U.S. Manufacturer Pays Price for Job Killing Anti-Stimulus Policies

The world agrees the U.S. manufacturing industry has been in steady decline.

Despite all actual evidence stating otherwise (the number of manufacturing jobs have declined, but productivity has increased greatly and the percent of GDP generated by manufacturing has remained fairly constant for decades), exporters and manufacturers have become some of the most politically-favored industries in the country.

The thing is though, the U.S. still does a really good job at making some things. One of those is coal-mining equipment.

Two of the world’s leading coal mining equipment makers, Joy Global (NASDAQ:JOYG) and Bucyrus International (NASDAQ:BUCY) are right here in the United States.

These companies have held out well against the economic downturn as China and India are rapidly growing their coal-powered energy infrastructure, but even they can’t win out against the environmentalists.

Virtually coinciding with another ho-hum monthly employment situation report, the Obama administration has announced a new policy to cost the economy more jobs.

The Wall Street Journal says in Employment, Environment at Odds:

For the second time in recent weeks, the Obama administration's environmental policies have clashed with its efforts to boost American jobs.

The U.S. Export-Import Bank, a federal body charged with promoting U.S. exports with loan guarantees, decided against backing a sale of coal-mining equipment to an Indian company. The guarantees were denied amid the agency's concerns about the mine's environmental impact.

Bucyrus International Inc. said it was likely to lose orders totaling as much as $600 million for mining machinery from a subsidiary of Reliance Power Ltd. of India because of a decision by the Ex-Im Bank against providing loan guarantees to help finance the purchase. The orders were contingent on obtaining the guarantees, which would cut the cost of financing for Reliance, part of a conglomerate headed by Anil Ambani.

A person familiar with the situation in India said Reliance has chosen not to purchase the mining equipment from Bucyrus because of the bank's decision.

The bank's chairman cited Obama administration policy against backing projects with heavy carbon emissions.

The decision means "throwing 1,000 jobs in the ditch," Tim Sullivan, chief executive officer of the South Milwaukee, Wis., maker of mining equipment, said in an interview. Bucyrus cited an estimate that the order would create or protect 984 jobs in 13 U.S. states.

Clearly, this is a stunningly ridiculous policy for two reasons.

First, it is based on preventing global warming/climate change. The reasons for a warming earth are varied and have yet to be proven beyond a reasonable doubt that carbon is causing. If you recall Al Gore’s win/win situation (either “I saved the world” or “I told you so”) politicians will always love it. And India will buy this equipment somewhere, so it’s not going to have any net effect on “climate change” to begin with.

Second, it just doesn’t make any economic sense at all. The failed government stimulus efforts were intended to “create or save” 3.5 million jobs. Even if it achieves those goals, which is highly dubious, it would do so at a cost of $246,285 per job. The India/Bucyrus deal would “create or save” nearly 1,000 jobs at negative net cost to the government. The profits, taxes, and tariffs created by the deal would increase government revenues.

The primary reason the U.S. economy hasn’t recovered is because of the uncertainty created by a government that has become and is becoming more hostile to private industry.

The markets will not recover until some sort of uncertainty is achieved.

With news like this, certainty is a long ways away.