Alan Beaulieu, President and Principal Economist at ITR, recently took a look at the Tax Overhaul Proposal authored by David Camp, Chairman of the House Ways and Means committee. What he reports is chilling for small manufacturers, prospects for employment, and the economy.

Confiscatory may be the "new normal" for small and medium sized businesses.
Confiscatory may be the “new normal” for small and medium sized businesses.

Headline Talking Points: A reduction in the corporate tax rate to 25% and a decrease in the number of personal income tax brackets are what you will hear about.
Those pesky details:

  • This plan would cause significant tax increases to those currently in the 39% bracket.
  • The loss of deductions and a phasing out of the benefit of the lower tax brackets would raise the effective rate to 42% on many higher-income earners.
  • The Brookings Institute states that a slice of America would be taxed at up to 60%.

Is your company a pass through tax entity (ie, not a C-Corp)?
Rep. Camp’s plan would place firms like yours at a significant disadvantage in that it would reach into the business income of these enterprises (income after the deduction for owner’s salaries) and make 70% of that business income subject to payroll taxes.
Does your company have a foreign subsidiary or operations? Double taxation may be in your future. Mr. Camp, and others, wants to reach overseas and claim a piece for Washington, and they not only want to tax income but also brick and motor investments.
What ever happened to “Thou shalt not covet?”
Do the folks in Washington really think that confiscatory taxation of the small to medium sized businesses that are the backbone of US employment and engines for growth will encourage hiring and growth after this plan increases their taxable income by 70%? (These businesses employ one out of every four workers here in the U.S.)
I can’t think of a single way that this so called “reform” will encourage growth here in the US. Maybe the recession of 2007-2009 was just a practice round…
Alan’s ITR Blog 
Confiscatory Taxes and Photo Credit
PMPA has a contract arrangement with ITR Economics for Business Cycle analysis and reporting for our members.

In cold worked steels, failures can be broadly categorized in two categories. The first, are those nucleated by localized defects- such as seams, pipe, and exogenous inclusions. The second, are those which result from exceeding the strength of the material itself.
The compressive stresses of cold working  results in failures by shear  along planes 45 degrees to the applied stress. These are known as shear failures. The presence of shear failures in an otherwise metallurgically normal material indicates excessive mechanical deformation. While often the result of tooling issues, conditions which lower material ductility including chemistry, macrostructure, nonmetallics, microstructure, aging, and hydrogen embrittlement have also  been implicated in investigations of premature shear failure.

Typical shear failures in cold forming.
Typical shear failures in cold forming.

This post will focus on the central Bursts in the product of cold drawn steel, especially from the point of view of a shop making parts on automated equipment.
Ignoring the steel factors that may play a role in triggering the central bursts or chevrons, the role of tooling is usually considered to be the root cause, as replacement of dies typically eliminates the central bursting.
A bar which exhibited central bursting was saw cut lengthwise to show the internal ruptures.
Presence of a wear ring in the cold drawing die results in forces greater than stee;l's strength causing bursting in the core.
Presence of a wear ring in the cold drawing die results in forces greater than steel’s strength causing bursting in the core.

In very rare cases, while machining parts from a bar which exhibits internal bursts or chevrons,  the part will separate from the bar in process because of the prior existing rupture. The photo below shows such a part, note the fracture surface on the sides of the stepped down diameter on the part end shown in the photo below.
note prior existing rough fracture suface on stepped down diameter. This was prior existing central burst in the bar.
Note prior existing rough fracture surface on stepped down diameter. This is remnant of prior existing central burst in the bar.

The following two photos show how the internal bursts could have been manifested in the original bar as well as the parts.
This figure shows how the prior existing ruptures could have existed in the bar as they are seen on the parts off the automatic screw machine.
This figure shows how the prior existing ruptures could have existed in the bar as they are seen on the parts off the automatic screw machine.

It is difficult to see the defect on the threaded end of the nearly completed part, but this photo does attempt to show that.
on this part the central burst or chevron was encountered at the threaded end of the part.
On this part the central burst or chevron was encountered at the threaded end of the part.

In a later post we will discuss more factors relating to central bursting or chevron failures of cold drawn or cold extruded steel.

March 2014  |  Craftsman’s Cribsheet #19


SARA Title III Section 313 (part of the community right-to-know regulations) is the legal authority requiring manufacturers to inventory their use of “Toxic Chemicals” during the calendar year and report on “releases” of those chemicals if the reporting thresholds for that chemical are exceeded.




On Wednesday, February 26, approximately 200 students from five different schools settled into their seats at the Elkhorn Area High School auditorium to listen to four experts and one of their own peers address the career opportunities in the manufacturing industry.
preplus panel 2014Brian White, President of Waukesha Engine; Hanan Fishman, President of PartMaker, Inc, (a software development company); Mary Isbister, President of GenMet, Mequon (metal fabricator); Mike Reader, President of Precision Plus; and senior, Brad Pearson, (manufacturing apprentice) shared their insights on opportunities the world of manufacturing offers.
According to all four speakers, there is a huge deficit in the number of young people applying for jobs in manufacturing.
Currently, the industry is looking for people skilled in

  • Design Engineering,
  • Manufacturing Engineering,
  • Machinists,
  • Welders,
  • CNC Programmers,
  • Fabricators,
  • Machine Maintenance.

White mentioned that top machinists can earn up to $80,000 per year and that every manufacturing job generates four other jobs in other sectors such as health, IT, finance, etc.
Both White and Reader stressed to students to make certain that  they are

  • Preparing for a career, not just for college;
  • To make sure that their advanced education can help them secure a job,
  • And to prepare themselves for life-long learning.

They cited the fact that 70% of manufacturing jobs will require education beyond the high school diploma. Fishman backed up this fact by stating that what goes on in manufacturing today has a lot more to do with what goes on above the neck than below. Isbister reminded students that when hiring she looks for highly driven and ambitious job candidates; those who are committed to their jobs. She, along with the Reader, White, and Fishman stressed the importance of soft skills—reliability, communication skills, collaboration, self-motivation, positive attitude, and a willingness to learn.
Senior apprentice, Brad Pearson, spoke of his experience at Precision Plus and his appreciation for the opportunities he has been given by his mentor to learn all aspects of precision-turned component manufacturing
Our PMPA member shops, like Precision Plus,  are leading the charge to change the conversation about careers in manufacturing. What about you?

The PMPA Business Trends Report for February 2014 has just been released.

“The PMPA Business Trends Index for February 2014 declined to 118, down about 6%, consistent with seasonal pattern, and down just 4 points from February 2013, and down just 2 points from Average for calendar year 2013.”

Strong showing, for February - normal month to month variability.
Strong showing, for February – normal month to month variability.

The February 2014 PMPA Business Trends Report shows that our precision machining industry is maintaining strong sales (with expected monthly variability) and positive prospects going into calendar year 2014. Positive levels of hours worked, shipments, lead time and profitability are great omens for our industry in the quarter ahead. Our indicators show strong prospects for the balance of first quarter 2014.

All indications are positive for the precision machining industry for the next three months according to our survey and reporting.

What are YOU doing to take advantage of this positive sentiment?

Full report can be found on our website here

Injuries and illnesses should be recorded on only one employer’s injury and illness log. 29 CFR 1904.31(b)(4).

In most cases, the host employer is the one responsible for recording the injuries and illnesses of temporary workers.

According to OSHA Release, injuries to Temporary workers go on the host employers, not the Temp Agency's OSHA 300.
According to OSHA Release, injuries to Temporary workers go on the host employers’, not the Temp Agency’s OSHA 300.

OSHA has released a new educational bulletin for staffing agencies and host employers on current requirements for recording injuries and illnesses of temporary workers. The new Recordkeeping Bulletin (PDF*), which is part of OSHA’s Temporary Worker Initiative, addresses how to identify which employer is responsible for recording these work-related injuries and illnesses on the OSHA 300 log.
“The Recordkeeping Bulletin is the first of many materials we are releasing and helps clarify which employers are responsible for reporting injuries and illnesses,” said Dr. David Michaels, assistant secretary of labor for occupational safety and health. “These materials will provide valuable information for both host employers and staffing agencies on how they can work together to make sure their workers are properly trained and protected.”
The temporary worker Recordkeeping Bulletin helps businesses determine which employer is responsible for recording work-related injuries and illness on the OSHA 300 log. For more information, read the news release and visit OSHA’s temporary worker page.

Guest post by Jon Holbrook, PMPA member company North Easton Machine Company
The industry today is a buzz with the need for qualified workers. Low cost energy here in the United States combined with our ability to manufacture some of the highest quality products in the world are creating a bit of a “perfect storm”.
This perfect storm of economic conditions is leading to a second industrial revolution in this country.
We are seeing a resurgence of many of the industries that only a few years ago were leaving the US in droves.

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This is not my father’s (or his father’s ) Industrial Revolution!

  • My father sharpened his own tools by hand on a bench grinder by eye.
  • He made fine adjustments on production equipment with a wrench and the tap of a ballpeen hammer.
  • He used “Speedi Dri” to soak up the oil that no matter how hard he tried could not seem to be contained to the machine.

Today we have a high tech industrial revolution!

Digital and optical technologies are routine, as is the use of  trig and geometry every day.
Digital and optical technologies are routine, as is the use of trig and geometry every day.

Today’s machinist uses disposable insert tooling, punches offsets into a computer and programs equipment using CAD models and 3D simulation programs.
All this in an environment that is closer to a climate controlled laboratory than the shops of the last century.
@ Key questions:

  1. How do we train the worker of tomorrow to be successful in manufacturing in the 21st century?
  2. Equally important, how do we re-train today’s workers to meet the needs of manufacturing in America today?

While I am unable to offer a perfect solution to these issues,  our company, North Easton Machine,  is  doing our part to hire the long term unemployed and re-train them for a rewarding career in the field of manufacturing. Our company was just awarded  a “Hiring Incentive Training Grant.” We have confidence in the future of North American Manufacturing, just as my father did years ago. We are working diligently to make it happen.
What can you do to help meet the challenges that we as North American Manufacturers face today?

We were pleased to be quoted in the weekend edition of the Wall Street Journal in an article by Tim Aeppel titled Feds Try Redefining Manufacturing.
Our initial post on Factoryless Goods Producers was cited in the article.

It's like manufacturing, except without us actually making anything.
It’s like manufacturing, except without us actually making anything.

The issue is that federal agencies are trying to redefine “Manufacturing” to recognize “Factoryless Goods Producers” as Manufacturers.
If you don’t actually make something- how can you be considered a Manufacturer?
If you contract to have some company in a foreign country make your product, why should you be credited as manufacturer and why should US get balance of trade credit for being the manufacturer?
We think that definitions ought to be honest.
Manufacturing is actually making things. not designing them, ordering them, or buying them from another company.
We think that manufacturing ought to be credited where the making things actually happens. Apple designs and sells some really cool electronics- but the manufacturing is not done in the US.
Why would we want to let US companies claim to be manufacturers when in fact they don’t make the products in the first place, and often have them made overseas where the operations are not governed by US legal protections for labor rules,  safety, environment?
Deceiving consumers and the voters with fraudulent numbers is what this about. It’s not about reacting to globalization. It is about counting the hollowing out of US Manufacturing as actually manufacturing.

  • Yet no new employees are hired.
  • No new assembly lines or factories are built.
  • No new payroll taxes are being paid.

Manufacturing is about making things.
If you don’t actually make it, you aren’t a manufacturer.
Sorry if that offends you.
You may be a great designer. Broker. Outsourcer. Wholesaler, Distributor. Whatever.
But you aren’t a manufacturer unless you actually make things.
Read Tim Aeppel’s WSJ Story
What is manufacturing?
He’s Lying Photo Credit

Consensus expectations were for 149,000 new positions to be added in February 2014.
BLS announced that the economy added 175,000 jobs in February, up from 129,9000 in January.
Despite all the “Beat expectations” headlines we have seen on the news, we are not impressed.

175,000 new jobs added? We need 350,000 jobs EACH month. not impressed.
175,000 new jobs added? We need 350,000 jobs EACH month. NOT impressed.

Here’s why:

  • The U-3 Headline unemployment rate actually increased to 6.7 percent while the  Labor Participation Rate remained steady.
  • The U-6 unemployment rate (un- and under- employment) was 12.6 percent
  • One in six men between ages 25 and 54 are jobless

The economy needs to add about 350,000 jobs each month to push unemployment down to an acceptable level.”- Dr. Peter Morici, University of Maryland
Beat the consensus? That isn’t even critical thinking.
Good news- Our last PMPA Business Trends Report showed that “Ninety-eight percent (98%) of respondents expect employment prospects to increase or remain the same
in our industry over the next three months.”

Employee safety is a responsibility of all of us- employers, employees, and even the regulators. We are puzzled as to why OSHA fails to enforce its existing rules  on fixed ladders  to protect the safety of Communication Tower Workers and Wind Generator Workers.

1910.1053 (a)(19) could have saved these lives
1910.1053 (a)(19) could have saved these lives

Four communications tower related deaths have already occurred in 2014 according to OSHA, and more were killed in 2013 than in the prior two years combined.
“Every one of them was preventable“- OSHA March 4 Quick Takes.
“We are very concerned about this sharp rise,” said Assistant Secretary of Labor for Occupational Safety and Health Dr. David Michaels in a Feb. 25 message delivered to the National Association of Tower Erectors. “The fatality rate in this industry is extraordinarily high—tower workers are perhaps 25 times more likely to die on the job than the average American worker.”
OSHA Press Release
In my problem solving practice, I ask three questions to get our remediation steps off in the right direction:

  • Is there a process?
  • Is it being followed?
  • Is it effective?

Lets see how this can be used to frame the 21 needless tower deaths  in the U.S from 2011-2013.
Is there a process? (In the OSHA case at hand, this might better be framed as “Is there a regulation that addresses this?”)
Is there a regulation?
YES! OSHA has a fixed ladder regulation on the books: 1926.1053(a)(19)

    • 1926.1053(a)(19): Where the total length of a climb equals or exceeds 24 feet (7.3 m), fixed ladders shall be equipped with one of the following:
    •  1926.1053(a)(19)(i): Ladder safety devices; or
    • 1926.1053(a)(19)(ii): Self-retracting lifelines, and rest platforms at intervals not to exceed 150 feet (45.7 m); or
    • 1926.1053(a)(19)(iii): A cage or well, and multiple ladder sections, each ladder section not to exceed 50 feet (15.2 m) in length. Ladder sections shall be offset from adjacent sections, and landing platforms shall be provided at maximum intervals of 50 feet (15.2 m).

Is the regulation being followed?
Great question. How many of the tower deaths involved workers working on ladders that were in compliance with 1926.1053(a)(19) (i) (ii)(iii)?
Is this regulation effective?
Not if it isn’t being enforced.
Safety of the people and processes under our authority is our greatest responsibility.

  • Why aren’t the fixed ladders on Communications Towers and  Wind Generators held to the same fixed ladder safety requirements as those in general industry?
  • Why doesn’t OSHA use the existing rules on the books to stop the death toll in this industry?

This doesn’t require new technology. Just enforcement of the existing proven effective regulation already on the books.
When I testified at OSHA last month I was asked, “Why does industry always come in against rules? Why doesn’t industry come in and say that they are for rules?”
I think all of us are for OSHA using its existing enforcement authority to assure that everyone abides by the demonstrated effective ladder safety requirements of 1926.1053 (a)(19)(i-iii).
I am certain that there are 21 families out there who would ask why their loved one wasn’t entitled to the same fixed ladder protections as everyone else in general industry seems to be.
Why doesn’t OSHA enforce 1926.1053(a) (19) (i-iii)?