- The Washington Times - Friday, January 9, 2009

ANALYSIS/OPINION:

The U.S. steel industry is currently lobbying to get President-elect Barack Obama’s support of a new public works program, costing about $1 trillion, as part of his economic plan to revive the faltering economy. This public works program would require large amounts of steel to be used for upgrading and repairing roads, public schools, electric power grids, hospitals, bridges and water treatment plants. Of course, the American steel industry requires that only U.S. steel companies would supply the steel for the project, also named the “Buy America plan.” In other words, the program would help bail out the American steel industry — an industry hit due to competition from foreign Chinese steel, poor business, frozen credit, a lack of construction projects and the auto industry’s decline in sales.

American steel companies will benefit in light of the International Trade Commission’s decision to allow tariffs on Chinese steel imports. (Foreign competition accounts for 30 percent of steel in the U.S.) Chinese competition has resulted in the loss of 500 U.S. Steel pipe worker jobs as the Chinese have been better at producing steel at lower costs for the U.S. In fact, the benchmark product, a hot-rolled U.S. steel sheet used for most steel products, dropped 17 percent per ton in December. The steel industry in general should receive a boost now that the International Trade Commission has made it possible for penalty tariffs to be placed on their biggest source of competition — Chinese steel imports. U.S. steelmakers have announced a number of job cuts and shutdowns of plants in the past two months due to the lack of demand for their product. However, the U.S. steel industry has bitten the bullet and revamped their plants, so they don’t suffer from the same lack of technology and wasteful production that U.S. automakers allowed. Also, according to Brian Johnson Executive Director of the Alliance for Worker Freedom, “U.S. steel has done better than the auto industry because they haven’t caved on pension demands like the auto industry to unions.”

Mr. Obama has not made a decision yet on whether or not the public works project will be funded. Shares of Nucor and U.S. Steel Corp. have actually risen 33 percent since Dec. 5 based on the expectation that the President-elect would roll out a plan that would benefit them. An Obama spokesperson stated that “we are reviewing the ‘Buy-American’ proposal, and we are committed to a plan that will save or create three million jobs, including jobs in manufacturing.”

Still, U.S. steelmakers have no more of a right to a bailout, and maybe even less, because the industry should be able to cope better with the current economy due to changes in their production style and recent events. There are no good reasons for Mr. Obama to engage in more infrastructure spending in his new administration, which is essentially a bailout for yet another industry instead of tax cuts for the harried individual taxpayer.

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