DV Journal

The Biden administration has proven to be the gang that can’t shoot straight.

The president’s signature economic policy has led to a perfect storm of spending, debt and inflation. Other misguided policies have undermined U.S. energy security, created immigration chaos and a more porous border, and weakened our standing abroad while emboldening our enemies. 

Meanwhile, one of the few areas of bipartisan consensus, supporting and repatriating American manufacturing, has been undermined by regulators within the administration.

Although the White House touts the massive sums of money allocated to support innovation and manufacturing in major legislation such as the Inflation Reduction Act and the CHIPS Act, its Environmental Protection Agency has simultaneously proven itself to be an obstacle to such efforts. The experience of the steel industry, in particular, exemplifies the contradiction that is being perpetrated.

While a series of provisions in these bills requires domestically produced steel to be used for the public projects they fund and proposed changes to Section 232 of the Trade Expansion Act would tighten trade regulations and impose tariffs on imported foreign steel products, the EPA’s recent decisions have hindered steel makers’ ability to supply domestically produced steel for industry and infrastructure.

In June, the agency proposed rules for steel mills that require them to cut emissions by 79 tons per year, a 15 percent reduction. While there is nothing wrong with commonsense and cost-effective steps to improve the air quality of domestic manufacturing operations, such drastic requirements are penny-wise and pound-foolish, and they will hurt companies’ ability to supply other domestic industries with much-needed steel.

For example, in the face of import restrictions and a steady growth in consumer demand, auto manufacturers have increasingly turned to domestically manufactured steel to keep their assembly lines moving. The story is the same for countless other consumer products. Additional operating costs and overbearing regulations for steel companies would cause a trickle-down effect along the supply chain and raise prices. With the average price of a new automobile skyrocketing to $48,000 and a slew of other pressures confronting families, regulators should be doing what they can to keep prices in check.

Not only are these actions economically damaging but they may also run against the law. American manufacturers, and the steel industry in particular, have alleged that the EPA is failing to act with scientific backing and that the policies it is pushing exceed the authority granted to the agency by the Clean Air Act.

Specifically, the EPA’s “Good Neighbor Plan” and its “test and set” provisions have been criticized in a recent court filing as “legally, technically, factually, and procedurally flawed.” An “illegal work-around of requiring owners and operators to install controls,” the provisions were instituted only after the initial emissions limits for steel furnaces proposed as part of the Good Neighbor Plan had no legal basis.

Since the EPA has not specified what emissions levels would constitute a violation of this rule after their first set of guidelines were scrapped, these new “test and set” policies would make compliance subjective to the whims of regulators. Not only would these rules force manufacturers to spend millions to install compliance equipment at facilities that may or may not violate emissions standards, but they would also allow the EPA to set specific limits after the fact without testing for the infractions themselves.

In essence, this would create a new regulatory regime where steel mills would have no way to know whether they are operating within the law and where companies would be faced with the threat of fines and violations until such time as the EPA decides to set a new round of arbitrary and capricious emissions standards.

It is unfair and, frankly, a little crazy to ask any business to operate under such an inconsistent and inequitable patchwork of regulations. If the administration wants to institute an actual good neighbor policy and bolster its “Buy American” efforts, it will instead find ways to better partner with manufacturers and temper such hasty actions against manufacturers more generally. 

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In 1856, when McWane Ductile produced its first iron pipe in Phillipsburg, N.J. – just across the river from Easton, Pa. – Franklin Pierce was president, and the transcontinental railroad was still a dozen years away.

It was the beginning of an economic revolution for the region. As one of Phillipsburg’s first major employers, the McWane foundry was crucial in attracting the rail infrastructure that allowed other, later arrivals to thrive. The industrial powerhouse Bethlehem Steel was founded just across the river in 1899, and industrial drill manufacturer Ingersoll Rand opened a Phillipsburg factory in 1903.

More than a century later, another economic evolution has occurred, shifting to more service industry jobs and away from manufacturing. Ingersoll Rand left for Ireland in 2000, and Bethlehem Steel went bankrupt in 2001.

Some argue the days when a manufacturing company could play a central role in a community’s economy are over.

But McWane has remained, continuing to serve as an economic anchor for Phillipsburg and a model for a different vision of job creation.

Nearly 170 years after its founding, McWane continues to offer local workers that level of historic security. “As one of the area’s largest employers and economic contributors, we are committed to finding ways to help young people here build a bright future,” Keith Mallet, the general manager of the McWane Ductile’s Phillipsburg plant, told DVJournal. To that end, the company engages in educational arrangements with local schools.

McWane Ductile has established “partnerships with the Warren County Technical School as well as Phillipsburg High School for nearly a decade,” Mallet said.

Phillipsburg High School said the company awards scholarships to its students entering into higher education, including trade schools.

“They usually award it to at least three students, sometimes more,” said an official in the school’s guidance office. The scholarships are well-known and sought-after by the students, she said.

Laura Clark, a spokeswoman for parent company McWane Inc.,  said, “Manufacturing and skilled trade sectors are critical industries to our economy.”

“At McWane, we know the challenges of the 21st century will require companies like us to invest in the next generation of technical and trades workforce,” she said. “That’s why we started our skilled trades scholarship program in 2021, to open the door for people looking to forge careers in industries like ours.

“And that vision of opportunity permeates through all of our businesses.”

Sean McGeough, an engineering instructor at Warren County Technical School, has previously been part of the school’s partnership with McWane. “They are a great company to work with,” he told DVJournal. “They were very supportive of the Engineering students at WCTS. My students did a research presentation about their company, testing and evaluating process, and one of their cast iron manufacturing processes. The partnership was beneficial to our students.”

In addition to its New Jersey plant, the company has locations in Utah and Ohio. The ductile iron it produces is the metal standard for potable water infrastructure due to its high damage tolerance and its fatigue resistance. The company also produces gaskets, coatings, and other industrial materials.

The company’s location, less than half a mile from the Delaware River, is not insignificant. For more than 400 years, the river has been a hub for commerce and transportation in the Mid-Atlantic. Situated strategically at the heart of colonial America, it nurtured Philadelphia and Trenton and gave rise to a broad network of canals and railroads along which towns flourished, among them Phillipsburg.

The town of about 15,000 rapidly grew from a small agricultural village to a regional manufacturing hub in the mid-19th century. That was largely due to what is now McWane Ductile, whose foundry there produced its first pipe five years before the town was formally incorporated in 1861.

Small businesses like McWane were critical to forming and cementing the American middle class. Long regarded as a defining feature of U.S. economic and social life, the middle class from the late 18th century onward offered workers a precious middle ground between the poverty to which most of humanity was accustomed and the riches that, for nearly all of history, had been unattainable.

The early U.S.’s friendliness to industry and business allowed a thriving manufacturing and production economy to flourish, especially in the Northeast, throughout the 19th century. For many generations, and as late as the 1960s, a manufacturing job was seen as the key to stable, prosperous employment.

In that vein, Mallet said the company is focused on ensuring that the rising generation of American workers and laborers is set up for success.

“We are proud to be a part of a culture that prioritizes investments that give kids new opportunities and ensures they have the training and education needed to succeed,” he said.

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The arrival of COVID-19 brought to light several underlying issues in America. But perhaps the issue that has been most exposed is our overreliance on products made outside of our borders.

International disruptions such as pandemics, natural disasters, and political upheaval significantly impact our nation’s supply chain of goods. The result of that disruption is stunted economic growth and increased prices for American consumers.

During my travels around Pennsylvania, it has been hard to ignore the abandoned factories and hallowed out towns throughout our commonwealth. Once vibrant communities were replaced with vacant lots and blight. Parents had to say goodbye to their children as they moved far away to find any kind of stable employment. Drugs usage and welfare replaced prosperity and family building.

It wasn’t always this way. Pennsylvania towns used to be a “keystone” to America’s ability to make products desired around the world. Our iron and steel once built the Golden Gate Bridge, the Hoover Dam, and the Empire State Building.

In 1999, manufacturing jobs accounted for 865,000 jobs in Pennsylvania. By 2019, that figure shrunk to 575,000.

The transition of jobs from the manufacturing sector to the service sector had a disproportional effect on men without a college degree in our commonwealth. Their lack of a degree and unique specific skillset made it difficult to find other good paying and fulfilling jobs.

Fatal foreign policy mistakes by the federal government and the failure of Pennsylvania’s state leaders to replicate pro-business polices implemented in other states were significant factors in the downfall of our manufacturing sector.

Many economic analysists point to the early 2000s as a consequential period that accelerated the decline.

Twenty years ago, the World Trade Organization made the fateful decision to admit the People’s Republic of China as member nation. The same WTO that oversees the global system of trade rules and regulations. China’s entry also granted them permanent “most favored nation” status in trade with the United States. Prior to its WTO entry, that status had to be approved on an annual basis by the U.S. Congress.

The monumental economic and political effects emanating from China’s entry into the WTO continue to reverberate today.

It opened the floodgates for foreign trade and investment into China’s markets. Most significantly, it led to China’s domination in the manufactured goods export market. China’s share of global manufacturing exports went from 4 percent in 2000 to 15 percent in 2020.

China’s advantage of an overabundant labor force, lax labor laws, and large government subsidies give them an unfair advantage when it comes to attracting companies to manufacture goods on their shores.

America’s trade deficit with China grew by over 400 percent from 2001-2018. According to a study by the Economic Policy Institute, this amounted to the loss of 3.7 million overall American jobs from 2001-2018.

While international agreements, automation, and changes in technology were factors in the decline of manufacturing in Pennsylvania, our state leaders certainly didn’t do any favors to keep the jobs we had or attract new investment.

While the manufacturing sector largely contracted in northeast states like Pennsylvania, other states adapted their business policies and found ways to attract new investment opportunities.

Ball State University’s Center for Business and Economic research conducts a comprehensive nationwide manufacturing industry scorecard every year dating back to 2009. The scorecard examines factors such as tax climate, regulatory environment, and human capital.

Every year, Pennsylvania has received a grade of “C” or worse when it comes to manufacturing health. Conversely, states like Michigan, Kentucky, and South Carolina receive an “A”.

Michigan, Kentucky, and South Carolina all saw an annual average manufacturing growth rate of 2 percent or more since 2009, according to the U.S Bureau of Economic Analysis. Meanwhile, Pennsylvania’s growth was anemic at less than 1 percent.

How do we make Pennsylvania more attractive to prospective manufacturers? Let’s start with much needed regulatory reform.

Pennsylvania was rated at No. 35 in the nation for regulatory environment, according to Forbes Best Business Ratings.  With over 153,000 regulations on the books, we have one of the most burdensome regulatory codes in the country. It would take an individual about 713 hours—or just under 18 weeks—to read the entire Pennsylvania Code.

Review, modification, and rescindment of onerous regulations can be the genesis of a manufacturing resurgence. There is a cost to every regulation. That cost is exacerbated when the regulation is no longer needed. Regulations need to be reviewed on a regular basis to determine if they continue to be needed, require modification, or require termination. By creating a consistent review schedule, the General Assembly can determine whether a regulation should be continued, modified, or terminated.

Additionally, creating a “2 for 1” model (removing 2 regulations for any new regulation) is something we should adopt here in Pennsylvania.

We also must improve our permitting process. Members of the General Assembly often hear from prospective employers who ask, why does it take so long to get a permit? Where does my permit stand? What is the holdup?

We saw this issue in practice when U.S. Steel decided to pull out of a $1.5 billion investment in the Mon Valley Works in Braddock. After delays in getting approvals and permits, US Steel called it off and the region lost out an opportunity to gain hundreds of good paying, blue-collar jobs.

Passing legislation to create a tracking system for permit applications and permit and third-party review of permit decision delays will go a long way to address concerns of business owners and bring greater transparency to the permitting review process.

We need to make our state a more attractive tax climate.  Our current Corporate Net Income Tax is the second largest in the country at 9.99 percent. For comparison, Arkansas’ corporate tax rate of 5 percent recently helped them land the most advanced steelmaking facility in North America that is expected to produce 3 million tons of advanced steel per year.

Reducing the corporate tax burden by at least 2 percent here will help us compete with other states to attract prospective manufacturers. Thankfully, it appears that this idea is starting to gain bipartisan support.

But I also believe that a corporate tax reduction should be contingent on employers agreeing to retain or attract a certain number of jobs in the commonwealth. We must ensure these companies are doing their part to invest in our people.

Will Pennsylvania’s manufacturing employment and output ever return to its heyday? Not likely.

But there are steps that our commonwealth can take now that will instantly make us a more attractive location for manufacturers to grow and invest. Pennsylvania manufacturing sector once powered America into the Industrial Revolution and helped her become the “Arsenal of Democracy” through two World Wars.

We can lead the way once again in reshoring jobs to America and stabilizing our supply chains in the long run.

The Governor’s Action Team, an organization dedicated to attracting and expanding business in Pennsylvania, recently produced its annual report for fiscal year 2020-2021, and the report painted a very flattering picture of northeastern Pennsylvania’s ongoing economic success.

With a total of 9,554 new jobs created in Pennsylvania last year, northeastern Pennsylvania led the commonwealth in job growth with the creation of 2,362 new job opportunities—representing 25 percent of all new jobs created in Pennsylvania last year.  Moreover, northeastern Pennsylvania far outpaced every other region in the state by securing more than $1 billion in private investment for economic development projects in the region—surpassing our closest competitor by more than $400 million.  One might have to harken back to the days of anthracite mining to find economic statistics from northeastern Pennsylvania as impressive as the ones reflected in the Governor’s Action Team report.

Job growth in northeastern Pennsylvania is strong across many industry sectors including logistics, regional/national headquarters, food processing, and our strongest sector, manufacturing.  Northeastern Pennsylvania led every region in the state with the creation of more than 1,300 new manufacturing jobs over the past year—representing 56 percent of all new jobs created in the region.  There was a time when many political leaders opined that Pennsylvania would never be able to revive its declining manufacturing base.  Northeastern Pennsylvania, and groups like the Pennsylvania Manufacturers’ Association, are dispelling those old ideas and leading a manufacturing renaissance that is attracting new manufacturing companies and creating new manufacturing jobs at a robust rate.  The message to the rest of the country and to the world is very clear: We can build it here in Pennsylvania.

As the Senate Chairman of the Community, Economic, and Recreational Development Committee, I have the pleasure of working closely with Dennis Davin, Secretary of the Pennsylvania Department of Community & Economic Development (DCED) and Brent Vernon, the Executive Director of the Governor’s Action Team (GAT).  The Commonwealth’s economic team and leaders in the Senate, like President Pro Tempore Jake Corman and Majority Leader Kim Ward, have helped communities in northeastern Pennsylvania set the stage for private sector job growth by driving state resources and incentives to projects that leverage private investment and create jobs.

The economic success of the South Valley communities of Hanover Township, Nanticoke City, and Newport Township is emblematic of the region’s economic resurgence and just one example of many economic success stories in the I-80/I-81 corridor in NEPA.  Strategic investments in infrastructure projects, like the $90 million South Valley Parkway, have already leveraged more than $1 billion in private investment from companies, like Northpoint Development, and have helped to create more than 7,000 new jobs in Luzerne County over the last five years.

The Ball Corporation, which invested $421 million in a manufacturing facility in Jenkins Township, is another great example of how Fortune 500 companies are eager to bring high wage ($69,593) manufacturing jobs to Luzerne County.

Our success continues with the recent site selection announcement made by Nacero, an innovative fuel manufacturing company that will transform the transportation industry with lower carbon fuel for everyday drivers.  Nacero plans to build a $6 billion manufacturing facility and create 4,000 new jobs in Nanticoke City and Newport Township.  Nacero signals that northeastern Pennsylvanian has a great opportunity to lead the Commonwealth in economic growth for decades to come.

When I graduated from Penn State University in 1993, Pennsylvania was facing one of its worst job markets since World War II.  When I was sworn in as a state legislator in 1999, Luzerne County’s unemployment rate was pushing past 7.5%.  Today, northeastern Pennsylvania is experiencing historic job and wage growth across diverse industry sectors.  Before the outbreak of the COVID-19 pandemic, Luzerne County was enjoying its lowest unemployment rate in more than 50 years.

State economic development agencies, like DCED and GAT, as well as legislative leaders committed to job creation like Senators Corman and Ward, have found willing and supportive partners in spurring economic growth among very talented local economic groups like CAN DO, Penn’s Northeast, NEPA Alliance, NEPIRC, the Earth Conservancy, and the Chambers of Commerce in Hazleton, Wilkes-Barre, Pittston, Scranton, and Carbon County.

It is an honor for me to work with these public sector and private sector partners who are passionately committed to creating jobs and building better communities where every citizen has an opportunity to pursue an economic success story of their own design.  Better days are ahead for Pennsylvania, and northeastern Pennsylvania is proud to lead the way.

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