Economic populists will often talk as though they are calculating realists who are thinking strategically, as opposed to us crazy free-market ideologues who live in the fantasy world of perfect theory.
So let’s put on our strategic-thinking cap and look at the government’s pending decision — supported by Joe Biden, Kamala Harris, Donald Trump, and J. D. Vance, all in the name of economic populism — to block Nippon Steel’s attempted acquisition of U.S. Steel.
That’s basically what Advancing American Freedom (AAF), the conservative advocacy group led by Mike Pence, has done in a new memo.
AAF starts by looking at the deal itself. Nippon Steel offered $15 billion to buy U.S. Steel. That’s about 40 percent more than the company is currently valued. It’s $8 billion more than the next best offer. “When put to a vote, 98% of U.S. Steel shares supported the acquisition,” the memo says.
“The deal leaves in place existing labor contract with U.S. based workers and retains U.S. Steel’s name and headquarters in Pittsburgh, Pennsylvania,” it continues. U.S. Steel isn’t even promising to keep its headquarters in Pittsburgh, and it is saying that without the billions in investment Nippon Steel is promising, it will close U.S. facilities.
So the play here is to reject a very generous offer, against the near-unanimous wishes of the people who own the company, from a buyer who is promising to do the things you want to happen, because the buyer is from . . . Japan?
America’s best friend in Asia? The country whose prime minister addressed Congress earlier this year and said “the people of Japan are with you, side by side, to assure the survival of liberty”? The current top source of foreign-direct investment in the U.S.? That the U.S. is treaty-bound to defend if attacked? Where 55,000 U.S. troops are stationed? Seriously?
“China now produces more than half the world’s steel and Russia produces almost as much steel as the U.S.,” the memo says. Strategically, then, it sure would be nice to have a really big steel company based in the U.S. and Japan — two wealthy, free countries that are tightly linked and opposed to both China and Russia.
So as business strategy, rejecting the deal makes no sense. As national-security strategy, it also makes no sense. “Policymakers have a duty to protect American industry from malicious foreign actors — not to nanny struggling industries in a bid to win an election,” AAF says.
That is undoubtedly what is going on here. Pennsylvania is vital to winning the Electoral College and the presidency. But is it even a good electoral strategy?
Rejecting the investment would probably cost jobs in Pennsylvania. It would also make it more challenging to modernize outdated equipment, harming the ability of the company to stay competitive in the future.
In the past, steel-based Pennsylvania pandering has not worked. George W. Bush instituted steel tariffs during his first term and lost Pennsylvania in 2004 anyway.
About 3,700 people work for U.S. Steel in Pennsylvania right now. Many of them support the deal with Nippon Steel. Pennsylvania has about 8.9 million registered voters. Many of them don’t care about it one way or another.
Pennsylvania also has about 550,000 people who work in manufacturing, many of whose jobs depend on steel as an input to production. They might like a rejuvenated U.S. Steel that was able to invest in better service to its customers.
The top identifiable group that opposes the deal is the United Steelworkers union. Union members aren’t sheep. They don’t vote for whoever the union bosses vote for. And the union bosses were going to vote for the Democrats regardless, because that’s what union bosses do.
Biden was always going to do what the union bosses wanted, because that’s what Democrats do. But Republican opposition on “strategic” grounds is just as nonsensical as opposition on economic grounds. The supposedly pragmatic realism of populist economics is anything but.