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Leibowitz: Biden's SOTU Pep Rally

Written by Lewis Leibowitz

Depending on when you read this, you might know who won the Super Bowl, but we know who won this week—Joe Biden.

President Biden gave an effective State of the Union on Tuesday.  The speech had everything his (and Bernie Sanders’) supporters could hope for: more Buy American, more equality, more populism, even more support for Ukraine, and a bit of baiting Republicans for planning to terminate Social Security and Medicare.  Biden was on his game as a long-time Washington insider and political operator. 

IN PROGRESS... Leibowitz:

The trade portions of the speech were typical, as I’ve noted in previous columns, of both the Biden and Trump administrations. One columnist I read called the president out for promising to buy more American-made drywall, lumber, glass, and fiber optic cables. It may be the first major address to call for more domestic drywall. Both parties applauded this thought.

While buying more things made here is popular, there are a few problems, which the president either did not mention at all, or treated with a phrase or two. The war in Ukraine, the future of semiconductors, issues with China, immigration policy, and the world economic and geopolitical order are things we need to worry about. But no immediate solutions appear, so they are not discussed at a pep rally. No question that the administration knows those things too. But President Biden wanted, maybe needed, a pep rally of an evening. That is what he dialed up. In that sense, it was certainly a success.

All these big issues—and more—are too complex for pep rallies, so the really big stuff, which requires tough choices and compromises, will have to wait. I like pep rallies as much as anyone, but I believe it is important to look now at the big issues and how they interact with one another.

One issue that is a big winner these days is Buy America. Republicans and Democrats support more manufacturing in the United States. He emphasized the role that trade policy had in encouraging outsourcing of manufacturing, and jobs, but other factors are at least as important. The world at large matters: countries around the world, friends and adversaries alike, believe that their economies are important. If their products are discriminated against through locally weighted government procurement and local production, they should be expected to resent it and fight back. 

One example comes to mind. Lithium-ion batteries can be made in the US, but the lithium needed to make them must be mined somewhere. There is one producing lithium mine in the United States, which produces about 1% of the global supply. By 2040, lithium demand is projected to balloon by 40 times, necessitating sharply increased mining. 

But lithium mining is dirty. The element needs to be leached out from brine containing lithium ore, creating enormous deposits of salt. Environmental and some indigenous groups are mobilizing to stop almost all new plans to increase lithium mining in the US. Which is more important—we must choose to increase local lithium mining or not to do so? Senator Joe Manchin (D., W.Va.) worked to obtain a commitment for environmental permitting reform to allow new energy and other projects to be approved. This reform would make new projects such as lithium mines more feasible. But permitting reform has, as yet, not reached the floor of either house of Congress.Indeed, the legislative text of a potential bill has yet to be released. 

“Reshoring” of mining requires permitting mining to be done here. And mines cannot be placed just anywhere. The ore we need is where it is—and that is where the mines need to be. If lithium mining is important, and it is, how can we ramp up mining and still pay attention to environmental issues (and issues of equity)?

An historical aside—one of the mines being touted for opening is an old one that produced lithium (a vital element for building nuclear weapons) for the Manhattan Project.  If the National Environmental Policy Act was in place during World War II, would we have gotten an atomic bomb? Indigenous groups are against this mine because part of the land is sacred ground. It seems to me that a compromise can be hammered out on the sacred ground issue—but so far, it appears elusive.

So, like most pep rally issues, the complex decisions required to make progress are left for another day. Today, we cheer and jeer. It can be frustrating to watch as politicians (and all sides do it) avoid tough issues, and repeat slogans that draw applause without solving problems. 

There are many other issues that demand attention, discussion and compromise. I’ll mention one more involving international trade—I’ve written on this before. In the recent “Inflation Reduction Act,” electric vehicles manufactured in North America are eligible for a significant tax credit—but other vehicles, whether or not better and cheaper, will not be eligible. The European Union is not happy, and will either take action in the World Trade Organization (WTO), or retaliate, given the WTO paralysis instigated by the United States.

Again, we need to choose whether to encourage consumers, companies, and governments to buy electric vehicles. Because the United States is a large market, it is tempting to say that, if such vehicles are made in the US, then US tax policy will subsidize them. That puts the electric vehicle revolution in the hands of investors that can fund new plants in North America. But that may not be enough to move the needle on climate change. Which is more important? 

It is very easy to say that votes in Congress are required, and encouraging local production of such vehicles is one way to secure the necessary votes. But the larger, international, issue of climate change is also important. I have some ideas on how to bridge the gap—and I’m definitely not alone in thinking about how to do it.  But it’s hard to get attention to issues that have two sides these days. 

Lewis Leibowitz 

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Lewis Leibowitz, SMU Contributor

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