Trump Picks Economic Winners, Guided by Nostalgia

Source: By Brad Plumer and Jim Tankersley, New York Times • Posted: Monday, June 18, 2018

The Big Rivers Electric Corporation power plant in Robards, Ky. President Trump’s efforts to boost domestic coal mining have come largely through proposals to prevent coal-fired power plants from closing.Luke Sharrett for The New York Times

WASHINGTON — As President Trump tries to tilt global trade in the United States’ favor, he is increasingly putting his finger on the scale to help once-iconic industries that are declining as a share of the American economy, at the expense of some of the country’s fastest-growing sectors.

The president’s attempts to boost domestic steel manufacturing and coal mining have come largely through policies that limit foreign competition, like tariffs, and proposals to prevent coal-fired power plants from closing. Those efforts have produced only modest job gains so far in two blue-collar sectors that Mr. Trump championed in his run to the White House. But they have injected uncertainty into a host of other growing industries — such as advanced manufacturing, natural gas production and renewable energy generation — that have helped drive American job creation since the Great Recession.

On Friday, the Trump administration escalated its trade conflict with China, announcing $50 billion in tariffs on goods from Chinese industries that the Beijing government has targeted for its next wave of economic development. The administration has not articulated a strategy similar to China’s, and experts have warned that the tariffs — and the retaliatory tariffs China has threatened to impose — will end up hurting America’s own growth industries.

By crafting an industrial policy that largely looks to the past, Mr. Trump differs from his predecessors, who often attempted to hasten the emergence of new industries and position the United States to lead the way.

On energy, both the Barack Obama and George W. Bush administrations enacted tax breaks and federal loan guarantees for emerging technologies like wind power or electric cars that were not initially competitive but, they believed, would eventually become widespread as the world shifted toward cleaner energy.

Mr. Obama convened a task force on advanced manufacturing and steered federal money toward research hubs, which supported the development of robotics and biofabrication, among other technologies.

Mr. Trump’s approach, by contrast, has largely focused on saving legacy sectors whose workforces have been hurt by globalization, automation and innovation.

The president has long been enamored with coal, steel and other blue-collar industries, promising to revitalize them on the campaign trail and, once in office, using them as a proxy for the working-class voters who powered his election. “The people that like me best are those people, the workers,” he told a rally in Missouri last year. “They’re the people I understand the best. Those are the people I grew up with. Those are the people I worked on construction sites with.”

A wind farm outside Lincoln, Kan. Both the Barack Obama and George W. Bush administrations enacted tax breaks and federal loan guarantees for emerging technologies like wind power and electric cars that they believed would become widespread as the world shifted toward cleaner energy.Christopher Smith for The New York Times

But while the approach has helped Mr. Trump remain popular with many working-class white voters, it has done little to help those populations prepare for changes that could further decimate their professions.

“Coal is not coming back,” said Joshua D. Rhodes, a research fellow at the Energy Institute at the University of Texas at Austin. “Further subsidies right now will only prevent workers from being retrained or building careers elsewhere — which will make things even more painful when the bottom finally does drop out.”

In the latest such move, Mr. Trump asked Energy Secretary Rick Perry on June 1 to “prepare immediate steps” to halt the closing of unprofitable coal and nuclear plants. While administration officials are still debating how they might do so, any plan to rescue these power plants would probably entail dramatic government intervention in America’s energy markets and come at the expense of newer, cheaper power sources like natural gas or wind.

A decade ago, coal provided nearly half of America’s electricity. That share has since plummeted to less than one-third, as coal has been driven out of the market by stricter pollution regulations and a glut of cheap natural gas from hydraulic fracturing. Wind and solar power, while starting from a small base, have grown at double-digit rates each year as the technology improves and costs drop.

The jobs have followed: The number of American coal miners has fallen from more than 80,000 in 2008 to about 53,000 today. The solar industry alone now employs twice as many people as the coal industry does. Solar installers, wind technicians and oil and gas drill operators are all expected to be among the fastest-growing occupations over the next decade, according to the Bureau of Labor Statistics.

“Ten years ago, the joke among industry players was that renewables were the energy source of the future and always would be,” said Andy Karsner, a former assistant secretary of energy in the George W. Bush administration. “Problem is, that future has arrived, and coal is now the energy source of the past and always will be.”

Manufacturing jobs have fared better under Mr. Trump but remain at a historic low as a share of the economy. Fewer than 9 percent of American jobs today are in factories. While primary metals manufacturers in the United States — including steel and aluminum mills — have added 11,000 jobs since Mr. Trump took office, according to the Labor Department, total employment in the industry remains under 400,000 jobs nationwide, down from nearly 700,000 jobs 15 years ago.

Mr. Trump’s approach to saving manufacturing has been to levy tariffs on steel and aluminum imports from places like China, Canada, Mexico, Japan and Europe. The tariffs, he says, will stop cheap foreign metals from coming into the country and make American manufacturers more competitive. Those tariffs have helped domestic steel mills but hurt other manufacturers that depend on steel inputs, such as door frame manufactures and automakers. They also favor certain companies depending on where they get their foreign steel.

Some of Mr. Trump’s tariffs have also set off retaliation from trading partners, who are hitting American goods with tariffs of their own on food, steel and other products that domestic manufacturers export overseas. And Mr. Trump’s threat to impose tariffs on $350 billion worth of foreign autos and auto parts could wind up hurting the domestic auto industry, which gets its parts from abroad. It could also result in higher car prices for American consumers.

Mr. Trump’s economic advisers insist that Mr. Trump’s bold trade stance is boosting growth in the United States, alongside a more broad-based economic agenda that includes cutting taxes and reducing federal regulation of business.

“We’re pushing through 3 percent” growth, Larry Kudlow, the chairman of the National Economic Council, said in a recent briefing with reporters. “Some said it couldn’t be done. It is being done, and we’re proud of it. And I think President Trump’s policies of lower taxes and major regulatory rollback are a key part of this issue.”

But many economists who favor industrial policy efforts and have long argued for more aggressive trade policies to protect American workers say Mr. Trump’s unpredictable approach has hurt the blue-collar workers he is trying to protect.

“The trade policies have been so erratic and inconsistently messaged that they are not a part of a broader strategic plan for the economy,” said Thea Lee, president of the liberal Economic Policy Institute and a trade specialist. “Even to the extent that there is some playing favorites, singling out workers in different sectors, that’s problematic, because it’s dividing. What workers need are policies that will be empowering, that will lift them up across sectors and not divide them.”

Free-market conservatives, who frequently criticized President Obama’s efforts to “pick winners and losers” and favor emerging technologies like wind and solar, have found even less to like in Mr. Trump’s efforts to rescue aging power plants in danger of going under.

“From an economic standpoint, this is one of the worst things you can do,” Nicolas Loris, a research fellow in energy and environmental policy at the conservative Heritage Foundation, said, referring to Mr. Trump’s proposal to help ailing coal plants. “It would keep a whole bunch of uncompetitive resources in place and choke off alternative investment strategies because those resources aren’t allowed to die off.”

To date, Mr. Trump has struggled to fulfill his promise of reviving the coal industry. While he has relaxed pollution rules on power plants and has overseen a small uptick of about 3,000 new coal-mining jobs, the long-term trend for the industry remains bleak: At least 40 more coal plants have announced they will close or reduce capacity by 2025, and others may soon follow.

Now, the administration is considering more drastic action: In one proposal discussed in a leaked internal memo, the Department of Energy would order grid operators to buy power from a designated list of coal and nuclear plants, using emergency powers normally reserved for short-term crises like hurricanes.

To make its case, the administration has contended that these ailing plants are necessary for the stability of the nation’s electric grid, although both outside experts and grid operators themselves sharply disagree that there is a grid emergency.

The oil and gas industry, which has normally cheered the administration’s efforts to expand drilling, has joined forces with the wind and solar industries to oppose Mr. Trump’s grid proposal, calling it “unprecedented and misguided.”