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Obama Economic Plan To Discourage Outsourcing, Reward 'Insourcing'

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Obama speaks Wednesday to a crowd in Cedar Rapids, Iowa, about the importance of the manufacturing sector.
Obama speaks Wednesday to a crowd in Cedar Rapids, Iowa, about the importance of the manufacturing sector.

WASHINGTON -- On the heels of President Barack Obama's State of the Union address, senior economic advisers to the president on Wednesday shared more details on Obama's blueprint for the economy, including a plan to strip incentives for companies to move jobs overseas and instead encourage the return of manufacturing jobs to U.S. soil.

Arguing that the country should build on the relative strength of its manufacturing sector, National Economic Council (NEC) Director Gene Sperling told reporters that Congress needs to remove the tax deductions that corporations can claim on moving expenses when they ship jobs overseas. In addition, he said the president is proposing a 20 percent income tax credit for companies that choose to bring jobs back to the U.S. Taken together, the two measures would be revenue-neutral, Sperling added.

"Moving jobs is not something we should be subsidizing," Sperling said. "The companies have a right to do it, but that doesn't mean we should subsidize it."

The plan underscores Obama's interest in spurring "insourcing," or the return of previously outsourced jobs, particularly in the manufacturing sector. Earlier this month the president held an "Insourcing American Jobs" forum at the White House with 14 American companies -- DuPont, Intel and Otis Elevators, among others -- with the goal of better understanding what incentives corporations would need to bring jobs home.

Talking with reporters Wednesday, Jason Furman, principal deputy director at the NEC, argued that manufacturers are starting to reconsider whether it's worth moving or keeping their operations overseas rather than in the U.S., in part because of rising labor costs in China. Indeed, the manufacturing sector has been one of the few bright spots in recent U.S. jobs reports, with around 300,000 such jobs having been added in the past two years.

As part of his broader plan, the president is also proposing a "minimum tax rate" on overseas profits to discourage corporations from moving work to countries with more favorable rates. The proposed changes to tax law, Ferman said, could help persuade some companies that are "sitting on the fence" to keep their workforces in the U.S.

"You look at the tax code as a whole, and right now it gives a large push to a company thinking about doing business overseas rather than in the U.S.," Furman said. "Rather than have everything in the tax code pointed towards China as it does now... we can point it back in the other direction."

In addition, the administration is proposing a "manufacturing communities tax credit" to encourage investment in areas where local plants are closing. With $6 billion in credits, the program would be designed to mitigate job losses by luring new manufacturers into those areas.

"Imagine the steel closings in the late '90s," Sperling said. "This tax credit [would allow] a community that has evidence that there will be a mass layoff to have a tax incentive to help bring an additional company in to relocate in that area."

Obama took to the road Wednesday to pitch his broader economic agenda directly to voters, speaking about the importance of the manufacturing sector in Cedar Rapids, Iowa, and Phoenix, Ariz.

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