issue or hash out a concern, great! That is the beauty of our American democratic system.

But manufacturers have run out of patience with leaders who do not have time to consider the facts—or refuse to see the power of long-term growth. We need action now in 2017!

So, if you are an opponent of tax reform, I want you to come to Minnesota or Ohio or Wisconsin, and look a manufacturing worker in the eye. Tell her she does not deserve a bigger paycheck. Tell her that her family does not deserve to save for school and retirement. Then, tell an unemployed dad that a worker overseas deserves a job more than he does.

Because that is what you are saying if you are defending the status quo and rejecting the chance for reform.

This is a chance to seize a new day. And U.S. manufacturers do not want to see it wasted.

This 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.

The NAM’s most recent Manufacturers’ Outlook Survey asked manufacturers what they would do if tax reform passed. Almost 65 percent of respondents say they would increase capital spending, 64 percent say they would expand their businesses, 57 percent say they would hire more workers and 52 percent report they would increase wages and benefits to grow.

We are not playing around here. Tax reform can be transformative.

So, if you agree with me, I am here to personally challenge you to do everything in your power to make the case for tax reform. Please communicate directly to your senators and congressmen and women!

Talk to your congressional representatives. Write opinion pieces to news outlets and letters to the editor. And engage with the NAM. 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?

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!

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 to move up in their careers…creating real wealth for the entire pool of American workers.

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—made in America, in Racine, Wisconsin!

Emerson manufactures the InSinkErator garbage disposer. (We made more than 7 million of them last year.) It is, by the way, 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—more than $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 and, again, here in Minnesota as well as in other states. We believe in American innovation and the drive to win! We are a midwestern American company that plays to win!

But like other companies, Emerson and our employees also know we 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.

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. 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 all want a chance to succeed by ourselves, not government driven.

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 and expanding the U.S. economic pie for all Americans!

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 Minnesota. And I am happy to take some questions and have some fun!

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