Cold Steel
The U.S. steel industry needs massive failure, not another bailout
"We have an answer for the crisis in American steel," Robert S. Miller Jr., the recently installed CEO of the bankrupt Bethlehem Steel Corp., told The New York Times in December. "It is the consolidation and the rationalization of the integrated steel industry by a combination of four or five companies to come together as a large integrated steel company."
The plan on the table is for the merger of USX-U.S. Steel Corp. and Bethlehem, with the possible inclusion of Weirton Steel Corp. and Wheeling-Pittsburgh Steel Corp. The new company would account for roughly 30 percent of U.S. steel production.
That would certainly help things in the notoriously fragmented and oversupplied industry. But as usual, there's a catch. Miller, who helped craft the 1979 federal bailout of Chrysler, wants the government's help: He says the new company will need protection from imports. Taxpayers must also pick up the $13 billion tab for the industry's pension and retiree health care benefits.
It's a gutsy offer. The captains of this floundering industry are asking for nothing less than national industrial socialism, a government-protected cartel that benefits a few producers at the expense of the rest of the country. Treasury Secretary Paul H. O'Neill is already acting as if he were an OPEC production minister. "O'Neill has been seeking greater balance among global steel makers by encouraging countries and companies to reduce production to stabilize prices," reports the Times. "He has also threatened to restrict the entry of steel imports to the United States."
Is protecting the steel industry a national security interest? Nope: The U.S. military uses very little, only 0.02 percent of domestic steel delivered. "The military argument is not only bogus," notes Dan Griswold, associate director of the Cato Institute's Center for Trade Policy Studies, "but insofar as it's significant it cuts the other way." Why, after all, would we want our military to pay inflated prices on a major purchase?