July 28, 2011

BIG OIL MAKES BIG MONEY IN 2Q

Today in Manufacturing
Industry giants Exxon Mobil and Royal Dutch Shell on Thursday reported a surge in earnings, helped by higher prices for oil, gasoline and other fuels ... continue

MANUFACTURERS STEP UP PRESSURE ON CONGRESS AND ADMINISTRATION FOR DEBT LIMIT DEAL.

NAM Capital Briefing
Despite a looming August 2 deadline to increase the nation's borrowing authority, at press time Washington policymakers had yet to reach agreement on a plan to raise the federal debt ceiling. Manufacturers are extremely concerned about the impact on manufacturing, our employees and the overall U.S. economy if the government fails to act in a timely fashion to raise the federal debt limit and reduce the federal deficit. The NAM and members of the business community sent a letter to the House on Wednesday, July 27 urging support for Speaker John Boehner's plan to raise the debt limit and avoid default. In a statement, NAM President and CEO Jay Timmons renewed the call for quick action on the debt ceiling and warned of the negative effects of default. "During the current uncertain economic times, Americans desperately need jobs. It is unreasonable for our government to stand by idly and allow interest rates to increase for families and businesses. Doing nothing also will result in a decrease in foreign investments in the United States and a general hit on the economy," he said. Because of the importance of this issue to manufacturers, their workers and the broader U.S. economy, the NAM urges manufacturers to contact Congress and press for quick action to raise the debt limit. Click here for more information and to e-mail your members of Congress.


HOUSE TO CONSIDER LEGISLATION TO REIN IN NLRB'S AGGRESSIVE AGENDA

NAM Capital Briefing
On Tuesday, July 26, the NAM issued a statement and key vote letter urging the House of Representatives to pass the Protecting Jobs from Government Interference Act (H.R. 2587). The legislation would help rein in the National Labor Relations Board (NLRB) by prohibiting the NLRB from ordering job creators to close, relocate, or transfer facilities. In a recent NAM poll of 8,700 manufacturers, 69 percent of the 1,000-plus respondents said that the NLRB's actions will negatively affect their ability to create jobs. The NLRB's actions are causing uncertainty among manufacturers who want to invest in America and hire workers in the U.S. The House is expected to vote on H.R. 2587 as early as Friday, July 29. For more information, click here.

NAM URGES SENATE TO PASS HOUSE-APPROVED MEASURE TO SPEED DEVELOPMENT OF OIL SANDS PIPELINE

NAM Capital Briefing
On Tuesday, July 26, the House of Representatives passed H.R. 1938, the North American-Made Energy Security Act, by a bipartisan 279-147 vote. The bill aims to speed up the Administration's review of the proposed Keystone XL Pipeline, which would move energy resources from Alberta, Canada down to the Gulf Coast. TransCanada originally applied for the permit in 2008 and after nearly three years of extensive studies and comments, the Environmental Protection Agency (EPA) has recommended more studies and reviews. In response to the recommendation, H.R. 1938 would require the Administration to decide whether to authorize the pipeline or not by November 1, 2011. The authorization of the Keystone XL Pipeline would generate jobs and revenue for the United States and reduce our dependence on foreign oil. The NAM fully supports the Keystone XL Pipeline project as it will benefit U.S. manufacturers by creating jobs and contract opportunities. Click here for the NAM's key vote letter in support of H.R. 1938 and here for the NAM's statement to the Senate.

APPLICATIONS FOR UNEMPLOYMENT AID DROP

Today in Manufacturing
The number of people seeking unemployment benefits dropped to lowest level since early April, a sign the job market may be healing after a recent slump ... continue

FEATURE: FROM SUSTAINABILITY TO SUCCESS

Today in Manufacturing
Next decade will bring dramatically increased focus on resource productivity and emergence of companies with capabilities to efficiently manage their resources ... continue


DURABLE GOODS ORDERS FELL 2.1 PERCENT IN JUNE

AP
"Orders for durable goods fell 2.1 percent last month, with the weakness led by a big drop in orders for commercial aircraft," according to a report from the Department of Commerce. "Manufacturing has been the stellar performer in the two-year-old recovery. But activity slowed in the spring, reflecting in part supply disruptions following the March earthquake and tsunami in Japan." Also, manufacturing was "hurt by the hit the overall economy took from higher energy prices which dampened consumer demand."


RESTORING THE IDEAL OF LIMITED FEDERAL GOVERNMENT

Richard S. Davis
The debt/deficit/default debacle dominates everything right now. It also tells us something about the current condition of federal-state relations. The states -- once celebrated as "laboratories of democracy" by defenders of American federalism -- now resemble insecure dependents of a faithless uncle. Billions of dollars of federal aid greased the states' slide from sovereign to beholden. The recession accelerated the descent, leaving states unable to shake free without enduring and inflicting unacceptable hardship on their citizens.

Forget "too big to fail." The federal government has become too big to succeed and too involved in activities properly handled by the states. Consequently, when the feds confront deficit reduction, the states fear they'll be among the first dominos to topple.

A report released last December by the National Association of State Budget Officers (NASBO) documents federal dominance. In 2008, before the stimulus act, federal funds accounted for about 26 percent of total state spending. With the stimulus, that share rose to nearly 35 percent in 2010, returning to pre-stimulus levels next year, long before state revenues recover. Remarkably and unreliably, a federal government borrowing more than 40 percent of the money it spends will pay for more than one-quarter of state spending.

Dependence on federal aid increases state budget risk. Most federal funding for states -- 43 percent according to NASBO -- is tied to Medicaid, the Sixties-era state-federal partnership providing health care for low income people. The feds pumped up Medicaid support in the stimulus package, but hamstrung states with "maintenance of effort" requirements that require elevated spending until 2014.

Medicaid cost control necessarily emerges as a central factor in deficit reduction talks. The prospect generates bipartisan apprehension from the nation's governors. Gov. Chris Gregoire, as outgoing chair of the National Governors Association, wrote the president and congressional leaders urging them "not to continue to mandate Medicaid program requirements upon states without … adequate federal funding or federal law flexibility..."

As the letter suggests, the federal government is always the senior partner in any joint venture. Following the inevitable path of all entitlements, Medicaid grew over the years with steady increases in benefits and expanded eligibility, some driven by federal requirement and others tied to the lure of matching funds. According to the Congressional Budget Office, in 1975 Medicaid (including state spending) amounted to less than 1 percent of the nation's economy. By 2008 it claimed an astonishing 2.5 percent.

Medicaid so ensnares states in the federal web that 26 attorneys general, including Washington Attorney General Rob McKenna, have made it a factor in their lawsuit challenging the 2010 federal health care law. Saying provisions of the act that add to states' Medicaid costs represent "an unprecedented encroachment" on state sovereignty, the states note that they cannot easily back away from the program:"

Plaintiffs cannot effectively withdraw … because Medicaid has, over the more than four decades of its existence, become customary and necessary for citizens throughout the United States … and because individual enrollment in …[these] programs, which presently cover tens of millions of residents, can only be accomplished by their continued participation in Medicaid."

Last month, in federal appeals court in Atlanta, Judge Joel Dubina called the states' argument "pretty powerful."

The lawyer representing the federal government countered, "They knew the terms of the deal going in."

If only.

Regardless of how the U.S. Supreme Court resolves the matter, the relentless expansion of the federal government, under Republicans and Democrats alike, cannot continue. Trillions of dollars in deficit spending must be stemmed. State and local governments will not be spared. In addition to the Medicaid expansion, Congress and presidents have steadily increased federal funding for education, unemployment, transportation and more -- all with policy strings attached.

The strings will not be sliced swiftly. More likely, they'll unravel as costs and consequences become clear. Trends that cannot be sustained eventually end. So it is with the relentless, debt-financed growth in federal spending.

Ideally, severing the strings binding them so tightly to national policies will stimulate more innovation and accountability in the states. The dysfunction on display this week in D.C. confirms the wisdom of limited federal government. With the eager complicity of state officials, those limits have been overstepped. Now, it's time to restore balance.

Richard S. Davis, president of the Washington Research Council, writes on public policy, economics and politics. His email address is rsdavis@simeonpartners.com.

© 2011 The Daily Herald Co., Everett, WA