From electricity to steel, Trump becoming increasingly active in shaping economy

|     Steven Mufson & David J Lynch, The Washington Post     |

WASHINGTON – President Donald Trump is increasingly intervening in the economy, making decisions about corporate winners and losers in ways that Republicans for decades have insisted should be left to free markets – not the government.

The shift amounts to a major change in the GOP’s approach to the management of the economy, and promises to shape the success of everything from American agriculture and manufacturing to the companies that produce the nation’s electricity.

On Friday, citing national security, Trump ordered the Energy Department to compel power-grid operators to buy from ailing coal and nuclear plants that otherwise would be forced to shut down because of competition from cheaper sources.

The order came one day after the president imposed historic metals tariffs on some of the country’s strongest allies and trading partners. Now the Commerce Department is further picking winners and losers as it weighs thousands of requests from companies for waivers from the import taxes.

“It replaces the invisible hand with the government hand,” said Mary Lovely, a Syracuse University economist. “You’re replacing the market with government fiat.”

The president has chastised individual companies, second-guessed the US Postal Service’s business arrangement with Amazon and put pressure on Boeing and Lockheed about the cost of their products.

Emissions rise from the coal-fired Santee Cooper Cross Generating Station power plant in Pineville, SC, in March. Construction of new coal plants around the world fell for the second year in a row in 2017 as the world’s biggest polluters began to restrict new projects and explore other technologies. – PHOTOS: WP-BLOOM
A pile of coal sits outside a coal-fired power plant in Illinois

Trump’s order to Energy Secretary Rick Perry to stop the shutdown of coal and nuclear plants is the latest example of government intervention. The method will probably resemble a 41-page memo discussed this week by the National Security Council and at the Cabinet deputies-level meeting.

According to the memo, the Energy Department should invoke emergency authority under Cold War legislation – the Defence Production Act of 1950 and the Federal Power Act – to require regional electricity grids to purchase electric power from a list of plants chosen by the department. The memo said the criteria would be reliability, a quality that is the subject of hot debate.

The activist group Earthjustice issued a statement titled Trump Administration Resorts to Soviet-style Takeover of Private Energy Markets To Keep Dirty, Uneconomic Coal Plants Running. Staff attorney Kim Smaczniak said “no law gives the administration the power to set energy prices”.

The companies running regional electricity grids currently operate under a competitive bidding process that has won praise from environmental groups, utilities and regulators.

Those regulators, the independent Federal Energy Regulatory Commission, rejected a similar Energy Department rescue for coal and nuclear plants in January.

But utility industry executives now worry that Trump is insisting on forcing through a plan akin to the one already rejected by regulators because of political rather than economic concerns.

Industry experts expect that the Appalachian coal mining firm Murray Energy and the Ohio-based utility FirstEnergy – who first broached the idea of a rescue plan to Perry last year – will be near the top of the list of companies benefitting from Trump’s order.

Murray Chief Executive Robert Murray and FirstEnergy Chief Executive Charles Jones Sr have contributed heavily to Trump and GOP political activities.

Murray presented an emergency plan to Perry in March 2017, days after Perry became Energy Secretary. Murray and Jones met Trump together in August 2017 to appeal for aid to prevent a FirstEnergy subsidiary from filing for bankruptcy, which it did anyway in early April. FirstEnergy’s highly paid lobbyist Jeff Miller was Perry’s campaign manager, and Trump dined with him and a small number of other re-election strategists that week.

Of course, Trump isn’t the only one to tinker with market forces. President Barack Obama backed subsidies for wind and solar. And about 30 states have adopted laws mandating minimum purchases of renewable energy.

Obama also won passage of a health care reform package that created winners and losers. Republicans criticised the Affordable Care Act at the time for forcing people to make purchases through the individual mandate.

Now Trump’s economic assertiveness is beginning to draw a response from congressional Republicans. On Friday, in the wake of the announcement on steel tariffs, Sen. Patrick Toomey, R-Pa, said that he and Senator Mike Lee, R-Utah, would co-sponsor legislation “to rein in the executive branch’s power to impose unilateral tax increases like these”.

Toomey, who said the import taxes would hurt American workers and employers, tweeted: “Congress should assert its constitutional responsibility and lead on trade policy so Americans keep access to affordable goods and services, and the opportunity to sell our products abroad.”

The trade tariffs have alarmed some traditional Republican free-market enthusiasts.

“One of the reasons tariffs are not good policy in general is that it is a form of corporate welfare,” said Stephen Moore, an economist at the Heritage Foundation. “You’re saying consumers will have to pay more so this auto company or steel company or aluminium company stays in business. It’s the ultimate form of picking winners and losers.”

The implementation of the tariffs illustrates how Trump’s interventionist impulses are creating a cumbersome, bureaucratic process with Washington sitting in the middle.

In March, when the president announced plans to impose tariffs of 25 per cent on steel and 10 per cent on aluminium, he allowed companies to petition the Commerce Department for waivers.

The department said it would allow companies to escape the tariffs if they relied upon foreign suppliers for steel or aluminium products that were unavailable in the United States in “satisfactory quality or in a sufficient and reasonably available amount”.

While the department promised decisions within 90 days, the process has bogged down amid several thousand applications for relief. To obtain an exclusion, each steel user must fill out a lengthy Excel spreadsheet, detailing for government bureaucrats its product needs, including the chemical composition, dimensions, tensile strength, coating, magnetic permeability, and global and local ‘ductility’.

Separate forms must be filled out and submitted for each product. Applicants must identify potential or existing domestic suppliers and – if they don’t have any – explain to the government how they determined that no US producer could meet their needs.

NHK of America Suspension Components in Bowling Green, Kentucky, a maker of suspension coil springs for automakers including Ford and Toyota, told Commerce in an April 20 filing that there has been no domestic maker of the type of steel it requires since the closure of a Republic Steel plant in Lorain, Ohio, two years ago.

Even though – thanks to Trump’s tariffs – Republic Steel plans to restart that facility this summer, it will take “multiple years” to qualify it as a new supplier, Metal One America, NHK’s importer, said in a related filing.

In the exclusions process, Commerce officials also are tasked with refereeing arcane disputes between steel companies over what specific products are and are not available in the United States.

On May 23, Nucor – the largest domestic producer – called upon Commerce to reject an exclusion bid by London-based Evraz that would allow it to import steel slab from Russia. “Evraz is requesting an exemption for approximately 1.9 million metric tonnes of Russian slab to be rolled into hot-rolled coil, plate in coil, cut-to-length plate, and large diameter pipe in the United States based on claims of non-availability and national security concerns,” Nucor said in a 25-page document. “There is no merit to these claims.”

The process assumes that there are domestic sources of steel and aluminium that the Commerce Department knows about and that profit-oriented companies remain ignorant of, Lovely said. “If it was a better match to begin with, the market would have made that match,” Lovely said. WP-BLOOM