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Friday, February 11, 2011

I'm from the Government, and I'm here to help you...

Yesterday I had the opportunity to give another presentation of the global economic conditions that are driving lumber prices, this time at the quarterly meeting of the Pennsylvania Hardwoods Development Council. After the presentation, I stayed to hear the reports by different company representatives on the state of the hardwood industry here in Pennsylvania.



The tenor of the comments was one of not just of deep concern, but of genuine fear for the industry. Most of the companies have cut their costs to the bone, reduced their workforce 50% or more, foregone wage and salary increases for several years now, and sought out any and all new product opportunities. And yet, they say, the rising cost of fuel, raw material, taxes, employee health care, and government regulations, in the face of still-shrinking markets, has put them on the brink. And they're frustrated by a common perception that the government is working against them, not for them.

One company representative explained that despite the fact that they have worked hard to gain certification as a sustainable producer of wood products, the lingering housing bust has caused their shipments to decline by two-thirds. Despite this, new EPA boiler MACT regulation is requiring them to spend over $6 million to install RTO's.



Another company president put it like this...
"We're in great shape, like an Olympic swimmer. And we're swimming out in the ocean, but instead of calm seas, a typhoon has blown up. And despite the fact that we're in great shape, we're working hard just to keep our heads above water. It would be nice if our government would throw us a life line, instead of a bag of weights."

When I returned to the office I had another frustrated email, from a local sawmill manager. Part of the email went like this...[He was working on]
"a 64 page survey, Manufacturing Energy Consumption Survey (MECS). It took a lot longer than the government estimated 9.2 hours to complete. It was mandatory and came with a hefty fine, if I didn't comply. Talk about burdensome and onerous government regulations. Instead of trying to figure out how to keep the 35 employees we have, I am filling out a survey on the energy we used as a company in 2010. I gave it my best shot and hopefully it will be adequate...oh by the way in the instructions it suggests that an "engineer" fill out the survey. I do not have an engineer on staff, it is just me. Sorry for venting."

It seems to me that government regulation is a great example of the Pareto Principle, in that 80% of the benefit of it is gained in the first 20% of the regulation. And that the remaining 80% of the regulation only gains us marginal benefit. And yet, an army of government employees, equipment vendors, and consultants thrives off of this marginal regulation. All at the expense of the producers of this country, who are being pressured to employ more and pay more all the while their markets are disappearing.

It's tough to be in the wood business right now. Those remaining are a hardy bunch. Can't we lighten up on the regulatory burden and confiscatory taxation a little, at least until their foreign competition is required to meet the same standards? Can't we direct tax incentives and government grants at existing businesses that have been good public citizens, instead of at politically-correct start-up "green" businesses that have questionable chances of business success? And can't we help communities invest in their local businesses with guaranteed loans and incentives to upgrade their homes and public buildings with locally-produced building materials?

Sure we can. We, the people...

1 comment:

Anonymous said...

Well stated from a point of view outside of industry! Thank you. Someone is listening! I feel better just knowing that. However, your comments are a scarey statement as to the facts involving those of us in the industry and the state of events currently. The Government regulation in the form of permits, surveys, taxes, etc, are not new. But our lack of revenue and therefore profit in the current market conditions, makes coping with that burden nearly an impossible task. If not for the passion for our industry, there would be even more companies departing! We are hardy. The industry will survive. It will sure look different, and probably should as we move on. But we don't need the added burden of Big Brother looking over our shoulder. It seems as though the greater the meddling, the worse the outcome!