Business & Obamacare

Kill Economic Freedom; Kill Job Creation

What is behind the attempt by the National Labor Relations Board (NLRB) to enjoin Boeing from completing its Dreamliner production plant in South Carolina, a year and half after the company announced its decision to build there? The acting general counsel’s complaint that Boeing transferred a second 787 Dreamliner production line of three planes per month from Washington to a non-union site in North Charleston to punish workers who had gone on strike isn’t supported by the facts. The company has a backorder of 850 aircraft. Boeing employs 1,000 workers working on the first line in Everett, Wash., and no one will be laid off. The 1,000 new jobs that are anticipated in South Carolina are being put at risk because in an extraordinary regulatory overreach the NLRB insists that all such production be restricted to the state of Washington.

Is it any wonder that the company has had enough of work stoppages that average one every three years, resulting in a million hours of lost labor for 27,000 employees in that state? Boeing selected a second production line in a state where the costs are lower and the business environment is stable—a fact confirmed by South Carolina’s ranking as the eighth best state in which to do business in Chief Executive’s annual survey of Best/ Worst States for Business (May-June 2011). Washington State ranked 34, down from 30 in last year’s survey.

Boeing has facilities in 34 states around the country, half of them in right-to-work states. “While this happened in South Carolina, it is also terrible for our country if the government can dictate where American companies can and cannot create jobs,” said South Carolina governor Nikki Haley. “It’s an assault on our economy and all of us.” And perversely such will be the unintended consequence of this regulatory bullying. But surely both the NLRB and President Obama, who refuses to rein the agency in, know that once Boeing joins the legal battle it will prevail.

The real point of this maneuver is to intimidate other companies, those with fewer lawyers and lobbyists and pockets not as deep as Boeing’s, to do organized labor’s bidding. In true Chicago-style political persuasion, the administration in effect is saying, “Nice company ya got here. Too bad if something should happen to it.” Trouble is, the effect of Chicago-style bare-knuckle politics in company boardrooms will be quite different than what the administration intends. Ironically, if Boeing had expanded its production in China, Mexico or Canada none of this would have happened. If the forces of aggravated lawlessness prevails, the lesson will not be lost on others.

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Growth Anemic

(Reuters) - The economy stumbled badly in the first half of 2011 and came dangerously close to contracting in the January-March period, raising the risk of a recession if a standoff over the nation's debt does not end quickly.

Output increased at a 1.3 percent annual pace in the second quarter as consumer spending barely rose, the Commerce Department said on Friday. In the first three months of the year, the economy advanced just 0.4 percent, a sharp downward revision from the previously reported 1.9 percent gain.

"The economy essentially came to a grinding halt in the first half of this year," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "We did get side-swiped by some temporary factors which are fading, but it raises some concerns about the sustainability the recovery."

The weaker-than-expected second-quarter reading and downward revisions extending into last year underscored the frail state of the recovery, which economists said could fall off the rails if lawmakers do not raise the nation's $14.3 trillion borrowing limit and avoid a government default.

Consumer spending, which accounts for about 70 percent of U.S. economic activity, decelerated sharply in the second quarter, advancing at only a 0.1 percent rate -- the weakest since the recession ended two years ago.

Stocks on Wall Street fell on the data and the debt impasse on Friday, to record their worst week in a year. Prices for government debt rallied, while the dollar fell broadly.


The Obama administration has said it will run out of borrowing authority on Tuesday and could soon run out of cash, but talks aimed at raising the debt ceiling remain deadlocked.

"This should wake up those in Washington who still have their thinking caps on," said Joel Naroff of Naroff Economic Advisors in Holland, Pennsylvania. "There is no margin for error and a default that lasted any length of time could push us back into recession."

But any debt agreement would include budget cuts that could also weigh on growth. High Frequency Economics said in a note on Thursday that a deal to trim the U.S. deficit would likely shave government spending by about $70 billion, or one-half of a percentage point of GDP, in its first year.

Growth in the first half of 2011 was held back by a combination of bad weather, expensive gasoline and supply chain disruptions after the earthquake disaster in Japan.

With economic activity yet to show signs of perking up, even with gasoline prices off their highs and the Japan supply constraints easing, there is concern that some of the weakness might be fundamental and linger for a while.

While economists still expect growth to accelerate to about a 3 percent pace for the remainder of this year and next year, the risks are stacked to the downside.

Annual revisions to GDP data that take into account newly available source material, including tax returns, showed the economy lost steam in late 2010, before it ran into the temporary headwinds. Fourth-quarter growth was revised to a 2.3 percent rate from 3.1 percent.

The revisions also showed the 2007-2009 recession was much more severe than prior measures had found.

The downgrades help to explain why the economy has only regained a fraction of the more than 8 million jobs lost during the downturn.

Economists said the current bout of weakness reinforced views that the Federal Reserve will maintain its accommodative monetary policy stance for a while, but few think the central bank will spring to the economy's rescue if it can avoid it.

"In the immediate environment, with so much at stake on fiscal policy, I think the Fed wants to remain quietly on the sidelines, sorting out events and how the data plays out in the second half of the year," said Robert DiClemente, chief economist at Citigroup in New York.


The U.S. central bank has held interest rates close to zero since December 2008, and it has bought $2.3 trillion in bonds in an effort to further spur the economy. Fed Chairman Ben Bernanke has opened the door to a further easing of monetary policy, but officials have said they are hesitant to act.

"It's a very high bar," Atlanta Federal Reserve Bank President Dennis Lockhart told CNBC on Friday.

The March earthquake in Japan severely disrupted U.S. auto output, which subtracted 0.12 percentage point from GDP growth in the second quarter.

The decline combined with high gasoline prices to weigh on retail sales as consumers were unable to find the vehicle models they wanted.

Future spending strength will depend on employment and confidence. So far, the immediate outlook is not promising.

The Thomson Reuters/University of Michigan's index of consumer sentiment fell to 63.7 in July from 71.5 in June, a separate report showed.

But economists are cautiously optimistic the jobs market will have started to improve somewhat in July after faltering badly in the last two months, although U.S. companies are still trying to hold the line on hiring to save costs.

Merck & Co said on Friday that it plans to slash thousands of jobs by late 2015 to wring out savings of up to $1.5 billion a year.

Nonfarm jobs likely rose 90,000 in July, according to a Reuters survey, after June's paltry 18,000 gain.

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The Top Five Obama Regulations that American Businesses Hate Most

Top GOP oversight official Rep. Darrell Issa asked 150 industry groups which of President Obama’s regulations they think are impeding economic growth.

The results are in: On Monday, Issa released 1,947 pages of almost unreadable letters from a slew of trad associations specifying complaints on government regulations that reach almost every part of American industry.

The letters are boring because they tackle highly technical subjects. For instance, the Kitchen Cabinet Manufacturers Association warned that an update to the Environmental Protection Agency’s Integrated Risk Information System (IRIS) on the chemical formaldehyde could negatively impact economic growth.

But those letters are important because millions – sometimes billions – of dollars are at stake to businesses that drive the American economy.

In the case of the formaldehyde IRIS update, the issue is a study on the cancer risks of formaldehyde, a chemical used in $145 billion worth of products in the U.S. and Canada each year, according to an industry group defending the chemical.

From more than 100 different new regulations either proposed or finalized by the Obama administration, these are the five business groups hate the most, based on the number of separate organizations that wrote Issa to recommend he look into them:

1. EPA climate change regulations

Though cap and trade was defeated in Congress, the EPA is sprinting to finalize its own regulations that would mandate reduced carbon dioxide and other “greenhouse gasses” scientists think are warming the planet.

Besides whether the EPA should be addressing global warming without a congressional mandate, the mechanism Obama plans to use is particularly burdensome. Environmentalists originally used the EPA-only approach as a threat to spur congressional action, thinking the doomsday scenario of that plan going forward would spur Republicans and industry groups to come to the negotiating table. That didn’t work, and now the regulations are going forward.

Thirty separate industry groups wrote Issa about the EPA’s “tailoring rule,” a legally questionable approach to limit the regulations to only major factories and industrial facilities. If the tailoring rule falls in court, six million new facilities would be subject to EPA regulations for the first time, including more than 3 million single-family homes. That would be regulatory Armageddon, even according to the EPA.

Twenty-three groups wrote about the regulations on the big industrial facilities to control for carbon dioxide emissions. Groups warn the regulations will be costly and unworkable.

2. OSHA’s “occupational noise” regulation

The Occupational Safety and Health Administration proposed a new regulation in October that would have put strict new regulations on the volume of noise experienced by workers on the job.

But the outcry over the cost and feasibility of the new regulations was so great the agency abandoned the regulation on Jan. 19, promising to start over after consulting with key members of Congress including Sen. Joe Lieberman, Connecticut Independent.

Still, industry groups are wary, and 29 of them wrote Issa about where the Obama administration is heading on this issue. The groups concerned about the matter include a who’s who of manufacturing sectors such as the American Iron and Steel Institute and the National Tooling and Machining Association.

3. EPA’s new restrictions on ozone pollution

Like the climate change regulations, this regulation is another rule on air pollution under the Clean Air Act.

EPA Administrator Lisa Jackson backed off the agency’s plans to more strictly regulate ozone pollution shortly after the midterm election “shellacking,” asking for more research on the issue in December.

States are in charge of implementing the EPA-set standards under the Clean Air Act, and a stricter new limit could put many of them out of “attainment” with the standards. In the worst case scenario, states could be forced to ban new construction and could lose federal money for highway construction.

4. Implementation of the Dodd-Frank financial reform bill

Industry groups raised concerns about 20 separate provisions in the Dodd-Frank regulation that the Obama administration is currently implementing.

Like most large bills, Dodd-Frank grants federal agencies broad discretion on how to implement the law, meaning the battle over what it means is far from over.

One example of the provisions in Dodd-Frank is new rules governing debit card “interchange fees” charged by credit card companies to merchants for processing purchases made in stores with the cards. Another example is new disclosure rules for executive pay.

5. EPA’s new training requirements for renovation projects

Lead-based paint, used for decades in homes and on buildings, is still found in many older buildings. Since lead is hazardous, especially to children, renovation projects that disturb lead-based paint can lead to the danger of inhaling lead dust.

To address this potential health issue, the EPA has required extensive training for workers before they complete renovation projects on any buildings built before 1978.

Construction and other workers subject to the new rules as of last April are concerned about the extent of the training and fearful of the penalty for non-compliance: up to a $37,500 per day fine.

Twenty industry groups expressed their concern about the regulation to Issa.

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Government Regulation


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