Interview by Enterprise Minnesota

What are your thoughts about the role of manufacturing in Minnesota and the role government should play to help us get out of this recession?

It‟s encouraging to hear that close to 80 percent of the companies surveyed last year were optimistic about their own futures. It‟s consistent with the message I‟m hearing from companies in my district, a few of which I‟ve visited in recent months. It‟s encouraging to find these little nuggets or jewels out there about high-tech manufacturing that exist, which can be attributed to Minnesota‟s success story, the medical device industry in particular. I‟m co-chair of the medical technology caucus here in the House, so I‟ve been trying each week to tour a medical device or technology company and I‟m learning something new all the time. The government should be paying more attention to how we can help our manufacturing or small business community as a whole more than anything.

The number-one concern among small manufacturers is health care. So many of these companies take great pride in being able to provide great benefits, which gives them a competitive advantage – even more so now at this time. What are your thoughts on what’s happening in the world of health care and the changes that are being pondered, and how it will or won’t affect these businesses?

I‟m really worried that the approach Congress is taking with health care is not going to be helpful to small businesses because there are additional penalties, mandates, and additional surtaxes that will be components of the bill. I think we should first and foremost work on lowering health care premiums, not only for small business but also for families and individuals. The House bill improves access the health care and it does that through subsidies, which is why the bill is so expensive. When seven out of 10 jobs are created by small business, we need to help them by allowing them to pool together to spread out risk and extend their own access to care, which will keep their own costs down. That‟s not a component of the bill we passed, even though there‟s strong bi-partisan support for moving toward that initiative on its own. There are some common sense things that aren‟t in the mix of the congressional leadership‟s plan, which is a little bit frustrating to me.

What can lawmakers or manufacturers do to elevate or change manufacturing’s image and importance in the minds of the public, and attract the skilled labor they’re going to need in this economic recovery?

It‟s really exciting when I visit one of these small medical technology companies. They‟re going through a manufacturing process that‟s really high-tech, meeting vigorous clean and testing standards, ultimately having to pass muster with the FDA. Even though certain manufacturing may be moved off-shore, this high tech, value-added manufacturing is still being done right here at home. Of course, they‟re struggling in a tough economic time, without a doubt. But I‟m really excited about what‟s happening with these companies.

The story, I think, is continuing to unfold. Knowing that 95 percent of consumers are outside of the United States, there are huge export markets out there to still sell our products to and that‟s where we‟re going to help keep and maintain our edge. Part of it is having a higher quality workforce, and Minnesota has that. Smaller companies that want to provide health care or other benefits for their employees do so because they‟re trying to attract those quality workers and the educated work force that we have in Minnesota in the high-tech area. It‟s going to, hopefully, continue.

You mentioned exporting. The top 20 percent of manufacturing businesses tend to have an export component in place, which has really helped fuel recent growth for some companies. Any thoughts on how we’re either stifling or helping the small companies that are exporting product?

The state has various trade delegations. The governor has embarked on a trip to South America and Brazil, and I had a chance to travel with Gov. Pawlenty to India when the India delegation took place. I think it‟s appropriate for the state to be involved in those trade delegation meetings and establishing connections, or making new markets available.

I think from a Congressional or federal level, we need to do all we can to promote more trade opportunities and that‟s an export opportunity that helps now with manufacturing, but also with agriculture in a huge ag state. So there are huge opportunities there. Whether it‟s free trade agreements that have been kind of on the back burner, unfortunately, with South Korea, Columbia, Panama, I think if we could get a little bit of movement on there - you know there‟s friction with the congressional leadership and even the Obama administration on this, which is a little frustrating - you could add about 250,000 new jobs.

What do you hear about commercial lending?

General frustration. Frustration from the standpoint of wanting access to credit and frustration from the bankers who are being told by their regulators that many loans which in the past had been reliable customers who‟d never missed a payment, they‟re now being told it‟s considered a risky or non-performing loan and are having them shut it down. There‟s a mixed message coming from Washington from those who want to help the credit markets flow, but at the same time the regulators are going out and putting the squeeze on a lot of banks. It‟s taking capital out of the market, it‟s taking credit out of the market and some of these small companies in particular are having difficulty getting a loan – even an SBA [Small Business Administration] loan. That‟s really frustrating, so as a member of the financial services committee, that‟s been a top priority for me.

I think helping our community bankers in Minnesota is especially important. That‟s where a lot of these personal relationships exist between smaller companies on Main Street in Minnesota. The baker knows the business they work with for a long period of time. And unfortunately, they are not “too big to fail,” which is why I‟ve concentrated my focus on community lending to jump-start things in local economies.

What are your thoughts about how manufacturing can grow and retain skilled jobs in Minnesota?

Among the small manufacturers I meet with, there‟s huge innovation out there, in particular in the med-tech industry. There‟s a lot of innovation going on from that sector. We‟ve had this medical technology tax emerge in both the House and Senate, so all of a sudden we‟re hearing small manufacturers who invest a lot of money in R&D and payroll in our area saying, „if we get hit with this tax, it‟s going have to come out of payroll and R&D.‟ That could potentially put us in the position of shifting that R&D and payroll off-shore to other countries. So, it‟s moving us in the wrong direction.

I think the innovation and opportunities are there, without a doubt, and we‟re seeing it in Minnesota. But some of these proposals are probably why a lot of these small businesses have been hesitant to invest, because there have been so many questions about what the government might do with health care, or cap-and-trade, and whether that‟s going to put increased costs on them. With regulation coming down on financial markets, manufacturers wonder whether it will be tougher to get credit. I think a lot of people are sitting on the sidelines rather than hiring people right now. They‟re sitting back and saying, „we‟ve got to let this settle a little bit before we can move forward.‟

Agriculture and our manufacturing base are tightly intertwined. Any thoughts on how the health of agriculture and manufacturing might be tied together?

I think the rural, agricultural farm community is directly connected to great, solid corporate citizens like General Mills. I toured Hormel, for instance, which is a Fortune 500 located in rural Minnesota and they‟ve gone through a lot of modernization on how they bring product directly to market. I think there‟s a huge connection. You know, I don‟t represent an agriculturally based district. But there are a lot of connecting points – U.S. Food Service, for instance. It‟s amazing the connections that do exist between manufacturing and the food service industry and agriculture overall.

Enterprise Minnesota is affiliated with the Manufacturing Extension Partnership (MEP), which is housed within the Minnesota Department of Commerce. Twenty-eight percent of manufacturing expenses occur in small companies under 500 employees, which can be reimbursed through that program. Do you think there is more that the Federal government could do to focus on these smaller manufacturers, or not?

I do think there‟s more the federal government could do in terms of incentivizing investment in manufacturing, whether it‟s laying down equipment depreciation quicker, or providing some tax deductions or some sort of percentage that might allow or encourage more investment in those types of machines or people. I‟m a strong advocate for small business and if you could give people a tax break, or not have them pay a higher individual tax rate on something they reinvestment in their company, you could see a lot more encouragement in terms of actually hiring people.

Of the 8,000 manufacturers in Minnesota, more than 4,000 have fewer than 10 employees. They tend to be the ones that struggle most in these economic times. Any final comments that you’d like to make?

One of my primary motivators when I first ran for office at the state level for the state legislature is that my grandfather owned a small Minnesota manufacturing company in Plymouth. My uncles run it now. They experienced changes over time, but it‟s just a small business and operation. They‟ve obviously struggled in tough economic times as well, but for me it‟s a motivator to make sure that Minnesota is always business competitive.

When I first ran for the Legislature, the question was always „How are you going to compete against South Dakota, Iowa and Wisconsin?‟ Today, it‟s „How are you going to compete against China, India and the rest of the world?‟ Southeast Asia is going to continue to be the center of economic gravity for a long period of time, and it should really encourage us - more than ever - to keep on our toes.

China and India seem to be taking the lead in the production of green products like solar panels. Even 3M is having some of its green products manufactured in China. Our Minnesota manufacturers are very focused on green product development. Any thoughts how government might help our manufacturers improve market share in this space?

Minnesota has always been a leader in clean energy and renewable energy developments. I think it‟s led the nation in many ways. I think there‟s huge opportunity. This is one area where I think government can help by trying to set some parameters and insist on research and development requisites. The U.S. Chamber of Commerce has been supportive of some solar and wind energy legislation, and I‟m an advocate for investing in some of those technologies. They will pay dividends down the road, not only by giving us a greener climate, but also by producing a lot of American energy with American jobs, right here. So there‟s a role for government in that to be sure.

We might need to look at the research and development tax credits; probably by doing it in a different way by targeting smaller companies. We should be more futuristic in knowing if we can get more of a bump in helping them; maybe even venture capital flow towards some green technologies. I think that may be a way to redesign the tax credit.