Why Bain matters

Politics,Beltway Confidential,Conn Carroll

Yesterday, Time Magazine released a transcript of Mark Halperin's interview with Mitt Romney about his tenure at Bain. After Romney claimed that his business experience gave him "a perspective on how jobs are created – that someone who’s never spent a day in the private sector, like President Obama, simply doesn’t understand," Halperin pressed:

I want to ask you to be just a little bit more specific about that, because again, he said this is like the central way he’s going to run this campaign, to focus on your business career.  You said you know how to read a balance sheet.  There are a lot of people in America who know how to do that.  What would make you qualify to be President – again, specific things you’ve learned, things you know, policies that grow out of your experience at Bain Capital that would lead toward job creation.

Romney responded:

Well, Mark, let’s be a little more specific as to the area you’d like to suggest. Trade policies? Labor policies? Energy policies? Let’s take energy, for instance. I understand that in some industries, the input cost of energy is a major factor in whether an industry is going to locate in the United States or go elsewhere. So, when, at Bain Capital, we started a new steel company called Steel Dynamics in Indiana, the cost of energy was a very important factor to the success of that enterprise. When the President is making it harder to mine coal, to use coal, to take advantage of our gas resources, to make it harder to get our oil resources – all those things combine to make our cost of energy higher than it needs to be, and it drives away enterprises from this country. It sends it to places that have lower-cost energy. I understand the impact of those kinds of factors on job creation. I will have a very different policy. My policy on energy is to take advantage of coal, oil, natural gas, as well as our renewables, and nuclear – make America the largest energy producer in the world. I think we can get there, in 10 or 15 years. That will bring back manufacturing of certain high-energy intensive industries. It’ll bring back jobs. It’ll create a surprising economic revitalization of this country.

Today, the Environmental Protection Agency is holding two hearings, one in Washington one Chicago, on its Carbon Pollution Standard for New Power Plants. The EPA assures us that this new rule "does not apply to plants currently operating or new permitted plants that begin construction over the next 12 months." So this rule will not close any existing coal power plants, only prevent new ones from being built.

But previous Obama EPA rules most certainly do apply to existing coal power plants and, by design, are shutting them down. The leftist Beyond Coal activist group even has a calculator on their website tracking how many coal plants are still in operation, and how many they have shutdown so far.

Shutting down coal plants, and preventing the creation of new ones, may make Obama's environmental base happy, but as Romney might say, it also increases "the input cost of energy" for manufacturers. Fox News reports:

Last week PJM Interconnection, the company that operates the electric grid for 13 states (Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia) held its 2015 capacity auction. ... The market-clearing price for new 2015 capacity – almost all natural gas – was $136 per megawatt. That’s eight times higher than the price for 2012, which was just $16 per megawatt. In the mid-Atlantic area covering New Jersey, Delaware, Pennsylvania, and DC the new price is $167 per megawatt. For the northern Ohio territory served by FirstEnergy, the price is a shocking $357 per megawatt.

Why the massive price increases? Andy Ott from PJM stated the obvious: “Capacity prices were higher than last year's because of retirements of existing coal-fired generation resulting largely from environmental regulations which go into effect in 2015.” Northern Ohio is suffering from more forced coal-plant retirements than the rest of the region, hence the even higher price.

These are not computer models or projections or estimates. These are the actual prices that electric distributors have agreed to pay for new capacity.

If you are an entrepreneur deciding where to locate your new manufacturing business, an eight-fold increase in energy costs is going to drive you away from creating jobs in the United States. That is what Mitt Romney, business man gets, and what President Obama, community organizer, still doesn't understand.

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