Tuesday, December 4, 2007

Pelosi Should Rethink Her Energy Bill

These are published remarks by Nancy Pelosi on February 25, 2004 that can be found at the House of Representative’s website.

One of her many remarks: "As we all know, since President Bush took office, manufacturing jobs are hemorrhaging. The President has already lost 2.8 million good paying manufacturing jobs and continues to lose more every single month.”

My opinion: She has a very short-term memory. This energy bill that congress wants to pass will have strong repercussions in the manufacturing industry!

The democrats (Nancy Pelosi) go on and on about the jobs lost in manufacturing to larger trading partners such as China. This article is not going to be a debate about industry destruction and suffering of the manufacturing industry. It should be noted, though, that I do believe in the evolution of production, and that the long-run transition from goods-based production (manufacturing) to service-based production (banking or health care) creates economic growth.

There are obvious inconsistencies across Congress’ current energy bill and their fight for manufacturing jobs. Congress’ version of the energy bill requires that all auto manufacturing firms produce cars, truck, and SUV’s with an across-fleet fuel efficiency average of 35 miles/gallon by 2020. This sounds great on paper, but unless I am unaware of some major redefinitions of what constitutes manufacturing, production of motor vehicle parts, body, and motor vehicles are considered manufacturing. By placing such strong fuel efficiency measures on the production of motor vehicles, the Democratic Congress is destroying manufacturing jobs. Yup, those precious jobs in Detroit……gone!

I see this occurring in two respects: direct and indirect. First, the direct effect is higher costs associated with the production of fuel-efficient vehicles that require new technologies. As costs rise, firm labor demand falls, and unemployment results. Second, the indirect effect is the falling demand on other sectors, such as steel, rubber, plastic, glass, and other basic materials. As demand falls, revenues to the firms in these industries fall, and firms fire workers.

It is simply ironic that Congress cannot see past the high cost of gasoline. The plan is laughable when considering the number of years they have appealed to the “American Manufacturer.”

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