Earlier this week the news hit that Bayou Steel, the LaPlace-based scrap metal recycling mill, is shutting down operations and laying off some 376 employees. The Bayou Steel layoffs, which our sources tell us are part of a Chapter 11 bankruptcy filing and the plant might reopen before the end of the year (we’ve heard two different stories on that), represented a politically-embarrassing data point for Louisiana governor John Bel Edwards – whose camp has been vigorous in their attempts to sell the Louisiana economy as robust.
Gov. John Bel Edwards said the sudden shutdown of Bayou Steel could signal trouble for other manufacturers in the state that rely on imported steel. Tariffs on billions of dollars’ worth of imported goods from China, including steel, were increased as recently as Sept. 24.
“While Bayou Steel has not given any specific reason for the closure, we know that this company, which uses recycled scrap metal that is largely imported, is particularly vulnerable to tariffs. Louisiana is among the most dependent states on tariffed metals, which is why we continue to be hopeful for a speedy resolution to the uncertainty of the future of tariffs. Meanwhile, we will do everything within our power to help those displaced workers,” Edwards said.
This was a rather peculiar statement, and not one which particularly rings true.
Bayou Steel, after all, is essentially a scrap metal recycler. They bring in junk metal, melt it down and turn it into something useful.
Now, as you might imagine that business works on a razor-thin margin. They would need to acquire their raw materials as cheaply as possible in order to keep that margin viable.
So ask yourself this – why would Bayou Steel be crippled by tariffs on steel coming from China?
To believe that you’d have to believe that the cheapest way for Bayou Steel to acquire their source material would be to bring junk metal in on oceangoing ships from China, rather than have it float down the Mississippi from junkyards and scrap sites in the heartland – or come in on train cars, as Bayou Steel is a multimodal facility.
To call that implausible is to be charitable.
We checked into this, and what you would expect to be the truth, is. Bayou Steel’s raw materials are predominately domestic. Not imported.
This is the kind of statement a politician like John Bel Edwards, who tells lies designed to bamboozle the ignorant and the stupid, will make as a matter of course.
He goes and blames Trump for Bayou Steel’s closure, knowing that his base will believe it because they want to believe bad things about the president. And he does it because he knows nobody in the legacy media will challenge him. They won’t challenge him because (1) they don’t know anything about business, (2) they’re lazy and (3) they want to help him.
If you want to look at external factors driving the closure of Bayou Steel, you might consider the fact that since John Bel Edwards took office they’re paying a great deal more on inventory taxes thanks to changes in the state’s tax laws. Or that sales taxes have shot up and are now among the highest in the country. Or that they’re now paying tax on business utilities, which for a steel mill running a furnace tends to be a big cost factor. Or that Louisiana is now taxing MM&E, where it was formerly exempt.
All of those changes, which have rolled in since Edwards took office, make it more than a little bit plausible for a Bayou Steel to decide it isn’t profitable to continue processing scrap metal into useful steel in Louisiana. A lot more than Trump’s tariffs on Chinese junk metal Bayou Steel would be stupid to buy in the first place, certainly.
But Edwards is hoping the ignorant and the stupid will just let him off the hook rather than recognize there are consequences to economic mismanagement at the gubernatorial level and that the state is suffering those.
But in case you think this is just a one-off that has nothing much to do with John Bel Edwards, we’ll just throw a couple of other data points your way.
First, the construction industry in Baton Rouge has been one of the few strengths in Louisiana’s economy for the last several years – mostly because of a massive industrial capital expansion at oil refineries, chemical plants and the like along the Mississippi. Well, that boom is now over. Baton Rouge saw the second-largest decline in construction jobs in America from August 2018 to August 2019, leading only the Charlotte, North Carolina market. This amid a nationwide construction surge, in which some 253 of 358 local markets surveyed report gains in construction jobs. The explanation? The big construction projects put on drawing boards beginning in Edwards’ predecessor Bobby Jindal’s term are all being completed, and nothing is replacing them in the pipeline.
They’re just shutting down.
Those projects came about in large measure because of ITEP, the state’s industrial tax exemption program, and incentives given against property tax liability to the large companies seeking to build or expand those facilities. Edwards came along and cut local government officials in on the ITEP vetting game, and those locals promptly turned ITEP into a crapshoot that site selectors could no longer forecast the value of. So the projects went to Texas and other states, and now the bill is coming due in construction-industry layoffs.
Whether that trend is related to the news Tuesday that there’s a 40 percent surge in people seeking homeless services in Baton Rouge, we can’t say, but that’s another data point which doesn’t say great things about Edwards’ economic performance.
Nor is it encouraging that Frontier Airlines is now pulling out of Lafayette.
The short answer is that Edwards has nothing to back his rhetoric touting the state’s economic performance. Louisiana is stagnant under his direction, and falling badly behind our neighbors. Even his excuses, as in the case of Bayou Steel, are lies. And four more years of this level of executive management will leave nothing left not just of Bayou Steel, but the Bayou State.