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The future of manufacturing in North Carolina

Today was the first day of the Emerging Issues Forum, organized by NC State’s Institute for Emerging Issues. The theme of the forum for this year, “Manufacturing Works,” looks at the future of manufacturing in the state. From all the enlightening discussions today– on the democratization of design and production, the need for a skilled workforce, changes in the economic climate and within the sector, technological advances, and new modes of funding such as crowd sourcing– it seems that there is some hope for a resurgence in manufacturing in the years to come. The tools and technology required to take ideas and turn them into products are more widely accessible today than ever before, allowing smaller businesses and innovators to step into the gap.

In a report published last week, The North Carolina Rural Center reported that 2011 marked the first time in 16 years that the state saw a net increase in manufacturing jobs. The sector accounts for 14 percent of employment in the state’s rural counties overall, and 20 percent of employment in 18 of these counties.  The sector provides good wages and provides an opportunity for workers to create long-term wealth. Although manufacturing looks very different today than it did in previous decades, some things remain the same– notably, the need for long-term public investments, especially in education and infrastructure  to create a fertile environment for the growth of manufacturing industries.

With manufacturing making gains in our state economy, the time is right for such investments. In order to make these investments, our state needs to have the resources to do so, but the issue of tax reform and state revenues has become a hot-button issue in the state’s political discourse these days, particularly with the proposal to eliminate the personal and corporate income taxes.  In recent years, state programs and services across the board have faced significant budget cuts, and despite small spending increases we still have not yet been able to get back to pre-recession funding levels.  Public education has seen a nearly 12 percent cut, while natural and economic resources have been cut by almost 50 percent since Fiscal Year 2008. Our state’s transportation infrastructure is already strained, and with budget cuts and the cap in the gas tax, resources for repairs and upgrades will be limited.

If we want to make investments in our state for the long-term to create good jobs and spark innovation, we need a tax system that is stable, fair, and effective in raising revenue. Investments in infrastructure and education would do much more than support manufacturing; these investments would uphold the economic healthy and vitality of North Carolina for generations to come. The private sector may not be ready to invest the trillions of dollars in cash that it is currently sitting on, but the public sector certainly should step in to invest in our collective future.


February 12, 2013 at 8:30 am

Small business optimism up for 2013

Wells Fargo and Gallup have released their Small Business Index, which is a survey of small business owners on their current financial situation and their views on what the next 12 months have in store. The survey includes 601 small business owners, and was conducted during the first two weeks of this month.

The big takeaway from the survey is that small business owners are more optimistic about their prospects than last quarter. The index was up 20 points on overall optimism than in November 2012. This is due to business owners feeling positive about their performance in terms of revenues, capital spending, and jobs in the past year, and also feeling positive about their prospects for revenues, cash flow, jobs, and their overall financial situation in the year ahead. As states, this is  “a dramatic turnaround from the end of last year, when the part of the index that measures business owners’ future expectations plunged to its lowest level since the start of the financial crisis.”

On the down side, it does not appear that hiring will increase significantly. Seventy-one percent reported that there will likely be no change in the number of jobs at their businesses, while the number of businesses that will add jobs did not increase from the last quarter. Even those who say they will hire are expecting to hire fewer jobs than they ideally would need. The primary reasons for this include that they don’t need any more workers, they are concerned about having enough consumer demand to support new jobs, the state of the economy, and potential costs of health care. Coincidentally, those businesses that are expecting to hire say they will do so because of increased demand.

These findings corroborate previous small  business surveys that we have reported on. Although there are a variety of issues that affect business owners, consumer demand and economic stability rank as the top factors. In order for these businesses to be successful, they need people to purchase the goods and services they offer. As the economy overall improves– and as individuals and families regain financial stability– the prospects for small businesses will also improve.

In related small business news, it appears that banks are also taking stock of their prospects when it comes to small business lending. Business News Daily reports that Bank of America, in response to its perception of small business lending as a growing opportunity  will be stepping up its efforts in this area, as it has recently hired more than 1,000 small business lending bankers. On the other hand, Bloomberg reports that Citigroup will be letting go of small business bankers, as a “realignment” within the company.

The economic recession and its ongoing impacts have changed the landscape for small businesses dramatically. From consumer demand to accessing capital, small businesses have faced a great deal of uncertainty in recent years. The various surveys of small businesses and the shifting roles of both big and small lenders all show that businesses and lenders alike are still trying to figure out and adjust to these changing conditions. But until the underlying challenges are addressed, the uncertainty will persist.  Many of the challenges faced by both businesses and lenders will be alleviated when economic recovery really reaches all communities– particularly those areas where small businesses are the main generators of economic activity.

January 25, 2013 at 1:43 pm

Fiscal cliff deal passed & Farm Bill extended

Happy new year everyone! While we were away, Congress had much to do regarding both the fiscal cliff and the farm bill. Finally, there is some news on both fronts.

Fiscal Cliff

Yesterday, a fiscal cliff deal was passed, which will raise income tax rates for couples earning above $450,000 (to 39.6 percent), increase capital gains and dividend taxes from 15 percent to 20 percent, and increase estate taxes from 35 to 40 percent. For higher-earning households, there will be additional incremental tax increases. In regard to “sequestration,” or the $109 billion in spending cuts that would have taken place on Jan 1, the fiscal cliff deal defers those cuts by two months. Although it did not include President Obama’s promise to increase taxes on earners above $250,000, and although it did not resolve the issue of spending cuts, it does represent the biggest changes in tax rates in decades.

The Washington Post does a good summary of the impact this deal will have on small businesses. For those few small businesses that report pass-through income of over $450,000– a very small slice of small businesses– their taxes will go up. However, the vast majority of small businesses do not report that much income. Only 1.4 percent of small businesses had income over $250,000, so the percentage with more than that would be even less. Other tax deductions and credits that do help small businesses were extended, such as the Research & Development credit, the Work Opportunity Tax Credit (WOTC) for hiring underemployed groups like youth and veterans, tax breaks for renewable energy, and tax breaks for purchasing software and equipment. On the other hand, payroll taxes will increase back up to 6.2 percent (from 4.2 percent) for workers, which some have warned will impact consumer demand. The delay of sequestration also continues the uncertainty that many businesses that contract with government agencies have faced recently.

Farm Bill

After a few months of no new farm bill, and much discussion about the impacts of reverting to the laws set in the 1930s and 1940s, Congress extended the 2008 farm bill for another nine months. Both the Senate and the House had come up with reforms for our nation’s agriculture policy– none of these will be acted upon until the extension expires in September. Many advocates who have been lobbying for a better farm bill are expressing their disappointment at Congress’s inability to take action. Food stamp funding was one of the major causes of the stalemate. This will be taken up again in the fall. For now, we’ll at least avoid $8 per gallon milk prices.

In the end, Congress did act to avert the fiscal cliff and raise taxes on the wealthiest Americans. However, the big questions about spending cuts and the farm bill remain unanswered. Instead of figuring out a solution, Congress has kicked the can down the road. Both of these stories will continue to unfold in 2013, and both will have an impact on our economy, our food, and our safety net programs. In a time that is already marked by uncertainty for many families that continue to struggle with significant economic challenges, Congress should be able to work together to lay the foundation for our future growth and recovery. We’ll keep you posted.

January 2, 2013 at 1:06 pm 2 comments

Small Businesses Can Handle Taxes; Need is Stability

Below is an Opinion piece from The Support Center’s President/CEO Lenwood V. Long, Sr. from today’s Greensboro News & Record:

We’re hearing a lot about the “fiscal cliff” and the consequences of allowing the tax cuts for the wealthiest Americans to expire. Small businesses have been thrown into the ring, with claims in the media that they will be dealt a detrimental blow if the tax cuts expire. But those of us who work with small businesses every day know that the vast majority of small businesses will not be harmed at all, and that taxes are not among the top concerns of small businesses.

Instead, what we need are policies to support a strong and growing middle class, which can create demand for the goods and services that our small businesses provide. This, in addition to expanding access to capital, is what drives business expansion and job creation.

Most small businesses do not report their income as personal income — and of those that do, only a small number will be impacted by higher tax rates on income over $250,000. According to the Center on Budget and Policy Priorities, only 1.4 percent of small businesses would be affected if these changes took effect. 

Extending these tax cuts on the rich will only benefit the very wealthy — not the restaurants, bakeries, corner stores, salons and other mom-and-pop shops that we work with on a daily basis. The truth is that these are the economic engines and job creators in communities across the country, particularly in the underserved communities we work in. Over the past 20 years, small firms have accounted for 60 to 70 percent of job creation in the U.S. 

A survey by the Main Street Alliance found that, by far, small businesses are concerned about weak consumer demand. We work with small businesses in underserved communities, and our borrowers echo this concern. With persistent high unemployment — particularly in the many rural, under-resourced communities across the state — many families continue to face financial and economic hardships, which means that they cannot participate fully in their local economies. 

The policies and programs that support working families will not only help improve their quality of life, but also help to support the small businesses in their communities.

Investments in our working families are investments in the long-term health of our economy. The Congressional Budget Office and Moody’s Analytics have shown that safety-net programs that help lift people out of poverty are a much more efficient use of our resources. But with the looming fiscal cliff, the future of these programs is uncertain. 

The $109 billion cuts in 2013 alone mean significant and devastating cuts to job training, workforce development, education and child care programs, among others. These are the programs that support families and help create healthy communities. Without healthy communities, small businesses would not be able to succeed.

Most of the claims about the dangerous impacts of the expiration of the tax cuts on small businesses do not resonate with the reality on Main Street. If they expire, everyone — including small businesses — will continue to receive tax cuts on their incomes below $250,000. 

We should focus on putting policies in place that uplift those who continue to struggle with economic hardships, and those communities that remain underserved and are in need of economic development.

Small businesses are an important part of these communities. When their fellow citizens succeed and find financial and economic stability, so do they.

Lenwood V. Long is president and CEO of  The Support Center in Wake Forest.

November 26, 2012 at 2:50 pm 3 comments

Fracking Could Raise New Issue Between Homeowners and Mortgage Companies

The North Carolina legislature passed legislation legalizing fracking in July 2012.  Fracking, or hydraulic fracturing, is the practice of using highly pressurized liquids to extract natural gas or oil from the earth.  During the debates and discussion, there were many debates about the environmental and economic impact that this legislation may have on the state.  However, one issue that went largely not discussed is the potential impact that fracking could have on the state’s housing industry.

The impact on the housing industry mainly comes from the answer to: who owns your property’s mineral rights?  Mineral rights are usually transferred as part of the parcel of property at the closing.  However, in certain situations, some property owners retained the mineral rights in the property. (D.R. Horton recently returned retained mineral interests).  Other landowners sold or leased their interest in the mineral rights throughout the years.

Now, the sale of these mineral rights did not receive detailed attention for many years because they were not fully utilized.  However, with the rising interest in fracking in North Carolina, there is the potential that their owners may take an interest in enforcing their rights.  The problem arises where the utilization of these rights might impact the value and foundation of the mortgaged property (such as building roads, pipelines, drills, etc.).  There may also be issues with the regulations of Fannie Mae and Freddie Mac, who require that drilling and mineral leases be handled in certain manners.  Some mortgage companies have considered this issue and are refusing to lend to properties without the mineral rights, while most do not have this policy.  It will be interesting to see if more mortgage companies limit their lending to properties with their full mineral rights in the future.  More information on a homeowner’s rights can be found at RAFI-USA’s resource page.

November 14, 2012 at 12:34 pm

Rising cost of living fuels inequality

Today, Progressive Pulse posted about a new report by the Center for Housing Policy and Center for Neighborhood Technology about the rapidly rising cost of housing and transportation. The study found that nationally, these costs increased by $1.75 for every $1 increase in household income between 2000 and 2010. Simply put, incomes were not keeping up with expenses. It also found that moderate-income households (those earning 50 to 100 percent of the median income in their area) spent 59 percent of their incomes on housing and transportation.

Also this week, the New York Times Economix blog reported on a paper out of Harvard University suggesting that the high cost of living contributes to the persistent and growing inequality that we blogged about on Wednesday. Low-wage workers are pushed out of the areas with the greatest economic opportunities because they cannot afford to live there. Instead, they are forced to seek jobs in areas that offer inferior wages and opportunities.

This was not always the case.

“The best places for low- and high-skilled workers used to be the same places: California, Maryland, New York,” said Peter Ganong, a doctoral student in economics, who wrote the paper with Daniel Shoag, a professor of public policy. “Now low-skilled workers can no longer afford to move to the high-wage places.”

To summarize, what we are seeing is growing income inequality and rising costs of housing and transportation, which are effectively prohibiting low-wage workers and families from accessing economic opportunity. This is not the path to a broadly shared, sustainable economic recovery. As the Economix blog says, “It doesn’t have to be this way.” Public policy can and must play a role in leveling the playing field for all workers.

October 19, 2012 at 10:39 am

Vote for The Support Center to present at this year’s Discovery Forum!

We have submitted an entry for this year’s Discovery Forum, hosted by the Institute for Emerging Issues. Please take a minute to click on the link below to see all the great entries that have been submitted, and be sure to vote for our presentation, “Dreams into Reality: Supporting North Carolina’s Entrepreneurs.”

October 10, 2012 at 3:54 pm

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