The NAM is leading the charge in urging the Biden administration to walk back a proposed revision to the National Ambient Air Quality Standards for fine particulate matter (PM2.5).
With the release of a letter signed by more than 70 associations representing nearly every sector of the U.S. economy and a new video advertisement, the NAM is highlighting how these regulatory actions would devastate the economy and actively undermine President Biden’s goal to expand manufacturing in the United States.
What’s going on: When the Environmental Protection Agency set forth the tentative new air quality standards earlier this year, manufacturers quickly recognized that if enacted, the new rules would put an undue burden on the industry—and could force companies to move operations overseas.
- Soon, manufacturers and related associations across the country began to speak out about the harm to their operations and communities, even as they affirmed the industry’s longstanding commitment to a clean, safe environment for all.
The background: The EPA’s proposed changes to the National Ambient Air Quality Standards—currently under review by the White House’s Office of Information and Regulatory Affairs— would lower the primary annual particulate matter standard from 12.0 µg/m3 to between 8.0 and 10.0 µg/m3.
- The EPA has estimated the total cost of the controls required for compliance with the proposed standard at up to $1.8 billion—and that figure could go higher, the agency admitted
- What’s more, some areas in the U.S. are already in “nonattainment” with the current PM2.5 standard, so a stricter standard will only put them further away from compliance and economic growth.
The costs: According to an analysis by Oxford Analytics and commissioned by the NAM, the revisions would:
- Threaten nearly $200 billion of economic activity and put up to a million current jobs at risk, both directly from manufacturing and indirectly from supply chain spending;
- In addition, growth in restricted areas may be constrained, limiting investment and expansion over the coming years; if the PM2.5 standard moves to 8 from the current 12, nearly 40% of the country will live in nonattainment areas, putting jobs and livelihoods at risk as factories may no longer be able to operate if located in an area that is in nonattainment, and no new facilities can be built to grow economic prospects; and
- Hit California’s manufacturing sector hardest, followed by Michigan and Illinois.
Speaking out: Many manufacturers from all sectors, along with related associations, have made their concerns public.
- Michael Canty, president and CEO of Alloy Precision Technologies of Mentor, Ohio, pointed out that these regulations may force companies to move production to other countries that don’t care about emissions reductions, unlike the U.S.
- Mark Biel, CEO of the Chemical Industry Council of Illinois, also worries that this regulation could make his state less attractive for manufacturers, despite its many assets.
- Dawn Crandall, executive vice president of government relations for the Home Builders Association of Michigan, decried the potential knock-on effects for Michigan’s suffering housing market.
The last word: The proposed changes “would risk jobs and livelihoods by making it even more difficult to obtain permits for new factories, facilities and infrastructure to power economic growth,” leadership from approximately 70 industry groups told White House Chief of Staff Jeffrey Zients yesterday.
- The revisions “would also threaten successful implementation of the Infrastructure Investment and Jobs Act, the CHIPS and Science Act and the important clean energy provisions of the Inflation Reduction Act. … We urge you to ensure the EPA maintains the existing fine particulate matter standards to [safeguard] both continued environmental protection and economic growth.”
The Federal Communications Commission voted late last week to advance a proposal that would reinstate Obama-era net neutrality rules, according to The New York Times (subscription).
What’s going on: “The commissioners at the Democratic-led agency voted 3 to 2 along party lines to kick off a monthslong process to bring back so-called net neutrality regulations.”
- In an NAM-supported move in 2018, the previous administration repealed net neutrality regulations put into place by President Obama in 2015, saying they stymied innovation.
Why it’s important: Last week’s proposal—which telecommunications companies have pledged to fight—“will ultimately enable the agency to categorize high-speed internet as a utility, like water or electricity. … The agency will then be able to police broadband providers for net neutrality violations.”
- That’s precisely why the proposal to restore the rules is problematic, critics say. A trade group representing telecom firms “wrote letters this week to the House and Senate Intelligence Committees warning of ‘mission creep’ by the F.C.C.”
- In 2017, then-FCC Chairman Ajit Pai said net neutrality laws amounted to “special interests [who] weren’t trying to solve a real problem but [were] instead looking for an excuse to achieve their longstanding goal of forcing the Internet under the federal government’s control.”
Government overreach: Indeed, the 2015 net neutrality rules—very similar to the ones now being advanced—were a prime example of agency overreach, said NAM Chief Legal Officer Linda Kelly in 2018.
- The 2015 FCC’s “heavy-handed approach … was neither appropriate nor necessary for the rapidly evolving, highly competitive broadband market,” Kelly said.
- Net neutrality laws also decrease investment in broadband, the NAM has told policymakers.
Up next: The FCC will take public comments on the proposed rules. The commission could vote to adopt new regulations as soon as early next year.
The last word: “Manufacturers are disappointed the FCC is moving forward with its proposal to regulate 21st-century broadband with rules designed for the era of the rotary phone,” said NAM Vice President of Domestic Policy Charles Crain. “Reinstating this misguided, overreaching policy of the past is a recipe for stymied innovation and outdated infrastructure.”
The economic impact of allowing a stricter interest deductibility limitation to remain in effect could be devastating, according to a new EY analysis prepared on behalf of the NAM.
What’s going on: Failure to reverse the stricter limitation that went into effect in 2022 could result in the following losses in the U.S., according to the study:
- 867,000 jobs
- $58 billion in employee compensation
- $108 billion in gross domestic product
More costly every year: Those figures have roughly doubled since the 2022 EY analysis released last year.
- Last year, EY estimated that leaving the stricter limitation in place would result in 467,000 lost jobs, $23.4 billion in lost employee pay and $43.8 billion in lost GDP.
The background: Prior to 2022, companies could deduct interest of up to 30% of their earnings before interest, tax, depreciation and amortization (EBITDA).
- However, since 2022, the deduction has been limited to 30% of earnings before interest and tax (EBIT), a significant change that disproportionately affects manufacturers, given their capital-intensive investments.
What can be done: “A stricter interest expense limitation restricts manufacturers’ ability to invest in new equipment and create jobs,” said NAM Managing Vice President of Policy Chris Netram.
- “Even more, the study finds that manufacturers and related industries bear 77% of the burden of this policy. Congress must act by year’s end to restore a pro-growth interest deductibility standard and allow manufacturers to continue to invest for the future.”
NAM in the news: POLITICO Pro’s Morning Tax newsletter (subscription) covered the study’s release.
Further reading: Visit the NAM’s interest deductibility page to learn more about this issue and how the NAM is taking action.
The world must add or replace nearly 50 million miles of transmission lines in the next 17 years to allow countries to meet climate goals and achieve energy security, according to a new report by the International Energy Agency covered by CNBC.
What’s going on: The amount of transmission line needed—49.7 million miles—“is roughly equivalent to the total number of miles of electric grid that currently exists in the world, according to the IEA.”
- The undertaking “will require the annual investment in electric grids of more than $600 billion per year by 2030,” double current global investment levels in transmission lines.
- Countries must also make changes to the way they operate and regulate their grids.
Why it’s important: Investment in global transmission lines has not kept pace with the growing appetite for renewables, and without replacements and additions to transmission lines, power bottlenecks will become “ever larger.”
Growing gridlock—and demand: “There are currently 1,500 gigawatts of renewable clean energy projects in what the IEA calls ‘advanced stages of development’ that are waiting to get connected to the electric grid around the world.”
- Meanwhile, demand for electricity will only rise as more of the globe moves to electric power.
- But building new transmission lines takes time, owing to lengthy permitting processes—which is why the NAM has long advocated speeding the process in the U.S.
Our view: “The NAM has identified building additional transmission lines as a top priority for the next round of permit reform negotiations,” said NAM Vice President of Domestic Policy Brandon Farris.
- “We will continue to fight to break down barriers to building new projects, including manufacturing facilities, energy generation, transmission lines, bridges, roads and more.”
Sales of existing homes fell to their lowest level in 13 years in September, according to Reuters (subscription).
What’s going on: “Existing home sales fell 2.0% last month to a seasonally adjusted annual rate of 3.96 million units, the lowest level since October 2010, the National Association of Realtors said on Thursday. They are counted at the closing of a contract, and last month’s sales likely reflected contracts signed in August, when the rate on the popular 30-year fixed mortgage vaulted above 7%.”
- Sales fell 1.1% in the South, 4.1% in the Midwest and 5.3% in the West. They rose 4.2% in the Northeast.
Anemic inventory: There was 3.4 months’ worth of unsold existing home inventory for sale in September, a decline of more than 8% from a year ago.
- “A four-to-seven-month supply is viewed as a healthy balance between supply and demand.”
Why it’s happening: Mortgage rates have spiked recently, “mostly because of expectations that the Federal Reserve will keep interest rates higher for longer in response to the economy’s resilience.”
For Husco—a family-owned manufacturer of hydraulic and electro-mechanical control systems—building a strong, cohesive culture is the key to retaining talent.
The Waukesha, Wisconsin, company is among the many manufacturers that find retention to be a top business challenge, as the NAM’s quarterly Manufacturers’ Outlook Survey shows. So how do they create this cohesion?
It all starts at the top: Angela Stemo, vice president of global human capital at Husco, says the company has always prioritized trust and communication between employees and their managers.
- “Our retention has grown and strengthened because of the emphasis we place on our leaders having strong relationships with their employees—get to know who they are, find out what their interests are,” said Stemo.
- The company also lays the groundwork for strong bonds between coworkers, which often flourish outside of work as well. “Once they feel connected to people within the organization, they’re going to want to stay,” explained Stemo. “They’ve built friendships, they’ve built connections, and they feel really tied to the organizational culture.”
How they do it: Husco conducts employee engagement surveys once a year and holds occasional in-person focus group discussions to get feedback from employees.
- “As our organization becomes more diverse, we are offering surveys in more languages,” said Stemo. “We have a large Afghan population on our shop floor as well as many Burmese workers, so we’ve had our surveys translated into various languages for all employees to participate.”
- “For us, we really try to listen to what people say and what their suggestions are,” said Stemo. “If it’s something feasible and we can implement it, we try to figure out how to do so.”
Read the full story here.
With many manufacturers relying on financing to expand their businesses and hire workers, Congress should reverse a stricter limitation on interest deductibility that went into effect in 2022, the NAM told policymakers last week.
What’s going on: The stricter limitation is effectively a tax on investment, NAM Senior Director of Tax Policy David Eiselsberg said at a briefing last Thursday hosted by Sens. Shelley Moore Capito (R—W.VA) and Kyrsten Sinema (I—AZ) on the American Investment and Manufacturing Act.
- “The stricter limitation makes it more expensive for capital-intensive companies—which many manufacturers are—to finance critical purchases, grow their businesses and hire new workers,” Eiselsberg said. “Failing to reverse this harmful change could cost the U.S. economy 467,000 jobs and reduce U.S. GDP by $43.8 billion,” he added, citing a 2022 EY study prepared for the NAM.
The background: Before last year, manufacturers were allowed to deduct 30% of their earnings before interest, tax, depreciation and amortization (known as EBITDA). The 2022 tax change limits that deduction to earnings before interest and taxes (EBIT).
- The AIM Act, which was introduced in April by Capito and Sinema, would permanently reinstate the EBITDA standard.
Financing growth —and competitiveness: Reversing the stricter limitation would safeguard manufacturers’ ability to finance growth, which is particularly important “ at a time when the cost of capital itself has increased due to rising interest rates,” Eiselsberg said.
- The current policy puts the U.S. at a global disadvantage, since, he continued, “of the more than 30 [Organization for Economic Cooperation and Development] OECD countries with an earnings-based interest limitation, the U.S. is the only one that employs an EBIT standard.”
NAM in the news: POLITICO highlighted the AIM briefing.
Learn more and take action: Visit the NAM’s Full
Expensing Action Center, which features a tool that lets manufacturers to send customized messages directly to Congress.
In a milestone for the logistics sector, Danish shipping firm Maersk recently unveiled “its first container vessel moved with green methanol,” CNBC reports.
What’s going on: “The new container ship, ordered in 2021, has two engines: one moved by traditional fuels and another run with green methanol—an alternative component, which uses biomass or captured carbon and hydrogen [for] renewable power. Practically speaking, the new vessel emits 100 tons of carbon dioxide fewer per day compared to diesel-based ships.”
- The ship is the first of a larger order of 25 due for delivery next year.
- Other shipping firms have placed orders for similar vessels.
Why it’s important: Because it’s a global industry—with approximately 90% of the world’s traded products traveling by sea—ocean shipping has typically been less receptive to transitioning to new energy sources, Danish Minister of Industry Morten Bodskov said, according to the article.
- For example, “[i]n June, a group of 20 nations supported a plan for a levy on shipping industry emissions. But China, Argentina and Brazil were among the nations pushing back against such an idea.”
Climate goals: Maersk aims to be “climate neutral” by 2040, making the green-methanol vessels a key part of its approximately 700-ship fleet.
However … “[A]nalysts are worried that Maersk and its competitors might struggle to find enough supply of green methanol. The fuel is scarce and costly to transport.”
The last word: “Manufacturers are leading the way on developing and scaling up new clean energy sources,” said NAM Vice President of Domestic Policy Brandon Farris. “The NAM continues to advocate for policies and programs that foster and encourage that innovation.”
The United Autoworkers union set a new strike deadline late last night, according to The Street.
What’s going on: In a video post on X, “UAW president Shawn Fain said [the union] would unveil more strike targets, with more union members participating, by noon eastern time Friday failing significant progress in talks with Ford, General Motors and Chrysler-owned Stellantis.”
- After negotiations for a new four-year labor contract failed late last Thursday, the UAW—which represents almost 150,000 U.S. autoworkers—ordered a walkout from vehicle plants belonging to the “Big Three” carmakers in Michigan, Missouri and Ohio.
- About 12,700 workers are now picketing assembly lines throughout the Midwest.
- Each of the vehicle manufacturers has put forth offers in recent days, and each has been rejected by the union, the demands of which include a sizable wage raise and a 32-hour workweek at 40-hour-a week pay.
Why it’s important: A 10-day strike of 143,000 UAW members against the three vehicle manufacturers could mean an economic loss of $5.617 billion, according to a recent report by Michigan-based consultancy Anderson Economic Group.
- A protracted strike this year would put “the state of Michigan and parts of the Midwest … into a recession,” Anderson Group CEO Patrick Anderson told the news outlet.
Our take: “ The economic harm produced by a strike goes well beyond GM, Ford and Stellantis,” said NAM Vice President of Domestic Policy Brandon Farris.
- “Numerous small and medium-size manufactures are already feeling the effects. The NAM encourages a swift resolution. Let’s get everyone back to work building products that our country relies on.”
What’s going on: “Lawmakers voted 222–190 to pass the Preserving Choice in Vehicle Purchases Act, which would amend federal law to block state attempts to eliminate the sale of vehicles with internal combustion engines as well as prohibit the Environmental Protection Agency from issuing waivers that ban such sales.”
The background: In recent months, the EPA, National Highway Traffic Safety Administration and state of California have all proposed measures to limit emissions from light- and medium-duty vehicles.
Why it’s important: The range of frequently conflicting regulations is creating confusion and regulatory uncertainty for manufacturers.
- The Preserving Choice in Vehicle Purchases Act would eliminate that confusion by “harmoniz[ing] vehicle emissions standards,” NAM Managing Vice President of Policy Chris Netram told lawmakers. “When manufacturers have regulatory clarity, we can focus on what we do best—innovating, creating jobs and investing in America.”
What’s next: The measure now moves to the Senate.