Irrational control

April 23, 2012
Manufacturers are not being helped by federal and state regulators whose policies and agendas are restricting available options for investment and development.

When I first started reporting about manufacturing there was a standard critique of corporations and their managers; according to analysts and columnists, companies that did not invest or expand, or hire more workers, were failing their stakeholders by neglecting to make long-term plans. Elected officials and regulators were inclined to take this criticism a step further, alleging that manufactures who would not invest were too focused on quarterly earnings at the risk of long-term viability.

In the past year or so, the charge against businesses has become more direct: their profits are evidence of greed, and indifference to general prosperity.

I suppose there were, or are, examples to demonstrate those allegations, but it's a criticism that overlooks facts: domestic steelmakers, for example, have invested billions of dollars in the past two decades to reduce production costs, energy-intensity (-27% per ton of steel produced since 1990), and CO2 emissions (-33% per ton of steel shipped.) Those numbers were referenced recently by U.S. Steel Corp. chairman and CEO John P. Surma, who assayed the strength and potential of his industry, and of manufacturers generally: domestic manufacturing is rebounding, he noted, and contributing significantly to economic growth by way of purchases of capital equipment, energy, raw materials, and consumable products.

An even more timely example of astute investment is Alcoa, whose $100-million redesign and reconstruction of a strategically important forging press demonstrates a commitment not just to its own long-term success - but to the success and progress of numerous defense and aerospace manufacturers, too, and thereby of the U.S. at large.

In their efforts to contribute to long-term growth, manufacturers are not being helped by federal and state regulators whose policies and agendas are restricting available options for investment and development. Surma listed "burdensome" federal and state corporate tax rates, uncertain energy supplies, inadequate infrastructure investments, and increasing regulatory burdens as inhibitors to the economic growth that manufactures have managed to kindle over the past year or so.

Energy presents a particularly irksome problem for manufactures, because while U.S. EPA works aggressively to contain carbon emissions beyond any level of feasible or rational control, it's also inhibiting economic growth by slowing or blocking development of domestic oil-and-gas reserves. The opportunities for economic expansion based on domestic energy sources are vast, but mostly unrealized because of official restrictions.

There is real irony in this situation because federal and state budgets are increasing at a rate that confounds simple explanation. Public debt levels cannot be adequately explained, so they cannot be discussed with any degree of responsibility - which seems to be taken by public officials as a license not to act responsibly about the debts we are incurring. Reproaching businesses for not increasing spending levels while recklessly running public deficits is, to say the least, presumptuous.

Perhaps such criticisms are public officials' way of deflecting attention from their own poor job performance. More likely, it's just a thorough misunderstanding of their roles, which is administration, not management, finance, stimulus, or any of the various economic development roles contrived to increase government influence.

The relationship between businesses (especially manufacturers) and government is, at best, a tense one. It should not be a comfortable arrangement: that inevitably leads to fraud and scandal. But it should be one based on an honest recognition of each other's proper authority. Without that, manufacturers' growing concerns over regulation, taxation, etc., can only increase.

Robert E. Brooks | Editor